Bloomberg News

Health Management Drops After CRT Analyst Notes Lawsuit

January 12, 2012

(Updates with closing share price in the third paragraph.)

Jan. 9 (Bloomberg) -- Health Management Associates Inc., an operator of acute-care hospitals in the rural southern U.S., fell the most in five weeks after an analyst raised concerns about an October whistle-blower lawsuit against the company involving Medicare billing.

Sheryl Skolnick, an analyst for CRT Capital Group LLC, wrote in a note to investors today that the suit was filed by a former Health Management employee named Paul Meyer. Meyer has “long experience” investigating Medicare fraud, Skolnick said.

HMA dropped 7 percent to $6.96 at the close in New York, the biggest decline since Dec. 2. Meyer filed the suit in October in state court in Florida and it was moved to federal court in Fort Lauderdale in November, according to court records. The company has filed court papers denying allegations in the complaint.

Analyst notes and news stories “refocused people’s attention” on the lawsuit, said A.J. Rice, an analyst with Susquehanna Financial Group in New York, in a telephone interview today. “People will always react whenever there’s a question about a government billing issue,” said Rice, who has a “positive” rating on Health Mangement. “Investors should take advantage of the selloff.”

Meyer said in his complaint that several HMA hospitals had won higher government payments from the Medicare program for the elderly and disabled, in part by “the submission of fraudulent billing to Medicare through the improper admission of patients as inpatients even though such patients clearly did not meet the standards for inpatient admission.”

Compliance Director

He said he was fired on the day he told the company he would report violations to the U.S. government.

HMA, while saying in its answers to the allegations that Meyer was promoted to director of compliance in January 2010 and fired last September, denied the allegations of fraudulent billing. A trial is scheduled for January 2013.

John Merriwether, a spokesman for Naples, Florida-based Health Management, didn’t immediately respond to a request for comment today. HMA is scheduled to make a presentation tomorrow at the J.P. Morgan Healthcare Conference in San Francisco.

The case is Meyer v. Health Management Associates Inc., 11- cv-62479-RNS, U.S. District Court, Southern District of Florida (Ft. Lauderdale).

--Editors: Jeffrey Tannenbaum, Bruce Rule

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net.

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net.


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