FINANCIAL STATEMENT ANALYSIS: HEALTH MANAGEMENT ASSOCIATES LA TONIA STEWART DR. LAURA FORBES HSA 525 AUGUST 4, 2013 FINANCIAL STATEMENT ANALYSIS: HEALTH MANAGEMENT ASSOCIATES Based on your review of the financial statements, suggest a key insight about the financial health of the company. Speculate on the likely reaction to the financial statements from various stakeholder groups (employee, investors, shareholders). Provide support for your rationale. Based on review of recent financial statements, Health Management Associates is in a precarious financial position due to its current legal woes and rising bad debt. The organization has been served with subpoenas by the Justice Department, the Department of Health and Human Services and Office of the Inspector General requesting records pertaining to a software program used by ED doctors and records regarding emergency department management In December 2012, CBS news magazine “60 Minutes” aired a story that featured interviews with several former HMA employees stating there was pressure from the company’s hospitals to admit patients from emergency rooms in order to maximize profits (Britt, 2012). HMA’s former compliance director, Paul Meyer, alleged HMA’s fraudulent practices in regard to Medicare and Medicaid patients was worthy of government investigation. In addition to Meyer’s claims, a hospital administrator, an executive vice-president and two doctors charged HMA with inappropriate systemic hospital admissions by ordering unnecessary tests and admitting patients without cause in an effort to increase revenue. Physicians were pressured to meet admissions quotas set by HMA or risk being reprimanded and even terminated. The former employees allege that HMA set an overall benchmark of 20 percent admission rate for emergency department patients and a 50 percent admission benchmark for patients 65 and older. As a result of the December 2, 2012 “60 Minutes” investigative report, HMA shares fell sharply on Monday, December 3, 2012 by 5.09 percent to $7.55. As of July 30, 2013 HMA is now being acquired by Community Health Systems Inc. for $3.9 billion dollars, eventually totaling $7.6 billion dollars (including assumed debt) in a deal that HMA investors feel is motivated by the current hardships the company is facing. HMA stockholders and federal regulators have to still clear the deal even though the boards of directors of both organizations have approved the merger. After the deal was disclosed on Tuesday, HMA stocks fell 11 percent to $13.30 in trading, down $1.62 from its Monday price of $14.92 per share. HMA also stated on Tuesday that its second quarter earnings of 10 to 11 cents per share on $ 1.46 billion of revenue would fall well below Wall Street predictions (Murphy, 2013). Identify the current industry trend that has the most significant impact on your chosen organization’s financial performance. Indicate the trend’s impact on the financial performance of the organization. As the ...

1. FINANCIAL STATEMENT ANALYSIS: HEALTH
MANAGEMENT ASSOCIATES
LA TONIA STEWART
DR. LAURA FORBES
HSA 525
AUGUST 4, 2013
FINANCIAL STATEMENT ANALYSIS: HEALTH
MANAGEMENT ASSOCIATES
Based on your review of the financial statements, suggest a key
insight about the financial health of the company. Speculate on
the likely reaction to the financial statements from various
stakeholder groups (employee, investors, shareholders). Provide
support for your rationale.
Based on review of recent financial statements, Health
Management Associates is in a precarious financial position due
to its current legal woes and rising bad debt. The organization
has been served with subpoenas by the Justice Department, the
Department of Health and Human Services and Office of the
Inspector General requesting records pertaining to a software
program used by ED doctors and records regarding emergency
department management In December 2012, CBS news
magazine “60 Minutes” aired a story that featured interviews
with several former HMA employees stating there was pressure
from the company’s hospitals to admit patients from emergency
rooms in order to maximize profits (Britt, 2012). HMA’s former
compliance director, Paul Meyer, alleged HMA’s fraudulent

