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HMA’s legal bills mount amid fraud probes


By Beth Kutscher
Posted: January 15, 2013 - 8:00 pm ET
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Legal bills are taking a toll on Health Management Associates, Naples, Fla., which is aggressively defending itself against government allegations of admissions fraud aired in a recent "60 Minutes" broadcast.

In a preview this week of its fourth-quarter results, the publicly traded system gave investors the first glimpse into the costs of fighting multiple government investigations as well as a public relations campaign after the allegations were aired on “60 Minutes.”

The news broadcast, which aired in early December, focused on allegations that administrators pressured physicians to boost their admissions numbers to meet certain targets.

Those allegations also have been the subject of a number of government investigations, some sparked by whistle-blowers.

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The company's legal expenses for December ran about $15 million over what it had budgeted for outside attorney fees in the fourth quarter, Chief Financial Officer Kelly Curry told investors on a conference call. Its total legal expenses for the year amounted to $64.5 million—more than double the $24.5 million it paid in 2011.

Curry noted that HMA General Counsel Steve Clifton is attempting to manage the costs by negotiating new contracts for 2013.

In a question-and-answer session, HMA President and CEO Gary Newsome stressed that the company is not planning to disclose any new investigations in its annual earnings report.

Instead the costs were associated with preparing documents for ongoing investigations, which he described as still in the discovery phase.

Newsome added that the company's in-house legal team is at a “size and quality that we've not had historically.”

The increased legal fees, flat adjusted admissions at its hospitals and Medicaid payment reductions in Mississippi are expected to mean a decrease in fourth quarter revenue for the chain. The company said it expects to report $1.48 billion in net revenue, which would be below the $1.58 billion it reported in the fourth quarter of 2011.

HMA for its part has said physicians interviewed by “60 Minutes” “grossly mischaracterized” its admissions policies and pointed to the growing challenges associated with choosing between an inpatient or observation stay.

While the system is the most recent to be in the public eye, Community Health Systems, Franklin, Tenn., is also under investigation from HHS' inspector general's office and the Securities and Exchange Commission relating to its admissions practices.


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