Health Management Associates Announces Restatement of Financial Statements
Health Management Associates, Inc. announced that it will restate its financial statements for the years ended December 31, 2010, 2011 and 2012 and the quarters ended March 31 and June 30, 2013 to correct the accounting treatment of approximately $31.0 million of Medicare and Medicaid Health Information Technology (“HCIT”) payments recognized as income between July 1, 2011 and June 30, 2013. The Company intends to file the necessary amendments to its prior filings as soon as possible, following which the Company will file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2013.
HMA participates in federal and various state HCIT programs pursuant to which Medicare and Medicaid incentive payments are paid to eligible hospitals and physician practices that implement and achieve “meaningful use” of certified electronic health record (“EHR”) technology. In October 2013, based on the results of an internal review, the Company determined that it had made an error in applying the requirements for certifying its EHR technology under these programs and, as a result, that 11 of the hospitals it had enrolled in the HCIT programs did not meet the “meaningful use” criteria necessary to qualify for HCIT payments. The Company promptly notified the Centers for Medicare and Medicaid Services (“CMS”), the government agency responsible for administering federal HCIT programs, as well as the agencies that administer the various relevant state HCIT programs, of its determination.
The Company estimates that, between July 1, 2011 and September 30, 2013, it recognized as income HCIT incentive payments totaling approximately $31.0 million for the hospitals that did not meet the “meaningful use” criteria. Of these payments, the Company recognized as income approximately $8.3 million in 2011, approximately $17.3 million in 2012 and approximately $5.4 million in the first six months of 2013. On October 30, 2013, the Company withdrew the 11 hospitals from the HCIT programs and has repaid the majority of the funds to CMS. The Company is in the process of repaying the balance of the funds to the relevant state programs. The Company expects to re-enroll the hospitals in the HCIT programs and may be able to recoup some portion of the amounts repaid.
The Company has concluded that, due solely to this matter, its financial statements and related communications for fiscal years 2010, 2011 and 2012 and the fiscal quarters ended March 31, 2013 and June 30, 2013 and its annual 2013 guidance issued on July 30, 2013 should no longer be relied upon. The Company is in the process of remediating a material weakness in internal control relating to the administration and oversight of its EHR enrollment process that it has now concluded existed as of December 31, 2012, March 31, 2013 and June 30, 2013. The Company today filed a Current Report on Form 8-K containing additional information concerning this matter.
The registration statement on Form S-4, previously filed by Community Health Systems, Inc. (NYSE:CYH) (“CHS”) with the United States Securities and Exchange Commission (“SEC”), and containing a preliminary proxy statement of HMA and a preliminary prospectus of CHS in connection with the announced merger, has not yet been declared effective by the SEC. The Company expects that the Form S-4 will be amended as soon as possible following the filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 to incorporate the restated financial statements and the Company’s results for the third quarter. Upon the Form S-4 being declared effective by the SEC, HMA will mail the proxy statement/prospectus to HMA stockholders and hold a special meeting of HMA stockholders to consider and vote upon the adoption of the merger agreement between CHS and HMA. Both parties continue to expect the transaction to close during the first quarter of 2014, subject to satisfaction of customary closing conditions contained in the merger agreement, including approval of HMA’s stockholders and expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
At this time, the Company is not providing annual guidance for 2013, and the previously issued guidance provided on July 30, 2013 has been withdrawn.
About HMA
Health Management Associates, Inc., through its affiliates, owns and manages hospitals and ambulatory surgery centers in small cities and selected larger urban markets. HMA currently operates 71 hospitals in 15 states with approximately 11,000 licensed beds. Shares in Health Management Associates are traded on the New York Stock Exchange under the symbol “HMA.”
All references to “Health Management,” “HMA” or the “Company” used in this release refer to Health Management Associates, Inc. and its affiliates.