Health Management Associates 10-Q 2009 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2009

or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from             to            

Commission File Number: 001-11141

HEALTH MANAGEMENT ASSOCIATES, INC.

(Exact name of registrant as specified in its charter)

Delaware	61-0963645
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5811 Pelican Bay Boulevard, Suite 500, Naples, Florida	34108-2710
(Address of principal executive offices)	(Zip Code)

(239) 598-3131

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of October 30, 2009, there were 248,388,246 shares of the registrant’s Class A common stock outstanding.

HEALTH MANAGEMENT ASSOCIATES, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009

INDEX

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements.
	Consolidated Statements of Income - Three and Nine Months Ended September 30, 2009 and 2008	3
	Condensed Consolidated Balance Sheets - September 30, 2009 and December 31, 2008	4
	Consolidated Statements of Stockholders’ Equity - Nine Months Ended September 30, 2009 and 2008	5
	Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2009 and 2008	6
	Notes to Interim Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 5.	Other Information	28
Item 6.	Exhibits	28
Signatures		29
Index To Exhibits		30

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

HEALTH MANAGEMENT ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
				(as adjusted - see Note 7)						(as adjusted - see Note 7)
Net revenue	$	1,121,903		$	1,060,224		$	3,418,373		$	3,270,548
Operating expenses:
Salaries and benefits		438,202			440,624			1,332,265			1,339,165
Supplies		154,262			145,786			480,051			447,026
Provision for doubtful accounts		143,745			120,039			419,872			364,472
Depreciation and amortization		60,424			58,543			179,198			173,150
Rent expense		25,532			23,006			75,060			66,841
Other operating expenses		202,147			190,302			602,497			573,667
Total operating expenses		1,024,312			978,300			3,088,943			2,964,321
Income from operations		97,591			81,924			329,430			306,227
Other income (expense):
Gains on sales of assets, net (see Note 6)		90			1,201			1,936			169,140
Interest and other income, net		942			1,352			1,499			5,200
Interest expense		(54,300	)		(59,716	)		(163,485	)		(186,932	)
Gains (losses) on early extinguishment of debt, net		(533	)		—			16,202			(700	)
Write-offs of deferred financing costs		—			—			(444	)		(1,497	)
Income from continuing operations before income taxes		43,790			24,761			185,138			291,438
Provision for income taxes		(12,495	)		(4,784	)		(62,392	)		(105,963	)
Income from continuing operations		31,295			19,977			122,746			185,475
Income (loss) from discontinued operations, including gains on disposals, net of income taxes (see Notes 4 and 6)		626			(4,597	)		1,042			(13,602	)
Consolidated net income		31,921			15,380			123,788			171,873
Net income attributable to noncontrolling interests		(6,476	)		(4,569	)		(19,734	)		(10,754	)
Net income attributable to Health Management Associates, Inc.	$	25,445		$	10,811		$	104,054		$	161,119
Earnings (loss) per share attributable to Health Management Associates, Inc. common stockholders:
Basic
Continuing operations	$	0.10		$	0.06		$	0.42		$	0.72
Discontinued operations		—			(0.02	)		—			(0.06	)
Net income	$	0.10		$	0.04		$	0.42		$	0.66
Diluted
Continuing operations	$	0.10		$	0.06		$	0.42		$	0.72
Discontinued operations		—			(0.02	)		—			(0.06	)
Net income	$	0.10		$	0.04		$	0.42		$	0.66
Weighted average number of shares outstanding:
Basic		245,234			243,286			244,953			243,249
Diluted		247,514			244,805			246,225			244,774

See accompanying notes.

3

HEALTH MANAGEMENT ASSOCIATES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(unaudited)

	September 30, 2009			December 31, 2008
				(as adjusted - see Note 7)
ASSETS
Current assets:
Cash and cash equivalents	$	222,346		$	143,614
Accounts receivable, net		618,143			621,505
Supplies, prepaid expenses and other assets		156,689			153,167
Prepaid and recoverable income taxes		16,739			59,278
Restricted funds		34,476			31,471
Deferred income taxes		16,743			9,292
Assets of discontinued operations		99,119			96,346
Total current assets		1,164,255			1,114,673
Property, plant and equipment		3,797,460			3,647,009
Accumulated depreciation and amortization		(1,411,682	)		(1,258,939	)
Net property, plant and equipment		2,385,778			2,388,070
Restricted funds		32,659			37,117
Goodwill		877,652			877,973
Deferred charges and other assets		126,941			136,399
Total assets	$	4,587,285		$	4,554,232
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	108,684		$	171,408
Accrued expenses and other liabilities		306,182			251,422
Liabilities of discontinued operations		8,502			4,830
Current maturities of long-term debt and capital lease obligations		36,428			62,792
Total current liabilities		459,796			490,452
Deferred income taxes		155,537			94,023
Long-term debt and capital lease obligations, less current maturities		3,011,355			3,144,042
Interest rate swap contract		223,406			283,750
Other long-term liabilities		211,302			207,286
Total liabilities		4,061,396			4,219,553
Redeemable equity securities		79,671			48,868
Stockholders’ equity:
Health Management Associates, Inc. equity:
Preferred stock, $0.01 par value, 5,000 shares authorized, none issued		—			—
Common stock, Class A, $0.01 par value, 750,000 shares authorized, 248,037 shares and 244,221 shares issued at September 30, 2009 and December 31, 2008, respectively		2,480			2,442
Accumulated other comprehensive income (loss), net of income taxes		(131,229	)		(169,914	)
Additional paid-in capital		124,154			108,374
Retained earnings		342,273			238,219
Total Health Management Associates, Inc. stockholders’ equity		337,678			179,121
Noncontrolling interests		108,540			106,690
Total stockholders’ equity		446,218			285,811
Total liabilities and stockholders’ equity	$	4,587,285		$	4,554,232

See accompanying notes.

4

HEALTH MANAGEMENT ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, 2009 and 2008

(in thousands)

(unaudited)

	Health Management Associates, Inc.
	Common Stock			Accumulated Other Comprehensive Income (Loss), net			Additional Paid-in Capital			Retained Earnings		Non- controlling Interests			Totals
	Shares	Par Value
Balances at January 1, 2009 (as adjusted - see Note 7)	244,221	$	2,442	$	(169,914	)	$	108,374		$	238,219	$	106,690		$	285,811
Comprehensive income:
Net income	—		—		—			—			104,054		19,734			123,788
Unrealized gains on available-for-sale securities, net	—		—		2,545			—			—		—			2,545
Change in fair value of interest rate swap contract, net	—		—		36,140			—			—		—			36,140
Total comprehensive income ($142,739 and $19,734 attributable to Health Management Associates, Inc. and noncontrolling interests, respectively)																162,473
Issuances of deferred stock and restricted stock, net of forfeitures, and related tax matters	2,384		24		—			(656	)		—		—			(632	)
Exercises of stock options	1,432		14		—			8,481			—		—			8,495
Stock-based compensation expense	—		—		—			7,955			—		—			7,955
Distributions to noncontrolling shareholders	—		—		—			—			—		(17,884	)		(17,884	)
Balances at September 30, 2009	248,037	$	2,480	$	(131,229	)	$	124,154		$	342,273	$	108,540		$	446,218

	Health Management Associates, Inc.
	Common Stock					Accumulated Other Comprehensive Income (Loss), net			Additional Paid-in Capital			Retained Earnings			Treasury Stock			Non- controlling Interests			Totals
	Shares		Par Value
Balances at January 1, 2008 (as reported)	277,184		$	2,772		$	(57,860	)	$	623,485		$	71,706		$	(559,075	)	$	—		$	81,028
Effects of new accounting guidance (see Note 7):
Noncontrolling interests	—			—			—			—			—			—			917			917
Convertible debt	—			—			—			(8,473	)		(1,636	)		—			—			(10,109	)
Balances at January 1, 2008 (as adjusted)	277,184			2,772			(57,860	)		615,012			70,070			(559,075	)		917			71,836
Comprehensive income:
Net income (as adjusted - see Note 7)	—			—			—			—			161,119			—			10,754			171,873
Unrealized losses on available-for-sale securities, net	—			—			(2,809	)		—			—			—			—			(2,809	)
Change in fair value of interest rate swap contract, net	—			—			(7,050	)		—			—			—			—			(7,050	)
Total comprehensive income ($151,260 and $10,754 attributable to Health Management Associates, Inc. and noncontrolling interests, respectively)																						162,014
Sale of convertible debt securities, net	—			—			—			34,009			—			—			—			34,009
Issuances of deferred stock and restricted stock, net of forfeitures, and related tax matters	990			10			—			(2,311	)		—			—			—			(2,301	)
Stock-based compensation expense	—			—			—			13,535			—			—			—			13,535
Forfeited restricted stock dividends and other matters	—			—			—			2,658			—			—			—			2,658
Treasury stock retirement	(34,318	)		(343	)		—			(558,732	)		—			559,075			—			—
Investments by noncontrolling shareholders	—			—			—			—			—			—			92,458			92,458
Distributions to noncontrolling shareholders	—			—			—			—			—			—			(1,299	)		(1,299	)
Balances at September 30, 2008 (as adjusted)	243,856		$	2,439		$	(67,719	)	$	104,171		$	231,189		$	—		$	102,830		$	372,910

See accompanying notes.

5

HEALTH MANAGEMENT ASSOCIATES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2009			2008
				(as adjusted - see Note 7)
Cash flows from operating activities:
Consolidated net income	$	123,788		$	171,873
Adjustments to reconcile consolidated net income to net cash provided by continuing operating activities:
Depreciation and amortization		184,312			183,121
Provision for doubtful accounts		419,872			364,472
Stock-based compensation expense		7,955			13,535
Gains on sales of assets, net		(1,936	)		(169,140	)
(Gains) losses on early extinguishment of debt, net		(16,202	)		700
Write-offs of deferred financing costs		444			1,497
Long-lived asset impairment charge		—			921
Deferred income tax expense		29,859			80,115
Changes in assets and liabilities of continuing operations:
Accounts receivable		(420,297	)		(391,587	)
Supplies, prepaid expenses and other current assets		(3,468	)		(6,686	)
Prepaid and recoverable income taxes		47,766			63,527
Deferred charges and other long-term assets		(3,626	)		1,491
Accounts payable		(57,167	)		27,477
Accrued expenses and other liabilities		47,322			13,566
Equity compensation excess income tax benefits		(149	)		—
(Income) loss from discontinued operations, net		(1,042	)		13,602
Net cash provided by continuing operating activities		357,431			368,484
Cash flows from investing activities:
Additions to property, plant and equipment		(158,746	)		(155,948	)
Proceeds from sales of assets		4,653			14,384
Proceeds from sales of discontinued operations		—			18,166
Decreases in restricted funds		4,247			5,391
Acquisitions and other		(569	)		(2,420	)
Net cash used in continuing investing activities		(150,415	)		(120,427	)
Cash flows from financing activities:
Net proceeds from long-term borrowings		—			244,471
Principal payments on debt and capital lease obligations		(78,842	)		(440,143	)
Repurchases of convertible debt securities in the open market		(67,714	)		(292,000	)
Proceeds from exercises of stock options		8,495			—
Cash received from noncontrolling shareholders		21,212			322,485
Cash payments to noncontrolling shareholders		(17,884	)		(2,891	)
Payments of financing costs		—			(350	)
Equity compensation excess income tax benefits		149			—
Net cash used in continuing financing activities		(134,584	)		(168,428	)
Net increase in cash and cash equivalents before discontinued operations		72,432			79,629
Net increases (decreases) in cash and cash equivalents from discontinued operations:
Operating activities		6,745			(19,547	)
Investing activities		(440	)		(3,585	)
Financing activities		(5	)		(452	)
Net increase in cash and cash equivalents		78,732			56,045
Cash and cash equivalents at the beginning of the period		143,614			123,987
Cash and cash equivalents at the end of the period	$	222,346		$	180,032

See accompanying notes.

