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HMA's Shareholder Battle Intensifies

July 10, 2013

Glenview Capital Management, the largest of Health Management Associates' shareholders, is calling for a major leadership change at HMA. It sees "a deficiency at both the board and management level" and wants a new board of directors.

UPDATE: 7/10/2013: Reuters reports that rivals of Health Management Associates, including Community Health Systems, are discussing a potential deal to buy the $4 billion hospital operator.

Troubles have worsened for beleaguered, for-profit, publicly-traded hospital chain Health Management Associates.  Glenview Capital Management, its largest shareholder, filed documents this month with the Securities and Exchange Commission calling for the replacement of its board of directors.

New York City-based hedge fund Glenview owns 14.6% of the company's stocks. Headquartered in Naples, FL, HMA operates 71 healthcare organizations in 15 states.  

In the SEC filing, Glenview says, "…[W]e are setting forth a path that we believe creates the strongest future for HMA's patients, employees, and investors while minimizing the risk to each vital constituency. We suggest HMA shareholders consent to fully reconstitute the Board…"

Glenview recommended replacing the board with "highly qualified, independent, newly elected directors" which it dubbed the "Fresh Alternative."

"We believe that our shared investment in HMA is best served with a Board who has the capabilities, vision, tenacity, and spirit to build a strong independent HMA and resolve legacy regulatory issues while concurrently being open to all avenues of shareholder value creation, including strong capital allocation and the rigorous evaluation of all strategic alternatives," the filing reads.

 

In its call for leadership change at HMA, Glenview accused the company of having "a deficiency at both the Board and management level."

In response to the SEC filing, HMA's board of directors issued a statement to shareholders rejecting the idea of instituting board members specially selected by Glenview.

"In our view, Glenview's actions are an unnecessary distraction to the Company's strategic review process and an attempt to advance its own agenda for the Company with its hand-picked nominees. … [O]ur focus is on serving the best interests of all stockholders over the narrow interests of one, as well as ensuring that we honor our commitment to provide our patients and communities with vital services of the highest quality. As you would expect, we are considering all strategic alternatives and opportunities available to the Company, including those alternatives suggested by Glenview."

"…[W]e strongly urge you to allow us to complete our work for the benefit of all stockholders, and to take no action in response to the Glenview materials until you hear from us about the results of our work so that you can make a fully informed decision. Please do not allow Glenview's efforts to disrupt this process," the statement continued.

 

This battle with Glenview comes on the heels of several other recent challenges for HMA.

In December 2012, CBS' "60 Minutes" aired a story in which former HMA employees accused the company of admitting patients for the sake of revenue rather than medical necessity. The company denies the allegations.

In May, HMA ratified a "poison pill"—a legal maneuver designed to thwart a hostile takeover by a large stakeholder—to prevent Glenview from seizing control of the company. Glenview has also filed documents with the SEC requesting that HMA amend the poison pill.

Also in May, president and CEO Gary D. Newsome announced plans to retire at the end of July to head a religious program in South America.

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