For the second time in three months, Health Management Associates, Naples, Fla., is disputing a healthcare stock analyst's report that questions its reliance on Medicare outlier payments. HMA said Kenneth Weakley, a stock analyst for UBS Warburg, did not seek information from the company. HMA also said that its actual year-to-date results contradict estimates Weakley made in a report earlier this week. The company's fiscal year started Oct. 1, 2003, Weakley was the first analyst to raise the issue of whether Tenet Healthcare Corp. relied too heavily on outlier payments in an October 2002 report. His latest report, using CMS data, predicts that HMA will receive outlier payments equal to nearly 5% of its Medicare inpatient revenue -- close to the national average but higher than would be expected given HMA's portfolio of mostly rural hospitals, Weakley wrote. HMA said its actual outlier ratio for the first five months of fiscal 2004 was 1.8%. The ratio was 3.7% for fiscal 2003, not the 4.2% estimated by the CMS, the company said. UBS spokesman William Dentzer said Weakley was not available for comment. Dentzer said UBS "stands by the integrity and objectivity of our analysts and their research conclusions."
Meanwhile, Standard & Poor's downgraded three of its ratings on Tenet debt in light of a new agreement cutting Tenet's bank-borrowing capacity by one-third. The ratings agency dropped Tenet's corporate credit and senior secured bank loan ratings to B from B+ and cut Tenet's unsecured notes to B- from B+. The unsecured rate fell the extra notch because Tenet pledged the stock of some subsidiaries as collateral for potential bank loans, leaving fewer assets available to pay off unsecured lenders in the event of a bankruptcy, S&P said. -- by Vince Galloro