2. practices in regard to Medicare and Medicaid patients was
worthy of government investigation. In addition to Meyer’s
claims, a hospital administrator, an executive vice-president and
two doctors charged HMA with inappropriate systemic hospital
admissions by ordering unnecessary tests and admitting patients
without cause in an effort to increase revenue. Physicians were
pressured to meet admissions quotas set by HMA or risk being
reprimanded and even terminated. The former employees allege
that HMA set an overall benchmark of 20 percent admission rate
for emergency department patients and a 50 percent admission
benchmark for patients 65 and older. As a result of the
December 2, 2012 “60 Minutes” investigative report, HMA
shares fell sharply on Monday, December 3, 2012 by 5.09
percent to $7.55.
As of July 30, 2013 HMA is now being acquired by
Community Health Systems Inc. for $3.9 billion dollars,
eventually totaling $7.6 billion dollars (including assumed debt)
in a deal that HMA investors feel is motivated by the current
hardships the company is facing. HMA stockholders and federal
regulators have to still clear the deal even though the boards of
directors of both organizations have approved the merger. After
the deal was disclosed on Tuesday, HMA stocks fell 11 percent
to $13.30 in trading, down $1.62 from its Monday price of
$14.92 per share. HMA also stated on Tuesday that its second
quarter earnings of 10 to 11 cents per share on $ 1.46 billion of
revenue would fall well below Wall Street predictions (Murphy,
2013).
Identify the current industry trend that has the most significant
impact on your chosen organization’s financial performance.
Indicate the trend’s impact on the financial performance of the
organization. As the CFO, suggest at least one (1) way that you
might minimize the impact of the trend on the organization.
The current industry trend impacting the financial performance
of HMA is declining hospital admissions, as many patients have
chosen to cut back or delay any elective surgeries and
procedures. Due to the recession that began in December 2007,

3. many people lost health insurance as a result of job losses and
declining employer based health care coverage benefits. Added
to the mix are an ever increasing pool of uninsured patients,
uncollectible revenue (bad debt) and drastic cuts to federal
funding on which many hospitals rely. As CFO, I believe the
recent merger with Community Health Systems is a step in the
right direction as it will create a larger hospital chain, with a
heavy presence in the South that will benefit from the federal
healthcare overhaul. Beginning in 2014, the Affordable Care
Act (ACA) will help ease the financial burdens many hospitals
face when providing charity care for indigent patients. The ACA
will provide the uninsured with income-based tax credits so
they can purchase insurance coverage as well as expanding
coverage for Medicaid programs in many states (USA.gov).
As the CFO, suggest one (1) key strategy that you might use in
order to improve the financial performance of the organization.
Recommend an approach to implement the suggested strategy.
Provide support for your recommendation.
As previously stated, as CFO I believe merging with
Community Health Systems is but one positive step in the right
direction with regard to improving the financial future of the
organization. Going forward, the merger would be an optimal
time for the newly formed organization to foster a culture of
improvement, openness, support and learning if it is going to
survive. As CFO, it is my responsibility to work with senior
leadership to set and implement clear internal control initiatives
that will involve oversight, authorization and ethical leadership
within the organization. There definitely has to be transparency
within the organization with regard to policies and procedures if
there is to be an environment of trust among employees at all
levels. One key concept to remember here is leaders model the
way. This means that leadership must take ownership of always
setting the example, being accountable, demonstrating
confidence, and providing clarity if they are to be taken
seriously.

4. REFERENCES
About us: Health Management Associates. Retrieved August 3,
2014 from http://www.healthmanagement.com/
Britt, R (2012, December 3). HMA feels fallout from “60
Minutes” story. The Wall Street Journal.
De La Merced, M.J. (2013, July 30). Community Health agrees
to buy H.M.A. for $3.6 billion. The New York Times.
How does the Affordable Care Act help people like me?
Retrieved August 4, 2013 from
https://www.healthcare.gov/how-does-the-affordable-care-act-
affect-me/
Kelly, S. and Humer, C. (2013, July 30), Update 4-Community
Health faces investor fight in $3.9 bln HMA deal. Reuters
Edition U.S.