6

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2009

1. Business and Basis of Presentation

Health Management Associates, Inc. and its subsidiaries (“we,” “our” or “us”) provide health care services to patients in hospitals and other health care facilities located primarily in non-urban communities in the southeastern United States. As of October 30, 2009, we operated 54 hospitals in fifteen states with a total of 7,926 licensed beds. At such date, eighteen and ten of our hospitals were located in Florida and Mississippi, respectively. See Note 9 for information regarding a hospital system in Fort Smith, Arkansas that we plan to acquire before the end of 2009.

Unless specifically indicated otherwise, all amounts and percentages presented in the notes below are exclusive of our discontinued operations, which are identified at Note 4.

The interim condensed consolidated financial statements as of September 30, 2009 and for the three and nine months ended September 30, 2009 and 2008 are unaudited; however, such interim financial statements reflect all adjustments (consisting only of those of a normal recurring nature) that are, in our opinion, necessary for a fair presentation of our financial position, results of operations and cash flows. The condensed consolidated balance sheet as of December 31, 2008 was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2008. Our results of operations and cash flows for the interim periods presented herein are not necessarily indicative of the results to be expected for the full year due to, among other things, the seasonal nature of our business and potential changes in the economy.

The interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2008.

Our preparation of the interim condensed consolidated financial statements and accompanying notes requires us to make estimates and assumptions. Actual results could differ from those estimates. When completing the interim condensed consolidated financial statements included herein, we evaluated subsequent events up to and including the date that this Quarterly Report on Form 10-Q was filed with the SEC.

As more fully discussed at Note 7, the prior year interim condensed consolidated financial statements have been adjusted to comply with certain new GAAP requirements and reclassified to conform to the current year presentation.

2. Long-Term Debt and Capital Lease Obligations

The following discussion of our long-term debt and capital lease obligations should be read in conjunction with Notes 2 and 3 to the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2008. The table below summarizes our long-term debt and capital lease obligations (in thousands).

	September 30, 2009			December 31, 2008
				(as adjusted - see Note 7)
Revolving credit facilities (a) (b)	$	—		$	—
Term Loan (a)		2,515,809			2,579,875
6.125% Senior Notes due 2016, net of discounts of approximately $2,414 and $2,691 at September 30, 2009 and December 31, 2008, respectively		397,586			397,309
2028 Notes, net of discounts of approximately $17,375 and $42,670 at September 30, 2009 and December 31, 2008, respectively (c)		74,075			157,330
Installment notes and other unsecured long-term debt		6,682			8,191
Capital lease obligations		53,631			64,129
		3,047,783			3,206,834
Less current maturities		(36,428	)		(62,792	)
Long-term debt and capital lease obligations, less current maturities	$	3,011,355		$	3,144,042

7

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. Long-Term Debt and Capital Lease Obligations (continued)

a. Senior Secured Credit Facilities.Our senior secured credit facilities (the “Credit Facilities”), which we entered into on February 16, 2007, consist of a seven-year $2.75 billion term loan (the “Term Loan”) and a $500.0 million six-year revolving credit facility (the “Revolving Credit Agreement”). The Term Loan requires (i) quarterly principal payments to amortize approximately 1% of the loan’s face value during each year of the loan’s term and (ii) a balloon payment for the remaining outstanding loan balance at the termination of the agreement. We are also required to repay principal under the Term Loan in an amount that can be as much as 50% of our annual Excess Cash Flow, as such term is defined in the loan agreement. Based on the annual Excess Cash Flow generated during the years ended December 31, 2008 and 2007, we were required to repay principal of approximately $94.1 million and $47.9 million, respectively. We satisfied these Term Loan requirements with principal payments of $18.4 million and $123.6 million during the nine months ended September 30, 2009 and 2008, respectively. We also prepaid $25.0 million of principal under the Term Loan during the nine months ended September 30, 2009 (such amount will be credited against our 2009 annual Excess Cash Flow obligation, if any). In connection with our annual Excess Cash Flow payments and our Term Loan prepayment, $0.4 million and $1.5 million of deferred financing costs were written off during the nine months ended September 30, 2009 and 2008, respectively.

During 2007, as required by the agreements underlying the Credit Facilities, we entered into a receive variable/pay fixed interest rate swap contract that has a term concurrent with the Term Loan. Notwithstanding this contractual arrangement, we remain ultimately responsible for all amounts due and payable under the Term Loan. Therefore, we are exposed to financial risk in the event of nonperformance by one or more of the counterparties to the contract. The interest rate swap contract provides for us to pay interest at a fixed rate of 6.7445% on the contract’s notional amount, which is expected to reasonably approximate the declining principal balance of the Term Loan. At September 30, 2009, approximately $66.6 million of the Term Loan’s outstanding balance was not covered by the interest rate swap contract and, accordingly, such amount was subject to the Credit Facilities’ variable interest rate provisions (i.e., an effective interest rate of approximately 2.0% on both September 30, 2009 and October 30, 2009).

Although there were no amounts outstanding under the Revolving Credit Agreement on October 30, 2009, standby letters of credit in favor of third parties of approximately $44.8 million reduced the amount available for borrowing thereunder to $455.2 million on such date. The effective interest rate on the variable rate Revolving Credit Agreement was approximately 2.0% on both September 30, 2009 and October 30, 2009.

b. Demand Promissory Notes. On July 14, 2009, we executed a $10.0 million demand promissory note in favor of a bank (the “2009 Demand Note”). The 2009 Demand Note replaced a $20.0 million demand promissory note with the same bank that was terminated on June 30, 2009 with no amounts outstanding thereunder at that time. Pursuant to the terms and conditions of the 2009 Demand Note, we may borrow and repay, on a revolving basis, up to the principal face amount of the note. Such borrowings, if any, will be secured on a pari passu basis with the Credit Facilities. All principal and accrued interest under the 2009 Demand Note will be immediately due and payable upon the bank’s written demand. Absent such a demand, interest will be payable monthly and determined using the LIBOR Market Index Rate, as that term is defined in the loan agreement, plus 2.0%. Although there were no amounts outstanding on September 30, 2009 and October 30, 2009, the effective interest rate on the 2009 Demand Note was approximately 2.3% on both those dates.

c. 3.75% Convertible Senior Subordinated Notes due 2028. On May 21, 2008, we completed a private placement of $250.0 million of 3.75% Convertible Senior Subordinated Notes due 2028 (the “2028 Notes”) to qualified institutional buyers under Rule 144A of the Securities Act of 1933. After transaction-related costs, the sale of the 2028 Notes resulted in our receipt of net proceeds of approximately $244.0 million, which we used to repurchase certain of our 1.50% Convertible Senior Subordinated Notes due 2023 in the open market (see further discussion below). During December 2008, we repurchased $50.0 million of principal face amount 2028 Notes in the open market.

During the nine months ended September 30, 2009, we used cash on hand to repurchase approximately $108.6 million of principal face amount 2028 Notes. Such notes were repurchased in the open market at approximately 62.4% of their principal face amount, plus accrued and unpaid interest, and resulted in a net gain on the early extinguishment of debt of $16.2 million.

1.50% Convertible Senior Subordinated Notes due 2023. During the nine months ended September 30, 2008, we used the net proceeds from the sale of the 2028 Notes and cash on hand to repurchase $292.0 million of our then outstanding principal face amount 1.50% Convertible Senior Subordinated Notes due 2023 (the “2023 Notes”). Such notes were repurchased in the open market at 100% of their principal face amount, plus accrued and unpaid interest. In connection with these 2023 Note repurchases, we recorded losses on the early extinguishment of debt of approximately $0.7 million.

8

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. Long-Term Debt and Capital Lease Obligations (continued)

Holders of the 2023 Notes had the right to require us to repurchase all or a portion of their notes on August 1, 2008 for a cash purchase price equal to 100% of the principal face amount of such notes, plus accrued and unpaid interest. As a result, we were required to repurchase substantially all of the then outstanding 2023 Notes on such date for approximately $288.7 million. The holders of 2023 Notes with a principal face value of $0.2 million did not require us to repurchase their notes and, accordingly, those notes remain outstanding.

Other. The estimated fair values of our long-term debt instruments, determined by reference to quoted market prices, were as follows (in thousands):

	September 30, 2009		December 31, 2008
2028 Notes	$	90,461	$	86,956
6.125% Senior Notes due 2016		369,000		256,000
Term Loan		2,381,100		1,694,419

The estimated fair values of our other long-term debt instruments reasonably approximate their carrying amounts in the condensed consolidated balance sheets. See Note 5 for a discussion of the estimated fair values of our other financial instruments, including valuation methods and significant assumptions.

At September 30, 2009, we were in compliance with all of the covenants contained in our debt agreements.

3. Earnings Per Share

Basic earnings per share is computed based on the weighted average number of outstanding common shares. Diluted earnings per share is computed based on the weighted average number of outstanding common shares plus the dilutive effect of common stock equivalents, primarily computed using the treasury stock method. The table below sets forth the computations of basic and diluted earnings (loss) per share for our common stockholders (in thousands, except per share amounts).

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
				(as adjusted - see Note 7)						(as adjusted - see Note 7)
Numerators:
Income from continuing operations	$	31,295		$	19,977		$	122,746		$	185,475
Income attributable to noncontrolling interests		(6,294	)		(4,607	)		(18,956	)		(10,756	)
Income from continuing operations attributable to
Health Management Associates, Inc. common stockholders		25,001			15,370			103,790			174,719
Income (loss) from discontinued operations		626			(4,597	)		1,042			(13,602	)
Loss (income) attributable to noncontrolling interests		(182	)		38			(778	)		2
Income (loss) from discontinued operations attributable to
Health Management Associates, Inc. common stockholders		444			(4,559	)		264			(13,600	)
Net income attributable to Health Management Associates, Inc. common stockholders	$	25,445		$	10,811		$	104,054		$	161,119
Denominators:
Denominator for basic earnings per share - weighted average number of outstanding common shares		245,234			243,286			244,953			243,249
Effect of dilutive securities:
Stock-based compensation		2,280			1,519			1,272			1,525
Denominator for diluted earnings per share		247,514			244,805			246,225			244,774
Earnings (loss) per share:
Basic
Continuing operations	$	0.10		$	0.06		$	0.42		$	0.72
Discontinued operations		—			(0.02	)		—			(0.06	)
Net income	$	0.10		$	0.04		$	0.42		$	0.66
Diluted
Continuing operations	$	0.10		$	0.06		$	0.42		$	0.72
Discontinued operations		—			(0.02	)		—			(0.06	)
Net income	$	0.10		$	0.04		$	0.42		$	0.66

Approximately 7.6 million and 10.9 million common stock equivalents relating to stock options to purchase shares of our common stock were not included in the computations of diluted earnings per share during the three and nine months ended September 30, 2009, respectively, because the exercise prices of such stock options were greater than the average market price of our common stock during the respective measurement periods. The corresponding amounts were 13.3 million and 12.7 million common stock equivalents for the three and nine months ended September 30, 2008, respectively.

9

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

3. Earnings Per Share (continued)

Approximately 0.8 million and 2.6 million common stock equivalents relating to deferred stock and restricted stock were not included in the computations of diluted earnings per share during the three and nine months ended September 30, 2009, respectively, because their effect was antidilutive or satisfaction of required performance and market conditions for certain stock-based compensation was not achieved by the end of the reporting period. The corresponding amounts for the three and nine months ended September 30, 2008 were 1.4 million and 2.7 million common stock equivalents, respectively.

