Peers, Collectors Monitor HMA’s New Collections Strategy

Health Management Associates (NYSE: HMA) may have piqued interest among it peers, debt buyers and collections professionals when it announced last week that it will move non-paying uninsured patients into collections immediately if they don’t sign a promissory note agreeing to a payment plan. But don’t expect other hospital groups to immediately follow suit, industry experts say.

“This is not a trend yet,” said Jeffrey Englander, healthcare facilities analyst for Standard & Poor’s. The Naples, Fla.-based hospital operator is dealing with some unique problems, said Englander, who follows HMA and other for-profit hospitals.

Specifically, HMA is struggling with some of the industry’s highest levels of uncompensated care expense. About one-third of its hospital beds are in Florida and Texas, states with the second and third largest number of uninsured patients, Englander said.

During its third quarter earnings report, HMA said it set aside $126.5 million during the quarter for doubtful accounts, or bad debt expense, compared to $94.1 million for the same period a year ago. HMA said interviews with its uninsured and indigent patients revealed that some were choosing HMA facilities because the company was less aggressive than other hospitals about collecting payment.

“This is something HMA is doing because they feel this is something they have to try as a solution,” Englander said. “I’m not sure everyone in the industry will feel this is the way to handle it.”

HMA, which operates 59 hospitals in 15 states, said it will continue to offer a 60 percent discount to uninsured patients. “But if you do not pay, you can expect to experience four to five years of concentrated collection effort should you not deal with your account,” Kelly Curry, HMA’s executive vice president and chief financial officer said during an earnings conference call.

HMA, which sold $16 million in accounts receivables during the quarter that had been previously written off, added that selling receivables will be an ongoing part of the company’s strategy to manage uninsured account receivables.

Although hospital executives may take pause at HMA’s strategy for reigning in bad debt expense, industry analyst say HMA’s peers, along with debt buyers and collection agencies will be watching how the approach fairs. “I think people will be watching HMA and all the hospitals to see what can be done to get more value for receivables,” said Lauren Coste, director of corporate finance for Fitch Ratings.