Consolidation is still the buzzword in health care, as the biggies spread their wings through mergers. An outfit some hedge funds are buying is Regency Health Services (RHS), whose shares have rocketed from 9 to 15.

A surge of buying took place quite recently--about the time early investors with big blocks of shares were selling. So why was the price climbing despite all that unloading?

To some pros, it had become evident that a large health-care service company had mounted a sophisticated program of accumulation--to take advantage of insider groups' selling.

''Regency is worth 22 to 25 in a buyout,'' figures one New York investment strategist who has been tracking the stock. ''It's a sight to behold when heavy selling by big-block holders translates into rising prices,'' he notes. The pattern signals that the persistent buying is on behalf of a group with buyout designs. CEO Richard Matros says speculation that Regency is a takeover target is totally unfounded.