4. Discontinued Operations

Our discontinued operations during the periods presented herein included: (i) the 172-bed Woman’s Center at Dallas Regional Medical Center in Mesquite, Texas; (ii) 189-bed Gulf Coast Medical Center in Biloxi, Mississippi; (iii) 79-bed Southwest Regional Medical Center in Little Rock, Arkansas; (iv) 70-bed Franklin Regional Medical Center in Louisburg, North Carolina; (v) 125-bed Upstate Carolina Medical Center in Gaffney, South Carolina; and (vi) certain other health care operations affiliated with those hospitals. As discussed at Note 6, our physician practices in North Carolina and South Carolina were transitioned to affiliates of Novant Health, Inc. during 2008 and, accordingly, discontinued operations also included those entities.

Subsequent to December 31, 2008, we modified the group of hospitals and affiliated health care entities that constitute discontinued operations by adding our hospitals in Louisburg, North Carolina and Gaffney, South Carolina (as discussed at Note 6). Accordingly, our discontinued operations have been retroactively adjusted in accordance with GAAP to conform to the current period presentation of the interim condensed consolidated financial statements. See Note 7 for a reconciliation between previously reported amounts and our current presentation.

Gulf Coast Medical Center and the Woman’s Center at Dallas Regional Medical Center (the “Center”) were closed on January 1, 2008 and June 1, 2008, respectively. Although we are currently evaluating various disposal alternatives for those hospitals’ tangible long-lived assets, which primarily consist of property, plant and equipment, the timing of such divestitures has not yet been determined. During our evaluative process, we concluded that the estimated fair value of the Center’s long-lived assets, less costs to sell, was lower than its net book value. Accordingly, we recorded a long-lived asset and goodwill impairment charge of approximately $23.1 million during the nine months ended September 30, 2008 to reduce the Center’s long-lived assets to their estimated net realizable value and write-off all of the Center’s allocated goodwill.

We closed Southwest Regional Medical Center (“SRMC”) on July 15, 2008. On August 28, 2008, we completed a sale of the hospital’s tangible long-lived assets, which primarily consisted of property, plant and equipment. The selling price, which was paid in cash, was approximately $14.3 million. After allocating $5.7 million of goodwill to SRMC, this divestiture resulted in a gain of $3.2 million.

The operating results and cash flows of discontinued operations have been included in our consolidated financial statements up to the date of disposition. As provided by GAAP, the financial position, operating results and cash flows of the abovementioned entities have been presented as discontinued operations in the interim condensed consolidated financial statements. The table below sets forth the underlying details of discontinued operations (in thousands).

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
				(as adjusted - See Note 7)						(as adjusted - See Note 7)
Net revenue	$	23,047		$	27,032		$	70,199		$	109,499
Operating expenses and other:
Salaries and benefits		9,099			16,894			27,405			72,090
Provision for doubtful accounts		4,785			6,122			16,238			22,951
Depreciation and amortization		1,361			1,283			4,064			5,236
Other operating expenses		6,830			12,013			21,148			44,422
Long-lived asset and goodwill impairment charge		—			—			—			23,100
Total operating expenses and other		22,075			36,312			68,855			167,799
Income (loss) from operations		972			(9,280	)		1,344			(58,300	)
Gains on sales of assets and related other, net (see Note 6)		9			2,846			54			36,504
Other expenses, net		(76	)		(4	)		(185	)		(72	)
Income (loss) before income taxes		905			(6,438	)		1,213			(21,868	)
Income tax benefit (expense)		(279	)		1,841			(171	)		8,266
Income (loss) from discontinued operations	$	626		$	(4,597	)	$	1,042		$	(13,602	)

10

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Discontinued Operations (continued)

The principal components of assets and liabilities of discontinued operations in our interim condensed consolidated balance sheets are summarized below (in thousands).

	September 30, 2009		December 31, 2008
			(as adjusted - See Note 7)
Accounts receivable, net	$	12,350	$	9,961
Supplies, prepaid expenses and other assets		5,564		6,143
Long-lived assets and goodwill		81,205		80,242
Total assets of discontinued operations	$	99,119	$	96,346
Accounts payable, accrued expenses and other liabilities	$	4,314	$	4,307
Capital lease obligations		4,188		523
Total liabilities of discontinued operations	$	8,502	$	4,830

5. Fair Value Measurements

During September 2006, the Financial Accounting Standards Board (the “FASB”) issued new fair value accounting rules (the “Fair Value Guidance”), which, among other things, established a framework for measuring fair value and required supplemental disclosures about such fair value measurements. On January 1, 2009, we adopted the provisions of the Fair Value Guidance that relate to non-financial assets and liabilities that are not required or permitted to be recognized or disclosed at fair value on a recurring basis; however, there was no impact on our financial position or results of operations. Before the end of 2009, we will complete our goodwill impairment testing using the Fair Value Guidance measurement criteria.

The Fair Value Guidance defines fair value as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Fair Value Guidance also establishes a hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Fair Value Guidance describes the following three levels of inputs that may be used:

Level 1:	Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2:	Observable prices that are based on inputs not quoted on active markets but corroborated by market data.
Level 3:	Unobservable inputs when there is little or no market data available, thereby requiring an entity to develop its own assumptions. The fair value hierarchy gives the lowest priority to Level 3 inputs.

Below are the estimated fair values of our financial assets (liabilities) as of September 30, 2009 (in thousands).

	Level 1		Level 2			Level 3
Available-for-sale securities	$	12,456	$	—		$	—
Interest rate swap contract		—		(223,406	)		—
Totals	$	12,456	$	(223,406	)	$	—

The estimated fair value of our interest rate swap contract was determined using a model that considers various assumptions, including LIBOR swap rates, cash flow activity, yield curves and other relevant economic measures, all of which are observable market inputs that are classified under Level 2 of the fair value hierarchy. The model also incorporates valuation adjustments for credit risk.

11

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Fair Value Measurements (continued)

Cash and cash equivalents, net accounts receivable, accounts payable and accrued expenses and other liabilities are reflected in the condensed consolidated balance sheets at their estimated fair values due to their short-term nature. The estimated fair values of available-for-sale securities and long-term debt (the latter of which are disclosed at Note 2) were determined by reference to quoted market prices.

At both September 30, 2009 and December 31, 2008, the cost basis of our available-for-sale securities, which consisted of shares in two equity-based mutual funds, was approximately $9.7 million. Additionally, the estimated fair value of such securities at December 31, 2008 was $9.7 million.

6. Other Significant Matters

Joint Venture Activity

General. As of October 30, 2009, we have established joint ventures to own/lease and operate 24 of our general acute care hospitals, including new joint ventures at ten general acute care hospitals during the nine months ended September 30, 2009 and six thereafter. Local physicians and/or other health care organizations own minority equity interests in each of the joint ventures and participate in the related hospital’s governance. We own a majority of the equity interests in each joint venture and manage each hospital’s day-to-day operations. We continue to evaluate new joint venture opportunities and have several such transactions currently pending.

Novant Health, Inc. On March 31, 2008, Novant Health, Inc. and one or more of its affiliates (collectively, “Novant”) paid us $300.0 million for (i) a 27% equity interest in a limited liability company that then owned/leased and operated our seven general acute care hospitals in North Carolina and South Carolina (the “Carolina Joint Venture”) and (ii) certain property, plant and equipment of the physician practices that were affiliated with those hospitals. After considering approximately $84.1 million of goodwill allocated to the North Carolina and South Carolina hospitals, this transaction yielded a gain of approximately $203.4 million ($0.51 per diluted share) that was split between our continuing operations ($161.4 million) and discontinued operations ($42.0 million). Gain treatment would not have been permitted for this transaction under the FASB’s new accounting and disclosure rules that are discussed at Note 7. During 2008, Novant assumed full operational and fiscal responsibility for the aforementioned physician practices; however, we were required to partially subsidize the losses, if any, of such physician practices for a period of up to three years in an amount not to exceed $4.0 million per annum (the “Physician Subsidy”). Accordingly, discontinued operations for the nine months ended September 30, 2008 also included a $7.9 million charge for the present value of our estimated Physician Subsidy payments.

Effective October 1, 2009, the Carolina Joint Venture was restructured with the following principal features:

(i) all of the equity interests in Davis Regional Medical Center in Statesville, North Carolina, Sandhills Regional Medical Center in Hamlet, North Carolina, Carolina Pines Regional Medical Center in Hartsville, South Carolina and Chester Regional Medical Center in Chester, South Carolina were distributed from the Carolina Joint Venture to us;

(ii) Franklin Regional Medical Center in Louisburg, North Carolina and Upstate Carolina Medical Center in Gaffney, South Carolina continue to be owned by the Carolina Joint Venture; however, Novant now manages both hospitals and receives 99% of the net profits, net losses, free cash flow and capital accounts of those hospitals (effectively reducing our interest in each hospital from 73% to 1%);

(iii) Lake Norman Regional Medical Center in Mooresville, North Carolina continues to be owned by the Carolina Joint Venture and managed by us (subject to certain management rights expressly delegated to Novant); however, we now receive 70% of the net profits, net losses, free cash flow and capital accounts of the hospital (effectively increasing Novant’s interest in the hospital from 27% to 30%);

(iv) we paid Novant approximately $7.6 million, which included the purchase of certain assets used by physicians previously employed by Novant who are transitioning back to our employment. Additionally, we will pay Novant $200,000 a year for ten years, commencing on January 15, 2010; and

(v) our remaining Physician Subsidy obligation, if any, was cancelled.

As a result of the Carolina Joint Venture restructuring, Franklin Regional Medical Center and Upstate Carolina Medical Center have been included in our discontinued operations. See Note 4.

12

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

6. Other Significant Matters (continued)

Divestitures. For cash consideration, we sold (i) a home health agency for approximately $2.5 million during the nine months ended September 30, 2009 and (ii) three home health agencies, a nursing home and a health care billing operation in separate transactions for a combined purchase price of $14.4 million during the nine months ended September 30, 2008. These divestitures yielded gains of $2.5 million in 2009 and $7.8 million in 2008 (after allocating $1.3 million of goodwill), which are included in gains on sales of assets in the interim condensed consolidated financial statements. Historically, these disposed operations contributed nominally to our consolidated operating results.

Income Taxes. Our effective income tax rates were approximately 33.7% and 36.4% during the nine months ended September 30, 2009 and 2008, respectively, and 28.5% and 19.3% during the three months ended September 30, 2009 and 2008, respectively. Net income attributable to noncontrolling interests, which is not tax-effected in our consolidated financial statements, diluted our effective income tax rates by approximately 380 and 140 basis points during the nine months ended September 30, 2009 and 2008, respectively. The corresponding impact was 480 and 440 basis points during the three months ended September 30, 2009 and 2008, respectively.

Our 2009 provision for income taxes was favorably impacted by: (i) the finalization of certain federal and state income tax returns; (ii) the satisfactory conclusion of a state tax audit; and (iii) the lapsing of certain state statutes of limitations. Partially offsetting these items were adjustments during 2009 pertaining to stock-based compensation and the related additional paid-in capital pool of excess income tax benefits. Our 2008 provision for income taxes was favorably impacted by: (i) the finalization of certain federal and state income tax returns; (ii) the satisfactory resolution of two Internal Revenue Service examinations; and (iii) the lapsing of certain state statutes of limitations.

Physician and Physician Group Guarantees. We are committed to providing financial assistance pursuant to certain recruiting arrangements and professional services agreements with physicians and physician groups practicing in the communities that our hospitals serve. At September 30, 2009, we were committed to non-cancelable guarantees of approximately $33.8 million under such arrangements. The actual amounts advanced will depend on the financial results of each physician’s and physician group’s private practice during the contractual measurement periods, which generally approximate one year. We believe that the recorded liability for physician and physician group guarantees of $13.6 million at September 30, 2009 is adequate and reasonable; however, there can be no assurances that the ultimate liability will not exceed our estimate.

Comprehensive Income and Related Other. GAAP defines comprehensive income as the change in equity of a business enterprise from transactions and other events and circumstances that relate to non-owner sources. The details of our total consolidated comprehensive income are presented below (in thousands).

