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Originally posted Oct. 26, 2011: Federal inquiries cost HMA millions

Subpoenas issued to hospital operator

Oct. 25, 2011

Health Management Associates Inc. has spent $4.5 million responding to federal subpoenas issued in August tied to physician recruitment, hospital-physician joint ventures and emergency room management software.

Executives disclosed the expenses Tuesday as part of a conference call with investment analysts to discuss the company's quarterly earnings that were released after hours on Monday.

HMA operates 66 hospitals, including Lehigh Regional Medical Center in Lehigh Acres, Charlotte Regional Medical Center and the Peace River Regional Medical Center in Charlotte County and two Physicians Regional Hospital campuses in Collier County.

The company had $9.3 million in legal expenses in the three months ended Sept. 30, which included expenses related to acquiring seven hospitals in Tennessee.

"A total of $4.5 million of that $9.3 (million) which related to legal expense was the cost of copying," said Kelly Curry, chief financial officer and executive vice president.

"That's what we are doing right now is copying."

Legal expenses related to the inquiries could reach $4 million to $5 million in the fourth quarter as well.

Beyond that, executives declined to comment on the inquiries.

"The reality is there is no more information to tell you than what we have already been saying," Curry said.

The inquiries were first announced in August, but were received in May and July, according to a filing with the Securities and Exchange Commission.

The company has said one subpoena requested information on the company's physician referrals and ownership and management of its whole-hospital physician joint ventures. Another requested information on emergency room management, including the use of ProMed software.

On Monday, HMA reported reported net income of $43.7 million, or 17 cents a share, for the quarter ended Sept. 30, up from net income of $35.3 million, or 14 cents a share, for the same period a year ago.

Shares of HMA closed at $8.82 on Tuesday, up 8 cents in trading since the financial results were announced.

Executives said the results were pleasing, especially because many people are delaying in-patient treatments that can be put off.

"The lack of a catalyst to improve the economy continues to weigh, as we continue to see reluctance on the part of people to take time from work to address illnesses," President and Chief Executive Officer Gary Newsome said.

Now that the $525 million purchase of the seven Tennessee hospitals has closed, the company continues to look for opportunities for partnerships and acquisitions.

"The pipeline for partnering with hospitals hasn't slowed down and we are receiving opportunities to review, literally, on a weekly basis," Newsome said.

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