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HMA Earnings Lower Than Predicted

In the wake of Health Management Associates' announcement Tuesday that first-quarter earnings would be lower than predicted, analysts speculated on reasons for it and what, if anything, it means.  They disagreed on whether this is a reason to sell the stock or buy more of it while it's in a dip.

The Naples-based hospital chain said in itspress release late Tuesday that it expects to report net revenue of about $1.48 billion, less than expected, and that it would be adjusting expectations downward for the rest of the year.

The main culprit was a plunge in inpatient admissions, accompanied by a steep increase in "observations."  Medicare patients in observation status can be indistinguishable from those who have been officially admitted, getting the same tests and treatments, but the hospital receives less money and the patient pays more -- sometimes a lot more.

There are at least two theories about why there was a sharp drop in admissions:

--Medicare audit teams have been actively scrutinizing admissions at all hospitals to make sure they met criteria, and if in the opinion of the auditors they didn't, hospitals would have to pay the money back.

--Physicians may have modified their behavior in admitting patients through the emergency room, following a broadcast in December of CBS 60 Minutes that claimed HMA was inappropriately pressuring doctors to admit patients to boost income.

HMA kicked off its second quarter with a bang, completing acquisitionof an 80-percent interest in  Bayfront Medical Center in St. Petersburg. The chain has 71 hospitals and 460 clinics in 15 states, according to its website.

Carol Gentry, founder and special correspondent of Health News Florida, has four decades of experience covering health finance and policy, with an emphasis on consumer education and protection.