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
				(as adjusted - see Note 7)						(as adjusted - see Note 7)
Consolidated net income	$	31,921		$	15,380		$	123,788		$	171,873
Components of other comprehensive income (loss):
Gross changes attributable to:
Interest rate swap contract		(18,631	)		(15,127	)		60,344			(8,300	)
Available-for-sale securities		2,864			(1,826	)		3,523			(4,321	)
Income taxes attributable to:
Interest rate swap contract		7,473			3,985			(24,204	)		1,250
Available-for-sale securities		(747	)		640			(978	)		1,512
Other comprehensive income (loss)		(9,041	)		(12,328	)		38,685			(9,859	)
Total consolidated comprehensive income	$	22,880		$	3,052		$	162,473		$	162,014

The table below summarizes our accumulated other comprehensive income (loss), net of income taxes (in thousands).

	September 30, 2009			December 31, 2008
Interest rate swap contract, net	$	(133,774	)	$	(169,914	)
Available-for-sale securities, net		2,545			—
Accumulated other comprehensive income (loss), net	$	(131,229	)	$	(169,914	)

13

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

7. Noncontrolling Interest and Convertible Debt Accounting

During December 2007, the FASB issued new accounting and disclosure rules for noncontrolling interests in consolidated financial statements (the “Noncontrolling Interest Guidance”). We were required to adopt these new accounting and disclosure rules on January 1, 2009. Early adoption was prohibited. The Noncontrolling Interest Guidance had no material accounting impact on our financial position or results of operations; however, we conformed the presentation of the interim condensed consolidated financial statements included in this report with the new requirements set forth therein. Specifically, we are required to present (i) noncontrolling (minority) interests as equity in our consolidated balance sheets and (ii) earnings attributable to noncontrolling interests as part of our consolidated earnings and not as a separate component of income or expense. In addition to the Noncontrolling Interest Guidance, the SEC issued supplemental guidance for registrants with equity-classified securities that are redeemable for cash at the option of the holders of such securities. In those circumstances, the SEC’s supplemental guidance provides that a registrant must use a temporary equity classification and capture the minimum amount that could be unilaterally redeemed for cash. Because certain holders of our noncontrolling interests maintain these unilateral rights, we characterized the related amounts as temporary equity in our condensed consolidated balance sheets under the caption “redeemable equity securities.”

During May 2008, the FASB issued a staff position that provided new accounting rules for convertible debt instruments that may be settled in cash upon conversion (the “Convertible Debt Guidance”). Among other things, the Convertible Debt Guidance requires issuers of certain convertible debt instruments to separately account for the liability and equity components thereof and reflect interest expense at the entity’s market rate of borrowing for non-convertible debt instruments. The Convertible Debt Guidance also requires retrospective restatement of all periods presented with the cumulative effect of the change in accounting principle on periods prior to those presented being recognized as of the beginning of the first period presented. We were required to adopt these new accounting rules on January 1, 2009. Early adoption of the Convertible Debt Guidance was prohibited. As part of our retrospective restatement, we selected January 1, 2007 as the effective date of our cumulative effect of an accounting change under the Convertible Debt Guidance.

The schedules below adjust certain of our historical consolidated financial statements for: (i) the presentation modifications mandated by the Noncontrolling Interest Guidance and the supplemental guidance provided by the SEC; (ii) the retrospective restatement required by the Convertible Debt Guidance; and (iii) certain reclassification adjustments for discontinued operations (see Note 4) and other nominal matters to conform to the current period presentation. The effects of these adjustments have also been reflected in the interim condensed consolidated statements of stockholders’ equity and cash flows for the nine months ended September 30, 2008. Retrospective restatement using the Convertible Debt Guidance favorably impacted both our basic and diluted earnings per share for the three months ended September 30, 2008 by $0.02. For the nine months ended September 30, 2008, basic and diluted earnings per share were favorably impacted by $0.03 and $0.04, respectively.

HEALTH MANAGEMENT ASSOCIATES, INC.

CONDENSED CONSOLIDATED STATEMENT OF INCOME

Three Months Ended September 30, 2008

(in thousands)

				Effects of the Noncontrolling Interest			Effects of the Convertible Debt			Discontinued Operations and Other
	As Reported			Guidance			Guidance			Reclassifications			As Adjusted
Net revenue	$	1,081,914		$	—		$	—		$	(21,690	)	$	1,060,224
Total operating expenses		999,817			—			—			(21,517	)		978,300
Income from operations		82,097			—			—			(173	)		81,924
Gains on sales of assets, net		1,201			—			—			—			1,201
Interest and other income, net		—			—			—			1,352			1,352
Interest expense		(56,226	)		—			(2,148	)		(1,342	)		(59,716	)
Refinancing and debt modification costs		(9,495	)		—			9,495			—			—
Income from continuing operations before minority interests and income taxes		17,577			—			7,347			(163	)		24,761
Minority interests in earnings of consolidated entities		(4,569	)		4,569			—			—			—
Income from continuing operations before income taxes		13,008			4,569			7,347			(163	)		24,761
Provision for income taxes		(2,562	)		—			(2,939	)		717			(4,784	)
Income from continuing operations		10,446			4,569			4,408			554			19,977
Loss from discontinued operations, net of income taxes		(4,043	)		—			—			(554	)		(4,597	)
Consolidated net income		6,403			4,569			4,408			—			15,380
Net income attributable to noncontrolling interests		—			(4,569	)		—			—			(4,569	)
Net income attributable to Health Management Associates, Inc.	$	6,403		$	—		$	4,408		$	—		$	10,811

14

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

7. Noncontrolling Interest and Convertible Debt Accounting (continued)

HEALTH MANAGEMENT ASSOCIATES, INC.

CONDENSED CONSOLIDATED STATEMENT OF INCOME

Nine Months Ended September 30, 2008

(in thousands)

				Effects of the Noncontrolling Interest			Effects of the Convertible Debt			Discontinued Operations and Other
	As Reported			Guidance			Guidance			Reclassifications			As Adjusted
Net revenue	$	3,339,785		$	—		$	—		$	(69,237	)	$	3,270,548
Total operating expenses		3,029,875			—			—			(65,554	)		2,964,321
Income from operations		309,910			—			—			(3,683	)		306,227
Gains on sales of assets, net		211,154			—			—			(42,014	)		169,140
Interest and other income, net		—			—			—			5,200			5,200
Interest expense		(177,086	)		—			(4,690	)		(5,156	)		(186,932	)
Refinancing and debt modification costs		(20,958	)		—			20,958			—			—
Losses on early extinguishment of debt		—			—			(700	)		—			(700	)
Write-offs of deferred financing costs		—			—			(1,497	)		—			(1,497	)
Income from continuing operations before minority interests and income taxes		323,020			—			14,071			(45,653	)		291,438
Minority interests in earnings of consolidated entities		(10,754	)		10,754			—			—			—
Income from continuing operations before income taxes		312,266			10,754			14,071			(45,653	)		291,438
Provision for income taxes		(118,007	)		—			(5,628	)		17,672			(105,963	)
Income from continuing operations		194,259			10,754			8,443			(27,981	)		185,475
Loss from discontinued operations, net of income taxes		(41,583	)		—			—			27,981			(13,602	)
Consolidated net income		152,676			10,754			8,443			—			171,873
Net income attributable to noncontrolling interests		—			(10,754	)		—			—			(10,754	)
Net income attributable to Health Management Associates, Inc.	$	152,676		$	—		$	8,443		$	—		$	161,119

HEALTH MANAGEMENT ASSOCIATES, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 2008

(in thousands)

				Effects of the Noncontrolling Interest			Effects of the Convertible Debt			Discontinued
	As Reported			Guidance			Guidance			Operations			As Adjusted
Total current assets from continuing operations	$	1,032,996		$	—		$	—		$	(14,669	)	$	1,018,327
Assets of discontinued operations		18,085			—			—			78,261			96,346
Property, plant and equipment, net		2,430,169			—			—			(42,099	)		2,388,070
Goodwill		898,031			—			—			(20,058	)		877,973
Other long-term assets		176,248			—			(1,297	)		(1,435	)		173,516
Total assets	$	4,555,529		$	—		$	(1,297	)	$	—		$	4,554,232
Total current liabilities from continuing operations	$	490,271		$	—		$	—		$	(4,649	)	$	485,622
Liabilities of discontinued operations		—			—			—			4,830			4,830
Deferred income taxes		77,474			—			16,549			—			94,023
Long-term debt and capital lease obligations, less current maturities		3,186,893			—			(42,670	)		(181	)		3,144,042
Other long-term liabilities		491,036			—			—			—			491,036
Minority interests in consolidated entities		155,558			(155,558	)		—			—			—
Total liabilities		4,401,232			(155,558	)		(26,121	)		—			4,219,553
Redeemable equity securities		—			48,868			—			—			48,868
Stockholders’ equity:
Health Management Associates, Inc. equity:
Preferred stock		—			—			—			—			—
Common stock		2,442			—			—			—			2,442
Accumulated other comprehensive income (loss), net		(169,914	)		—			—			—			(169,914	)
Additional paid-in capital		82,838			—			25,536			—			108,374
Retained earnings		238,931			—			(712	)					238,219
Total Health Management Associates, Inc. stockholders’ equity		154,297			—			24,824			—			179,121
Noncontrolling interests		—			106,690			—						106,690
Total stockholders’ equity		154,297			106,690			24,824			—			285,811
Total liabilities and stockholders’ equity	$	4,555,529		$	—		$	(1,297	)	$	—		$	4,554,232

15

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

8. Contingencies

Class Action Lawsuits

Stockholder Actions.On or about August 2, 2007, Health Management Associates, Inc. (referred to as “HMA” for Note 8 purposes) and certain of its executive officers and directors were named as defendants in a purported stockholder class action entitled Cole v. Health Management Associates, Inc. et al. (No. 2:07-CV-0484) (the “Cole Action”), which was filed in the U.S. District Court for the Middle District of Florida, Fort Myers Division (the “Florida District Court”). After other purported stockholders filed motions to be appointed as the lead plaintiff, the Florida District Court designated the City of Ann Arbor Employees’ Retirement System as the lead plaintiff pursuant to the Private Securities Litigation Reform Act (the “PSLRA”). Subsequently, the case continued to be administered under the docket number and caption assigned to the Cole Action. On July 31, 2008, the lead plaintiff filed a consolidated complaint that named HMA and three current and former officers and directors as defendants. The lead plaintiff alleged (i) that certain statements made by HMA regarding its provision for doubtful accounts pertaining to self-pay patients were false and misleading and (ii) violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The lead plaintiff purported to represent a class of stockholders who purchased HMA’s common stock during the period January 17, 2007 through August 1, 2007. On July 17, 2009, the Florida District Court dismissed the lead plaintiff’s consolidated complaint with prejudice for failure to state a claim or plead fraud with the particularity required by Rule 9(b) of the Federal Rules of Civil Procedure or the PSLRA. The lead plaintiff elected not to appeal the Florida District Court’s ruling. As a result, the Cole Action is now closed.

ERISA Actions. On or about August 20, 2007, HMA and certain of its executive officers and directors were named as defendants in an action entitledIngram v. Health Management Associates, Inc. et al. (No. 2:07-CV-00529) (the “Ingram Action”), which was filed in the Florida District Court. This action was brought as a purported class action on behalf of all participants in or beneficiaries of the Health Management Associates, Inc. Retirement Savings Plan (the “Plan”) during the period January 17, 2007 through August 20, 2007 and whose participant accounts included shares of HMA’s common stock. The plaintiff alleged, among other things, that the defendants: (i) breached their fiduciary responsibilities to Plan participants and their beneficiaries under the Employee Retirement Income Security Act of 1974 (“ERISA”) and neglected to adequately supervise the management and administration of the Plan; (ii) failed to communicate complete, full and accurate information regarding the Plan’s investments in HMA’s common stock; and (iii) had conflicts of interest. Three similar purported ERISA class action lawsuits were subsequently filed in the Florida District Court.

On May 14, 2008, the Florida District Court granted the plaintiffs’ motion to consolidate the four ERISA actions. The consolidated case continues to be administered under the docket number and caption assigned to the Ingram Action. On May 20, 2009, a U.S. Magistrate Judge issued a report and recommendation as to an interim lead counsel committee for the plaintiffs. On June 10, 2009, such report and recommendation were adopted by the Florida District Court. On July 27, 2009, the plaintiffs filed a consolidated amended complaint, which is similar to the original complaint in the Ingram Action. The defendants named in the consolidated amended complaint include HMA, certain current and former officers and directors of HMA and members of the Plan’s Retirement Committee. During September 2009, the defendants moved to dismiss the consolidated amended complaint for failure to state a claim. The plaintiffs’ response to the defendants’ motion is due by November 9, 2009.

The plaintiffs in the Ingram Action, as amended, seek awards of unspecified monetary damages, attorneys’ fees and costs. In connection with the ERISA class action lawsuits that were filed prior to consolidation, counsel for certain plaintiffs sent letters to the Plan’s Retirement Committee claiming that their preliminary calculations indicate the Plan suffered losses of at least $60 million. We intend to vigorously defend against all ERISA class action lawsuits.

Derivative Lawsuit. On August 28, 2007, HMA’s directors, three of its executive officers and HMA, as a nominal defendant, were named as defendants in a putative shareholder derivative action entitledMartens v. Health Management Associates, Inc. et al. (C.A. 07-2957), which was filed in the Circuit Court of the 20^th Judicial Circuit in Collier County, Florida, Civil Division. The plaintiff’s claims are based on the same factual allegations as the Cole Action. Additionally, the plaintiff alleges that HMA’s payment of a special cash dividend of $10.00 per share of common stock in March 2007 was wasteful. The plaintiff further alleges claims for breach of fiduciary duty, abuse of control, mismanagement, waste and unjust enrichment. The plaintiff seeks, among other things: (i) unspecified monetary damages and restitution from the officers and directors; (ii) modifications to HMA’s governance and internal control; and (iii) an award of attorneys’ fees and costs. On December 10, 2007, the defendants moved to dismiss the complaint for failure to (i) state a claim and (ii) make the

16

HEALTH MANAGEMENT ASSOCIATES, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

8. Contingencies (continued)

required pre-suit demand on HMA’s Board of Directors or plead facts excusing such demand. On April 11, 2008, while the motion to dismiss the complaint was pending, the plaintiff filed an amended complaint that is very similar to the original complaint. On May 5, 2008, the defendants moved to dismiss the amended complaint on the same grounds that were raised in their December 2007 motion. The motion to dismiss remains pending.

Ascension Health Lawsuit.On February 14, 2006, HMA announced the termination of non-binding negotiations with Ascension Health (“Ascension”) and the withdrawal of a non-binding offer to acquire Ascension’s St. Joseph Hospital, a 231-bed general acute care hospital in Augusta, Georgia. On June 8, 2007, certain Ascension subsidiaries filed a lawsuit against HMA, entitledSt. Joseph Hospital, Augusta, Georgia, Inc. et al. v. Health Management Associates, Inc., in Georgia Superior/State Court of Richmond County claiming that HMA (i) breached an agreement to purchase St. Joseph Hospital and (ii) violated a confidentiality agreement. The plaintiffs claim at least $35 million in damages. On July 17, 2007, HMA removed the case to the United States District Court for the Southern District of Georgia, Augusta Division (No. 1:07-CV-00104).

We do not believe there was a binding acquisition contract with Ascension or any of its subsidiaries and we do not believe we breached a confidentiality agreement. Accordingly, we consider the lawsuit filed by the Ascension subsidiaries to be without merit and we intend to vigorously defend HMA against the allegations.

Medicare Billing Lawsuit. HMA and one of its subsidiaries have been named in aqui tam lawsuit entitledUnited States of America ex rel. Ted D. Kosenske, M.D. v. Carlisle HMA, Inc. and Health Management Associates, Inc. (No. 1:05-CV-2184), which was filed in the U.S. District Court for the Middle District of Pennsylvania (the “Pennsylvania District Court”). Although the False Claims Act grants the federal government the right to intervene inqui tam actions, the government has declined to do so in this lawsuit. Carlisle HMA, LLC (formerly known as Carlisle HMA, Inc.) has owned and operated Carlisle Regional Medical Center and other health care facilities in Carlisle, Pennsylvania since they were acquired from an unrelated not-for-profit organization in June 2001. The plaintiff’s complaint alleges that since 1998 the defendants and the hospital’s previous owner erroneously submitted outpatient hospital claims for pain management services to Medicare and that those claims were falsely certified to be in compliance with the Stark Act and the Anti-Kickback Act.

On November 14, 2007, the Pennsylvania District Court granted the defendants’ motion for summary judgment on the grounds that there were no violations of either the Stark Act or the Anti-Kickback Act. On January 21, 2009, the U.S. Court of Appeals for the 3^rd Circuit (docket No. 07-4616) reversed the lower court’s decision and remanded the case back to the Pennsylvania District Court for further proceedings. On March 9, 2009, the defendants petitioned the U.S. Court of Appeals for a rehearing of its decision but this petition was denied on April 14, 2009. On July 31, 2009, the defendants filed a motion for summary judgment and the plaintiff filed a motion to reconsider a previously-filed motion for summary judgment. The Pennsylvania District Court will hear oral arguments on December 2, 2009 regarding the motions for summary judgment. We intend to vigorously defend HMA and its subsidiary against the allegations in this matter.

Other. As it is not possible to estimate the ultimate loss, if any, relating to each of the abovementioned lawsuits, no loss accruals have been recorded for those matters at either September 30, 2009 or December 31, 2008. We are also a party to various other legal actions arising out of the normal course of our business; however, we believe that the ultimate resolution of such actions will not have a material adverse effect on us.

Due to uncertainties inherent in litigation, we can provide no assurances as to the final outcome of our outstanding legal actions and other potential loss contingencies. Should an unfavorable outcome occur in some or all of our legal matters, there could be a material adverse effect on our financial position, results of operations and liquidity.

9. Subsequent Event

On November 4, 2009, we signed a definitive agreement to acquire the Sparks Health System in Fort Smith, Arkansas for approximately $138 million, which includes, among other things, property, plant and equipment, supply inventories and other costs of closing. Subject to regulatory approvals and other conditions customary to closing, we anticipate that this acquisition of a 492-bed general acute care hospital, clinics and other related health care operations will close before the end of 2009. We plan to fund this acquisition with a combination of cash on hand and borrowings under the Revolving Credit Agreement (see Note 2).

17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

Overview

As of October 30, 2009, Health Management Associates, Inc. and its subsidiaries (“we,” “our” or “us”) operated 54 hospitals with a total of 7,926 licensed beds in non-urban communities in Alabama, Arkansas, Florida, Georgia, Kentucky, Mississippi, Missouri, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Washington and West Virginia. See Note 9 to the Interim Condensed Consolidated Financial Statements in Item 1 for information regarding a hospital system in Fort Smith, Arkansas that we plan to acquire before the end of 2009.

Unless specifically indicated otherwise, the following discussion excludes our discontinued operations, which are identified at Note 4 to the Interim Condensed Consolidated Financial Statements in Item 1. Such discontinued operations were not material to our consolidated results of operations during the periods presented herein, other than the following items that occurred during the nine months ended September 30, 2008: (i) a long-lived asset and goodwill impairment charge of approximately $23.1 million; (ii) a gain of $42.0 million from the sale of a 27% equity interest in a limited liability company that owned and operated two of our general acute care hospitals; and (iii) a charge of $7.9 million for the estimated cost of partially subsidizing certain third party physician practice losses.

During the three months ended September 30, 2009, which we refer to as the 2009 Three Month Period, we experienced net revenue growth over the three months ended September 30, 2008, which we refer to as the 2008 Three Month Period, of approximately 5.8%. Such growth primarily resulted from increased admissions and emergency room visits and improvements in reimbursement rates. Income from continuing operations and diluted earnings per share from continuing operations (attributable to common stockholders of Health Management Associates, Inc.) increased approximately $11.3 million and $0.04, respectively, during the 2009 Three Month Period when compared to the 2008 Three Month Period. The primary factors contributing to this year-over-year increase in profitability were lower interest costs and reduced salaries and benefits expense. Partially offsetting these items during the 2009 Three Month Period were increases in our provision for doubtful accounts and effective income tax rate.

In light of the downturn in the economy, volatility in the credit markets and uncertainties about economic conditions for the remainder of 2009 and beyond, we have implemented several company-wide cost containment measures. Our initiatives were designed to position our company to remain profitable and strategically flexible while continually providing the highest level of patient care. The cost containment measures that have been implemented to date include, among other things, personnel reductions, postponements of merit pay increases, new hire limitations and modifications to certain employee benefit plans. There can be no assurances that our actions will adequately address a prolonged economic downturn, including levels of unemployment that are substantially higher than historical trends, and/or other economic headwinds that we may face.

At our hospitals, all of which were in operation during the entirety of the 2009 Three Month Period and the 2008 Three Month Period, hospital admissions and emergency room visits increased during the 2009 Three Month Period by approximately 5.4% and 12.9%, respectively; however, our corresponding surgical volume declined 0.2%. We believe that the 2009 outbreak of H1N1 influenza (“swine flu”) contributed to the growth in our emergency room visits and hospital admissions during the 2009 Three Month Period, including an increase of approximately 10.9% in admissions with upper respiratory diagnoses. Although the level of H1N1 influenza activity has continued to increase in the United States and is now widespread in 46 states, we cannot predict what its ultimate impact will be on our business and results of operations.

We continue to pursue strategic action plans that were previously initiated at our hospitals to address unfavorable operating trends. These plans include, among other things, hiring new management teams, modifying physician employment agreements, renegotiating payor contracts and initiating patient, physician and employee satisfaction surveys. In this regard, our prime objective is to improve operations in the areas of patient volume, operating margins, uninsured/underinsured patient levels and the provision for doubtful accounts. We also seek opportunities for market development in the communities that our hospitals serve, including establishing ambulatory surgical centers and orthopedic, cardiology and neurology/neurosurgery centers of excellence. Furthermore, we continue to invest significant resources in physician recruitment and retention, emergency room operations and capital projects at our hospitals. As a result, recent company-wide investments to enhance and upgrade our emergency room clinical systems contributed, in large part, to the growth in emergency room visits and hospital admissions during the 2009 Three Month Period. We believe that our strategic initiatives, coupled with appropriate corporate oversight and centralized support, will enhance patient, physician and employee satisfaction, improve clinical outcomes and ultimately yield increased surgical volume, emergency room visits and admissions.

We have also taken the steps that we believe are necessary to achieve industry leadership in clinical quality. Our vision is to be the highest rated health care provider of any hospital system in the country, as measured by Medicare. With our knowledgeable and

18

experienced clinical affairs leadership to support this critical quality initiative, we measure the appropriate performance objectives, increase accountability for achieving those objectives and recognize the leaders whose quality indicators and clinical outcomes demonstrate improvement.

Outpatient services continue to play an important role in the delivery of health care in our markets, with approximately half of our net revenue during both the 2009 Three Month Period and the 2008 Three Month Period generated on an outpatient basis. Recognizing the importance of these services, we have improved many of our health care facilities to accommodate the outpatient needs of the communities that they serve. We have also invested substantial capital in many of our hospitals and clinics during the past several years, resulting in improvements and enhancements to our diagnostic imaging and ambulatory surgical services.

Economic conditions and changes in commercial health insurance benefit plans over the past several years have contributed to an increase in the number of uninsured and underinsured patients seeking health care in the United States. Although this general industry trend has affected us, we experienced a decline in self-pay admission activity during the year ended December 31, 2008 when compared to the year ended December 31, 2007. More recently, our self-pay admissions as a percent of total admissions increased from approximately 7.0% during the 2008 Three Month Period to 7.7% during the 2009 Three Month Period. There can be no assurances that our self-pay admissions will not continue to grow in future periods, especially in light of the downturn in the economy and correspondingly higher levels of unemployment. We regularly evaluate our self-pay policies and programs and consider changes or modifications as circumstances warrant.

Critical Accounting Policies and Estimates Update

Other than the accounting and financial reporting changes required under U.S. generally accepted accounting principles that are further discussed at Note 7 to the Interim Condensed Consolidated Financial Statements in Item 1, there were no material changes to our critical accounting policies and estimates during the 2009 Three Month Period.

2009 Three Month Period Compared to the 2008 Three Month Period

The tables below summarize our operating results for the 2009 Three Month Period and the 2008 Three Month Period.

	Three Months Ended September 30,
	2009					2008
	Amount			Percent of Net Revenue		Amount			Percent of Net Revenue
	(in thousands)					(in thousands)
Net revenue	$	1,121,903		100.0	%	$	1,060,224		100.0	%
Operating expenses:
Salaries and benefits		438,202		39.1			440,624		41.6
Supplies		154,262		13.7			145,786		13.8
Provision for doubtful accounts		143,745		12.8			120,039		11.3
Depreciation and amortization		60,424		5.4			58,543		5.5
Rent expense		25,532		2.3			23,006		2.2
Other operating expenses		202,147		18.0			190,302		17.9
Total operating expenses		1,024,312		91.3			978,300		92.3
Income from operations		97,591		8.7			81,924		7.7
Other income (expense):
Gains on sales of assets, net		90		—			1,201		0.1
Interest and other income, net		942		0.1			1,352		0.1
Interest expense		(54,300	)	(4.8	)		(59,716	)	(5.6	)
Loss on early extinguishment of debt		(533	)	(0.1	)		—		—
Income from continuing operations before income taxes		43,790		3.9			24,761		2.3
Provision for income taxes		(12,495	)	(1.1	)		(4,784	)	(0.4	)
Income from continuing operations	$	31,295		2.8	%	$	19,977		1.9	%

	Three Months Ended September 30,								Percent
	2009		2008		Change				Change
Total Hospitals
Occupancy	42.5	%	42.2	%	30		bps	*	n/a
Patient days	306,871		298,107		8,764				2.9	%
Admissions	74,890		71,063		3,827				5.4	%
Adjusted admissions (admissions adjusted for outpatient volume)	135,033		126,237		8,796				7.0	%
Emergency room visits	355,213		314,750		40,463				12.9	%
Surgeries	66,337		66,438		(101	)			(0.2	)%
Outpatient revenue percent	50.2	%	49.3	%	90		bps		n/a
Inpatient revenue percent	49.8	%	50.7	%	(90	)	bps		n/a

* basis points

19

Net revenue during the 2009 Three Month Period was approximately $1,121.9 million as compared to $1,060.2 million during the 2008 Three Month Period. This change represented an increase of $61.7 million, or 5.8%. Net revenue per admission increased approximately 0.4% during the 2009 Three Month Period as compared to the 2008 Three Month Period. The growth in net revenue and net revenue per admission were primarily due to increased admissions and emergency room visits and improvements in reimbursement rates, partially offset by unfavorable movement in our payor mix.

Our provision for doubtful accounts during the 2009 Three Month Period increased 150 basis points to 12.8% of net revenue as compared to 11.3% of net revenue during the 2008 Three Month Period. This change is primarily due to an increase in (i) uninsured patients in the mix of patients that we serve and (ii) co-payments and deductibles due from underinsured patients, which subject us to a higher risk of collection. Both of these factors can be attributed, in part, to the downturn in the economy and correspondingly higher levels of unemployment.

Our consistently applied accounting policy is that accounts written off as charity and indigent care are not recognized in net revenue and, accordingly, such amounts have no impact on our provision for doubtful accounts. However, as a measure of our fiscal performance, we routinely aggregate amounts pertaining to our (i) provision for doubtful accounts, (ii) uninsured self-pay patient discounts and (iii) foregone/unrecognized revenue for charity and indigent care and then we divide the resulting total by the sum of our (i) net revenue, (ii) uninsured self-pay patient discounts and (iii) foregone/unrecognized revenue for charity and indigent care. We believe that this fiscal measure, which we refer to as our Uncompensated Patient Care Percentage, is important because it provides us with key information regarding the aggregate level of patient care for which we do not receive remuneration. During the 2009 Three Month Period and the 2008 Three Month Period, our Uncompensated Patient Care Percentage was determined to be 25.7% and 23.6%, respectively. The 210 basis point increase during the 2009 Three Month Period reflects, among other things, a larger provision for doubtful accounts for our self-pay patients.

Salaries and benefits as a percent of net revenue decreased to 39.1% during the 2009 Three Month Period from 41.6% during the 2008 Three Month Period. This decline was primarily due to our company-wide cost containment measures, most of which were implemented late in 2008, such as headcount reductions, new hire limitations, lower personnel turnover, postponements of merit pay increases and a suspension of substantially all matching contributions to our 401(k) plan. Additionally, the 2008 Three Month Period included incremental costs attributable to a change in our Chief Executive Officer during September 2008.

Other operating expenses as a percent of net revenue increased from 17.9% during the 2008 Three Month Period to 18.0% during the 2009 Three Month Period. This change is primarily due to modest increases in costs for repairs and maintenance, professional fees and recruiting fees, partially offset by reductions in travel and utility costs.

Interest expense decreased from approximately $59.7 million during the 2008 Three Month Period to $54.3 million during the 2009 Three Month Period. Such decrease was primarily due to (i) lower average outstanding principal balances on our $2.75 billion seven-year term loan (the “Term Loan”) and our 3.75% Convertible Senior Subordinated Notes due 2028 (the “2028 Notes”) during the 2009 Three Month Period as compared to the 2008 Three Month Period and (ii) a reduction of interest expense on our 1.50% Convertible Senior Subordinated Notes due 2023 (the “2023 Notes”), substantially all of which were repurchased during 2008. See “Liquidity, Capital Resources and Capital Expenditures” below and Note 2 to the Interim Condensed Consolidated Financial Statements in Item 1 for information regarding our long-term debt arrangements.

We repurchased certain of the 2028 Notes during the 2009 Three Month Period, which resulted in a loss on the early extinguishment of debt of approximately $0.5 million. See “Liquidity, Capital Resources and Capital Expenditures” below and Note 2(c) to the Interim Condensed Consolidated Financial Statements in Item 1 for information regarding the 2028 Notes.

Our effective income tax rates were approximately 28.5% and 19.3% during the 2009 Three Month Period and the 2008 Three Month Period, respectively. Net income attributable to noncontrolling interests, which is not tax-effected in our consolidated financial statements, diluted our effective income tax rates by approximately 480 and 440 basis points during the 2009 Three Month Period and the 2008 Three Month Period, respectively. Our provision for income taxes during the 2009 Three Month Period was favorably impacted by: (i) the finalization of certain federal and state income tax returns; (ii) the satisfactory conclusion of a state tax audit; and (iii) the lapsing of certain state statutes of limitations. Partially offsetting these items were adjustments during 2009 pertaining to stock-based compensation and the related additional paid-in capital pool of excess income tax benefits. Our provision for income taxes during the 2008 Three Month Period was favorably impacted by: (i) the finalization of certain federal and state income tax returns; (ii) the satisfactory resolution of two Internal Revenue Service examinations; and (iii) the lapsing of certain state statutes of limitations.

20

2009 Nine Month Period Compared to the 2008 Nine Month Period

The tables below summarize our operating results for the nine months ended September 30, 2009 and 2008, which we refer to as the 2009 Nine Month Period and the 2008 Nine Month Period, respectively. All of our hospitals were in operation during the entirety of the 2009 Nine Month Period and the 2008 Nine Month Period.

	Nine Months Ended September 30,
	2009					2008
	Amount			Percent of Net Revenue		Amount				Percent of Net Revenue
	(in thousands)					(in thousands)
Net revenue	$	3,418,373		100.0	%	$	3,270,548			100.0	%
Operating expenses:
Salaries and benefits		1,332,265		39.0			1,339,165			41.0
Supplies		480,051		14.1			447,026			13.7
Provision for doubtful accounts		419,872		12.3			364,472			11.1
Depreciation and amortization		179,198		5.2			173,150			5.3
Rent expense		75,060		2.2			66,841			2.0
Other operating expenses		602,497		17.6			573,667			17.5
Total operating expenses		3,088,943		90.4			2,964,321			90.6
Income from operations		329,430		9.6			306,227			9.4
Other income (expense):
Gains on sales of assets, net		1,936		0.1			169,140			5.1
Interest and other income, net		1,499		—			5,200			0.2
Interest expense		(163,485	)	(4.8	)		(186,932	)		(5.7	)
Gains (losses) on early extinguishment of debt, net		16,202		0.5			(700	)		—
Write-offs of deferred financing costs		(444	)	—			(1,497	)		(0.1	)
Income from continuing operations before income taxes		185,138		5.4			291,438			8.9
Provision for income taxes		(62,392	)	(1.8	)		(105,963	)		(3.2	)
Income from continuing operations	$	122,746		3.6	%	$	185,475			5.7	%
	Nine Months Ended September 30,									Percent
	2009			2008		Change				Change
Total Hospitals
Occupancy		45.3	%	45.6	%		(30	)	bps*	n/a
Patient days		977,160		967,551			9,609			1.0	%
Admissions		232,798		225,243			7,555			3.4	%
Adjusted admissions (admissions adjusted for outpatient volume)		405,140		389,998			15,142			3.9	%
Emergency room visits		1,034,071		983,470			50,601			5.1	%
Surgeries		200,807		203,262			(2,455	)		(1.2	)%
Outpatient revenue percent		48.0	%	48.1	%		(10	)	bps	n/a
Inpatient revenue percent		52.0	%	51.9	%		10		bps	n/a

* basis points

Net revenue during the 2009 Nine Month Period was approximately $3,418.4 million as compared to $3,270.5 million during the 2008 Nine Month Period. This change represented an increase of $147.9 million, or 4.5%. Such growth primarily resulted from: (i) increased admissions and emergency room visits; (ii) favorable case mix trends; and (iii) improvements in reimbursement rates. These items were partially offset by unfavorable movement in our payor mix during the 2009 Nine Month Period. Net revenue per admission increased approximately 1.1% during the 2009 Nine Month Period as compared to the 2008 Nine Month Period. The factors contributing to such change included increased patient acuity and the favorable effects of renegotiated agreements with certain commercial health insurance providers.

Our provision for doubtful accounts during the 2009 Nine Month Period increased 120 basis points to 12.3% of net revenue as compared to 11.1% of net revenue during the 2008 Nine Month Period. This change is primarily due to an increase in (i) uninsured patients in the mix of patients that we serve (approximately 7.0% and 6.7% of total admissions during the 2009 Nine Month Period and the 2008 Nine Month Period, respectively) and (ii) co-payments and deductibles due from underinsured patients, which subject us to a higher risk of collection. Both of these factors can be attributed, in part, to the downturn in the economy and correspondingly higher levels of unemployment. During the 2009 Nine Month Period and the 2008 Nine Month Period, our Uncompensated Patient Care Percentage, which is described above under the heading “2009 Three Month Period Compared to the 2008 Three Month Period,” was determined to be 24.5% and 23.0%, respectively. The 150 basis point increase during the 2009 Nine Month Period reflects, among other things, a larger provision for doubtful accounts for our self-pay patients.

21

Salaries and benefits as a percent of net revenue decreased to 39.0% during the 2009 Nine Month Period from 41.0% during the 2008 Nine Month Period. This decline was primarily due to our company-wide cost containment measures, most of which were implemented late in 2008, such as headcount reductions, new hire limitations, lower personnel turnover, postponements of merit pay increases and a suspension of substantially all matching contributions to our 401(k) plan.

Supplies as a percent of net revenue increased from 13.7% during the 2008 Nine Month Period to 14.1% during the 2009 Nine Month Period. This increase was primarily due to more cardiology and neuro-surgery procedures having been performed during the 2009 Nine Month Period, which resulted in our utilization of a larger quantity of costly cardiac and spinal implant devices and related supplies.

Other operating expenses as a percent of net revenue increased from 17.5% during the 2008 Nine Month Period to 17.6% during the 2009 Nine Month Period. This change is primarily due to increased costs for repairs and maintenance, professional fees, collection agency fees, recruiting fees and utilities, partially offset by reductions in advertising/marketing and travel costs.

During the 2008 Nine Month Period, we recorded gains on sales of assets of approximately (i) $161.4 million from the sale of a 27% equity interest in a limited liability company that then owned/leased and operated five of our general acute care hospitals in North Carolina and South Carolina and (ii) $7.8 million from sales of three home health agencies, a nursing home and a health care billing operation. The sale of a home health agency during the 2009 Nine Month Period yielded a gain of $2.5 million. See Note 6 to the Interim Condensed Consolidated Financial Statements in Item 1 for information regarding these transactions and other related matters.

Interest and other income declined from approximately $5.2 million during the 2008 Nine Month Period to $1.5 million during the 2009 Nine Month Period. This decline during the 2009 Nine Month Period was primarily due to (i) lower weighted average interest-bearing cash balances and (ii) lower rates of return in the marketplace for our interest-bearing cash. As described at Note 6 to the Interim Condensed Consolidated Financial Statements in Item 1, we received approximately $300.0 million on March 31, 2008 from an affiliate of Novant Health, Inc., which significantly increased our interest-bearing cash balances during part of the 2008 Nine Month Period.

Interest expense decreased from approximately $186.9 million during the 2008 Nine Month Period to $163.5 million during the 2009 Nine Month Period. Such decrease was primarily due to (i) a lower average outstanding principal balance on the Term Loan during the 2009 Nine Month Period as compared to the 2008 Nine Month Period and (ii) a significant reduction of interest expense on the 2023 Notes, substantially all of which were repurchased during 2008. See “Liquidity, Capital Resources and Capital Expenditures” below and Note 2 to the Interim Condensed Consolidated Financial Statements in Item 1 for information regarding our long-term debt arrangements.

During the 2009 Nine Month Period, we repurchased certain of the 2028 Notes, which yielded a net gain on the early extinguishment of debt of approximately $16.2 million. During the 2008 Nine Month Period, we repurchased certain of the 2023 Notes, which resulted in losses on the early extinguishment of debt aggregating $0.7 million. See “Liquidity, Capital Resources and Capital Expenditures” below and Note 2 to the Interim Condensed Consolidated Financial Statements in Item 1 for information regarding the 2028 Notes and the 2023 Notes.

Our effective income tax rates were approximately 33.7% and 36.4% during the 2009 Nine Month Period and the 2008 Nine Month Period, respectively. Net income attributable to noncontrolling interests, which is not tax-effected in our consolidated financial statements, diluted our effective income tax rates by approximately 380 and 140 basis points during the 2009 Nine Month Period and the 2008 Nine Month Period, respectively. Our provisions for income taxes during the 2009 Nine Month Period and the 2008 Nine Month Period were impacted by the same items described above under the heading “2009 Three Month Period Compared to the 2008 Three Month Period.”

22

Liquidity, Capital Resources and Capital Expenditures

Liquidity

Our cash flows from continuing operating activities provide the primary source of cash for our ongoing business needs. Below is a summary of our recent cash flow activity (in thousands).

	Nine Months Ended September 30,
	2009			2008
Sources (uses) of cash and cash equivalents:
Operating activities	$	357,431		$	368,484
Investing activities		(150,415	)		(120,427	)
Financing activities		(134,584	)		(168,428	)
Discontinued operations		6,300			(23,584	)
Net increase in cash and cash equivalents	$	78,732		$	56,045

Operating Activities

Our cash flows from continuing operating activities decreased approximately $11.1 million, or 3.0%, during the 2009 Nine Month Period when compared to the 2008 Nine Month Period. Two important factors contributing to this change in cash flows were (i) net federal and state income tax refunds of approximately $38.9 million during the 2008 Nine Month Period, as compared to $14.3 million during the 2009 Nine Month Period, and (ii) a reduction in our current liabilities during the 2009 Nine Month Period due primarily to the timing of vendor payments. Partially offsetting these items were lower interest payments during the 2009 Nine Month Period when compared to the 2008 Nine Month Period and overall stronger collections on accounts receivable during the 2009 Nine Month Period.

Investing Activities

Cash used in investing activities during the 2009 Nine Month Period included approximately $158.7 million of additions to property, plant and equipment, consisting primarily of renovation and expansion projects at certain of our facilities. Partially offsetting such cash outlays were a decrease in restricted funds of $4.2 million and $4.7 million from sales of assets.

Cash used in investing activities during the 2008 Nine Month Period included approximately $155.9 million of additions to property, plant and equipment, consisting primarily of renovation and expansion projects at certain of our facilities. Partially offsetting these cash outlays were: (i) cash receipts of $18.2 million from sales of discontinued operations (consisting of property, plant and equipment used in our former physician practices in North Carolina and South Carolina and our general acute care hospital in Little Rock, Arkansas); (ii) $14.4 million from sales of assets, including three home health agencies, a nursing home and health care billing operation; and (iii) a decrease in restricted funds of $5.4 million. See Notes 4 and 6 to the Interim Condensed Consolidated Financial Statements in Item 1 for information regarding our discontinued operations and certain divestitures, respectively.

Financing Activities

During the 2009 Nine Month Period, we made principal payments on long-term debt and capital lease obligations of approximately $78.8 million, including an $18.4 million Excess Cash Flow payment (as described below under “Capital Resources”) and a $25.0 million prepayment under the Term Loan. We also paid (i) $67.7 million to repurchase certain of the 2028 Notes in the open market and (ii) $17.9 million to noncontrolling shareholders, including the first annual distribution under our joint venture arrangement in North Carolina and South Carolina. Partially offsetting these cash outlays were $21.2 million that we received from noncontrolling shareholders to acquire minority equity interests in our joint ventures and cash proceeds from exercises of stock options of $8.5 million. See Notes 2 and 6 to the Interim Condensed Consolidated Financial Statements in Item 1 for information regarding our long-term debt/capital lease obligations and our joint venture activity, respectively.

During the 2008 Nine Month Period, our financing activities included net cash proceeds of approximately $244.0 million from our sale of the 2028 Notes and $322.5 million that we received from noncontrolling shareholders to acquire minority equity interests in our joint ventures. During the 2008 Nine Month Period, we made principal payments on long-term debt and capital lease obligations of $440.1 million, including $123.6 million of Excess Cash Flow payments under the Term Loan. We also paid $292.0 million to repurchase certain of the 2023 Notes in the open market and $2.9 million to noncontrolling shareholders.

23

Discontinued Operations

Cash provided by our discontinued operations during the 2009 Nine Month Period was approximately $6.3 million and the corresponding cash used in operating our discontinued operations during the 2008 Nine Month Period was $23.6 million. We do not believe that the exclusion of such amounts from our consolidated cash flows in future periods will have a material effect on our liquidity or financial position. See Note 4 to the Interim Condensed Consolidated Financial Statements in Item 1 for information regarding our discontinued operations.

Days Sales Outstanding

Days sales outstanding, or DSO, is calculated by dividing quarterly net revenue by the number of days in the quarter. The result is divided into the net accounts receivable balance at the end of the quarter to obtain our DSO. We believe that this statistic is an important measure of collections on our accounts receivable, as well as our liquidity. Our DSO was 49 days at September 30, 2009, which compares favorably to 51 days and 50 days at September 30, 2008 and December 31, 2008, respectively, and reflects overall stronger cash collections on accounts receivable during the 2009 Three Month Period.

Income Taxes

Other than certain state net operating loss carryforwards, we believe that it is more likely than not that carrybacks, reversals of existing taxable temporary differences and future taxable income will allow us to realize the deferred tax assets that are recognized in our consolidated balance sheets.

Capital Resources

Sales of Assets and Related Activities

In addition to our current initiatives to increase patient volume and operating profit, our plans to enhance cash flow during the remainder of 2009 and beyond may also include sales of: (i) hospitals and other health care business units that no longer meet our long-term strategic objectives; (ii) certain hospital assets; and (iii) certain assets included as part of our discontinued operations. We are also considering joint venture opportunities at several of our hospitals to supplement our cash flow. These potential transactions are collectively referred to herein as our “Strategic Transactions.” As discussed at Note 6 to the Interim Condensed Consolidated Financial Statements in Item 1 and Note 4 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2008, we recently completed certain Strategic Transactions. There can be no assurances that we will successfully initiate and complete any additional Strategic Transactions on satisfactory terms, if at all, or that any future Strategic Transactions will not cause us to recognize a loss in our consolidated financial statements. Furthermore, our senior secured credit facilities, as described at Note 2(a) to the Interim Condensed Consolidated Financial Statements in Item 1, contain certain covenants that may limit the Strategic Transactions that we would otherwise complete.

Credit Facilities

Senior Secured Credit Facilities. On March 1, 2007, we completed a recapitalization of our balance sheet (the “Recapitalization”) wherein we entered into agreements for $3.25 billion in new variable rate senior secured credit facilities (the “Credit Facilities”). The Credit Facilities were initially used to fund a special cash dividend and repay all amounts outstanding under a predecessor revolving credit agreement. The Credit Facilities consist of a seven-year $2.75 billion term loan (the “Term Loan”) and a $500.0 million six-year revolving credit facility (the “Revolving Credit Agreement”).

The Term Loan requires (i) quarterly principal payments to amortize approximately 1% of the loan’s face value during each year of the loan’s term and (ii) a balloon payment for the remaining outstanding loan balance at the termination of the agreement. We are also required to repay principal under the Term Loan in an amount that can be as much as 50% of our annual Excess Cash Flow, as such term is defined in the loan agreement. Based on the annual Excess Cash Flow generated during the year ended December 31, 2008, we were required to repay principal of approximately $94.1 million under the Term Loan, which we satisfied with payments of $18.4 million and $75.7 million during the 2009 Nine Month Period and the 2008 Nine Month Period, respectively. We also prepaid $25.0 million of principal under the Term Loan during the 2009 Nine Month Period (such amount will be credited against our 2009 annual Excess Cash Flow obligation, if any). Our mandatory principal payments under the Credit Facilities for the year ending September 30, 2010, excluding an annual Excess Cash Flow obligation for calendar year 2009, if any, will be approximately $25.8 million. During the Revolving Credit Agreement’s six-year term, we are obligated to pay commitment fees based on the amounts available for borrowing. Additionally, the Revolving Credit Agreement has a $75.0 million standby letter of credit limit. Amounts outstanding under the Credit Facilities may be repaid at our option at any time, in whole or in part, without penalty.

24

We can elect whether interest on the Credit Facilities, which is generally payable quarterly in arrears, is calculated using LIBOR or prime as its base rate. The effective interest rate includes a spread above our selected base rate and is subject to modification in certain circumstances. Additionally, we may elect differing base interest rates for the Term Loan and the Revolving Credit Agreement. During 2007, as required by the agreements underlying the Credit Facilities, we entered into a receive variable/pay fixed interest rate swap contract that provides for us to pay a fixed interest rate of 6.7445% on the notional amount of such contract for the seven-year term of the Term Loan. Notwithstanding this contractual arrangement, we remain ultimately responsible for all amounts due and payable under the Term Loan. Therefore, we are exposed to financial risk in the event of nonperformance by one or more of the counterparties to the interest rate swap contract. See Note 5 to the Interim Condensed Consolidated Financial Statements in Item 1 regarding the estimated fair value of our interest rate swap contract. At September 30, 2009, approximately $66.6 million of the Term Loan’s outstanding balance was not covered by the interest rate swap contract and, accordingly, such amount was subject to the Credit Facilities’ variable interest rate provisions (i.e., an effective interest rate of approximately 2.0% on both September 30, 2009 and October 30, 2009).

Although there were no amounts outstanding under the Revolving Credit Agreement on October 30, 2009, standby letters of credit in favor of third parties of approximately $44.8 million reduced the amount available for borrowing thereunder to $455.2 million on such date. Our effective interest rate on the variable rate Revolving Credit Agreement was approximately 2.0% on October 30, 2009.

We intend to fund the Term Loan’s quarterly interest payments, required annual principal payments and mandatory annual Excess Cash Flow payments with available cash balances, cash provided by operating activities, cash proceeds from our Strategic Transactions and/or borrowings under the Revolving Credit Agreement.

Demand Promissory Note.We maintain a $10.0 million secured demand promissory note in favor of a bank for use as a working capital line of credit in conjunction with our cash management program. Pursuant to the terms and conditions of the demand promissory note, we may borrow and repay, on a revolving basis, up to the principal face amount of the note. All principal and accrued interest will be immediately due and payable upon the bank’s written demand. The demand promissory note’s effective interest rate on October 30, 2009 was approximately 2.3%; however, there were no amounts outstanding thereunder on such date. See Note 2(b) to the Interim Condensed Consolidated Financial Statements in Item 1 for information regarding the demand promissory note and its predecessor arrangement.

3.75% Convertible Senior Subordinated Notes due 2028 (the “2028 Notes”)

On May 21, 2008, we completed a private placement of $250.0 million of the 2028 Notes, which are unsecured obligations that are subordinated in right of payment to all of our existing and future senior indebtedness. After transaction-related costs, the sale of the 2028 Notes resulted in our receipt of net proceeds of approximately $244.0 million, which we used to repurchase certain of our 1.50% Convertible Senior Subordinated Notes due 2023 (the “2023 Notes”) in the open market. The 2028 Notes mature on May 1, 2028 and bear interest at a fixed rate of 3.75% per annum. Since December 1, 2008, we have used cash on hand to repurchase $158.6 million of principal face amount 2028 Notes in the open market at approximately 56.8% of their principal face value, plus accrued and unpaid interest. Should market conditions continue to be advantageous to us, we intend to repurchase additional 2028 Notes in the open market. Any such 2028 Note repurchases and the interest payments on the remaining 2028 Note outstanding principal balance of $91.4 million will be funded with available cash balances, cash provided by operating activities and/or borrowings under the Revolving Credit Agreement.

Debt Covenants

The Credit Facilities and the indentures governing the 2028 Notes, the 2023 Notes and our 6.125% Senior Notes due 2016 contain covenants that, among other things, require us to maintain compliance with certain financial ratios. At September 30, 2009, we were in compliance with all of the covenants contained in those debt agreements. Specifically, the table below summarizes what we believe are the key financial covenants under the Credit Facilities and our corresponding actual performance as of and for the period ended September 30, 2009.

	Requirement	Actual
Minimum required consolidated interest coverage ratio	2.60 to 1.00	3.06 to 1.00
Maximum permitted consolidated leverage ratio	5.30 to 1.00	4.43 to 1.00

Although there can be no assurances, we believe that we will continue to be in compliance with all of our debt covenants. Should we fail to comply with one or more of our debt covenants in the future and are unable to remedy the matter, an event of default may result. In that circumstance, we would seek a waiver from our lenders or renegotiate the related debt agreement; however, such renegotiations could, among other things, subject us to higher interest and financing costs on our debt obligations.

25

Dividends

As part of the Recapitalization, our Board of Directors declared a special cash dividend that totaled approximately $2.43 billion. In light of the special cash dividend, which was paid in March 2007, we indefinitely suspended all future dividend payments. Additionally, the Credit Facilities restrict our ability to pay cash dividends.

Standby Letters of Credit

On October 30, 2009, we maintained approximately $44.8 million of standby letters of credit in favor of third parties with various expiration dates through October 1, 2010. Should any or all of these letters of credit be drawn upon, we intend to satisfy such obligations with available cash balances, cash provided by operating activities and, if necessary, borrowings under the Revolving Credit Agreement.

Capital Expenditures and Other

We believe that capital expenditures for property, plant and equipment will be approximately 5% of our net revenue for the year ending December 31, 2009 and will remain at a reasonably comparable level during 2010, which is within the capital expenditure limitations of the Credit Facilities for both years. As of September 30, 2009, a number of hospital renovation and expansion projects were underway. We estimate that the cost to build and equip a replacement hospital for 77-bed Walton Regional Medical Center in Monroe, Georgia will range from $70 million to $80 million. Although we recently negotiated a deferral of all construction activities for this replacement hospital until December 1, 2010, we are currently obligated to complete construction no later than December 31, 2012. We do not believe that any of our hospital renovation and expansion projects are individually significant or that they represent, in the aggregate, a material commitment of our resources.

Our long-term business strategy calls for us to acquire hospitals that are strategic to our business plan, available at a reasonable price and otherwise meet our strict acquisition criteria. We generally fund acquisitions, replacement hospital construction and other recurring capital expenditures with available cash balances, cash provided by operating activities, amounts available under revolving credit agreements and proceeds from long-term debt issuances, or a combination thereof. Specifically, we plan to fund the Sparks Health System acquisition, which is discussed at Note 9 to the Interim Condensed Consolidated Financial Statements in Item 1, with a combination of cash on hand and borrowings under the Revolving Credit Agreement.

Hospital Divestitures and Other

As more fully discussed at Note 4 to the Interim Condensed Consolidated Financial Statements in Item 1, we intend to sell (i) Gulf Coast Medical Center, formerly a general acute care hospital in Biloxi, Mississippi that we closed on January 1, 2008, and (ii) the Woman’s Center at Dallas Regional Medical Center, formerly a specialty women’s hospital in Mesquite, Texas that we closed on June 1, 2008. However, the timing of such divestitures has not yet been determined.

We intend to use the proceeds from these hospital sales and other Strategic Transactions that we may consummate for general corporate purposes and debt reduction.

Contractual Obligations and Off-Balance Sheet Arrangements

As a result of: (i) our repurchases of certain of the 2028 Notes; (ii) a prepayment of principal under the Term Loan; and (iii) an extension of time to construct a replacement hospital for Walton Regional Medical Center, our long-term debt and other contractual obligations changed from the amounts disclosed in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2008. Note 2 to the Interim Condensed Consolidated Financial Statements in Item 1 contains further discussion of our debt structure, as well as related activity during the 2009 Nine Month Period, and is incorporated herein by reference. Further discussion regarding the replacement hospital for Walton Regional Medical Center is included above under the heading “Capital Expenditures and Other.”

During the 2009 Nine Month Period, there were no material changes to the off-balance sheet information provided by us in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2008.

26

Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q, including, without limitation, statements containing the words “believe,” “anticipate,” “intend,” “expect,” “may,” “could,” “plan,” “continue,” “should,” “project,” “estimate” and words of similar import, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may include projections of revenue, provisions for doubtful accounts, income or loss, capital expenditures, debt structure, principal payments on debt, capital structure, other financial items, statements regarding our plans and objectives for future operations, acquisitions, divestitures and other transactions, statements of future economic performance, statements of the assumptions underlying or relating to any of the foregoing statements, and statements that are other than statements of historical fact.

Forward-looking statements are based on our current plans and expectations and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, the risks and uncertainties identified by us under the heading “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2008. Furthermore, we operate in a continually changing business environment and new risk factors emerge from time to time. We cannot predict what these new risk factors may be, nor can we assess the impact, if any, of such new risk factors on our business or results of operations or the extent to which any factor or combination of factors may cause our actual results to differ materially from those expressed or implied by any of our forward-looking statements.

Undue reliance should not be placed on our forward-looking statements. Except as required by law, we disclaim any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained in this Quarterly Report on Form 10-Q to reflect new information, future events or other developments.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

During the 2009 Nine Month Period, there were no material changes to the quantitative and qualitative disclosures about market risks that were presented in Item 7A of Part II of our Annual Report on Form 10-K for the year ended December 31, 2008, except for the estimated fair value of our long-term debt and capital lease obligations. In that regard, the estimated fair value of our long-term debt and capital lease obligations as a percent of their carrying value increased from approximately 65.8% at December 31, 2008 to 95.2% at September 30, 2009. Such increase was primarily due to favorable developments in the credit markets during 2009. Note 2 to the Interim Condensed Consolidated Financial Statements in Item 1 includes a discussion of our long-term debt and capital lease activity during the 2009 Nine Month Period.

Item 4. Controls and Procedures.

Evaluation Of Disclosure Controls And Procedures. Our President and Chief Executive Officer (principal executive officer) and our Senior Vice President and Chief Financial Officer (principal financial officer) evaluated our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date.

Changes In Internal Control Over Financial Reporting. There has been no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

27

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Descriptions of and updates to material legal proceedings to which Health Management Associates, Inc. and its subsidiaries (“we,” “our” or “us”) are a party are set forth at Note 8 to the Interim Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q and are incorporated herein by reference.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The table below summarizes the number of shares of our common stock that were withheld to satisfy tax withholding obligations for stock-based compensation awards that vested during each month during the quarter ended September 30, 2009.

Month Ended	Total Number of Shares Purchased	Average Price Per Share
July 31, 2009	5,290	$	5.08
August 31, 2009	—		—
September 30, 2009	—		—
Total	5,290

Item 5. Other Information.

On August 5, 2009, William J. Schoen, our Chairman of the Board, adopted a pre-arranged stock trading plan in accordance with the requirements of Rule 10b5-1 of the Securities Exchange Act of 1934. Rule 10b5-1 permits a person to adopt a written plan, at a time when such person is not in possession of material non-public information, pursuant to which a registrant’s shares can be sold in the future at predetermined times and in accordance with pre-established price parameters.

Mr. Schoen’s plan applies solely to shares of our common stock that he may acquire upon exercise of currently exercisable stock options that are due to expire on May 25, 2010. Mr. Schoen informed us that he adopted the plan to diversify his investment portfolio and that he would publicly disclose all transactions under the plan in accordance with applicable securities laws.

We do not undertake to report any modifications, terminations, transactions or other activities under Mr. Schoen’s plan, except as may be required by law.

Item 6. Exhibits.

See Index to Exhibits beginning on page 30 of this Quarterly Report on Form 10-Q.

28

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HEALTH MANAGEMENT ASSOCIATES, INC.
Date: November 5, 2009	By:	/s/ Robert E. Farnham
		Robert E. Farnham
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

29

INDEX TO EXHIBITS

(10) Material Contracts

*10.1 Restructuring Agreement, dated as of September 30, 2009, among Health Management Associates, Inc., Carolinas Holdings, LLC, Carolinas JV Holdings, L.P., Novant Health, Inc. and Foundation Health Systems Corp.

(31) Rule 13a-14(a)/15d-14(a) Certifications

31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.

31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.

(32) Section 1350 Certifications

32.1 Section 150 Certifications.

* Health Management Associates, Inc. has requested confidential treatment of certain information contained in this exhibit. Such information has been filed separately with the Securities and Exchange Commission pursuant to an application for confidential treatment under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2.

30