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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

OR

Commission File Number 001-11141

HEALTH MANAGEMENT ASSOCIATES, INC.
(Exact name of Registrant as specified in its charter)

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

Registrant’s telephone number, including area code: (239) 598-3131

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Title of Each Class
Zero-Coupon Convertible Senior Subordinated Notes due 2022

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    o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   x

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.) Yes    x       No    o

As of December 16, 2003, there were 242,786,806 shares of the Registrant’s Class A Common Stock, par value $.01 per share outstanding. As of March 31, 2003 (the last business day of the most recently completed second fiscal quarter), the aggregate market value of the voting stock held by non-affiliates of the Registrant was $4,402,757,273, as determined by reference to the listed price of the Registrant’s Class A Common Stock as of the close of business on such day. The aggregate market value of the voting stock held by non-affiliates of the Registrant is $5,397,785,907, as determined by reference to the listed price of the Registrant’s Class A Common Stock as of the close of business on December 16, 2003.

Portions of the Registrant’s definitive Proxy Statement, to be issued in connection with the Annual Meeting of Stockholders of the Registrant to be held on February 17, 2004, have been incorporated by reference into Part III, Items 10, 11, 12, 13 and 14 of this Report.

TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT
HEALTH MANAGEMENT ASSOCIATES, INC.
Fiscal year ended September 30, 2003

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PART I

Item 1.   Business

Overview

     Through our subsidiaries, we own and operate general acute care hospitals and psychiatric hospitals in non-urban communities. As of September 30, 2003, we operated 47 hospitals, consisting of 45 acute care hospitals with a total of 6,337 licensed beds and two psychiatric hospitals with a total of 142 licensed beds. Our fiscal year runs from October 1 through September 30. During the twelve months ended September 30, 2003, which we refer to as fiscal 2003, we operated facilities located in Alabama, Arkansas, Florida, Georgia, Kentucky, Mississippi, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington and West Virginia. During fiscal 2003, our general acute care hospitals contributed substantially all of our consolidated net patient service revenues.

     Services provided by our hospitals include general surgery, internal medicine, obstetrics, emergency room care, radiology, oncology, diagnostic care, coronary care, pediatric services, behavioral health services and psychiatric care and, in several of our hospitals, specialized services such as open-heart surgery and neuro-surgery. Our facilities benefit from corporate resources, such as purchasing, information services, finance and control systems, facilities planning, physician recruitment services, administrative personnel management, marketing and public relations.

     Our class A common stock is listed on the New York Stock Exchange under the symbol “HMA,” and is included within the Standard and Poor’s 500 Index. On January 7, 2003, for the second consecutive year, we were named to the Forbes Platinum 400—The Best Big Companies in America. We were incorporated in Delaware in 1979 but began operations through our current subsidiary, Hospital Management Associates, Inc., which was formed in 1977. We became a public company in 1991.

Recent Transactions

     We proactively identify acquisition targets in addition to responding to requests for proposals from entities that are seeking to sell or lease hospital facilities. As a result, we generally enter into several agreements to acquire additional hospital facilities during our fiscal year. Generally, at any given time, we are actively involved in negotiations concerning possible acquisitions. Our recent transactions include the following:

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Market

     Our market for operating and acquiring acute care hospitals is primarily non-urban areas of 30,000 to 400,000 people in the southeastern and southwestern United States. Typically, the acute care hospitals we acquire are, or can become, the sole or preferred provider of health care services in their market areas. Our target markets generally have the following characteristics:

Business Strategy

     Our business strategy is to efficiently and profitably operate our existing hospitals, acquire additional hospitals in non-urban communities and provide quality health care.

     Improve Operations of Existing Hospitals

     For our existing hospitals, we seek to increase our patient revenue by providing quality health care necessary to increase admissions and outpatient business. These hospitals are administered and directed on a local basis by each hospital’s chief executive officer. A key element of our strategy is establishing and maintaining cooperative relationships with our physicians. We maintain a physician recruitment program that is designed to attract and retain qualified specialists and other physicians, in conjunction with our existing physicians and community needs, so that we can broaden the services offered by our hospitals.

     Our hospitals also increase admissions and outpatient business through the implementation of selective marketing programs. The marketing program for each hospital is directed by the hospital’s chief executive officer and is generally tailored to best suit the particular geographic, demographic and economic characteristics of the hospital’s particular market area.

     In addition, we pursue various clinical means to increase the utilization of the services provided by our hospitals, particularly emergency and outpatient services. These include our “Nurse First” emergency service program, which provides for a well- qualified nurse to quickly assess the condition of patients upon arrival in our emergency rooms; our “ProMed” program, an emergency room clinical pathway support service; “MedKey^TM”, a plastic identification and patient information card that streamlines the registration process; and “One Call Scheduling”, a dedicated phone system that physicians and other medical personnel can use to schedule various diagnostic tests and services at one time.

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     Acquire Additional Hospitals

     For acquisitions, we generally seek to acquire acute care hospitals in market areas consisting primarily of rural and non-urban areas of 30,000 to 400,000 people in the southeastern and southwestern United States. Typically, the acute care hospitals we acquire are, or can become, the provider of choice for health care services in their market areas. When we evaluate potential acquisitions, we require that a hospital’s market service area have a demonstrated need for the hospital, along with an established physician base that can benefit from our ability to attract additional, qualified physicians to the area, based on community needs.

     Many of the hospitals we acquire are under-performing at the time of acquisition. Upon acquiring a hospital, we conduct a thorough review and, where appropriate, retain current administrative leadership. We also take several other steps, including, among other things, employing a well-qualified chief executive officer, chief financial officer and chief nursing officer, implementing our proprietary management information system (the PULSE System^TM) and other technological enhancements, recruiting physicians, establishing additional quality assessment and efficiency measures, introducing volume purchasing under company-wide agreements, and spending the necessary capital to renovate facilities and upgrade equipment. Our PULSE System^TM and the other technological enhancements that we implement provide each hospital’s chief executive officer, chief financial officer, and chief nursing officer with the financial and operational information necessary to operate the hospital efficiently and effectively. Based on the information gathered, we can also assist physicians in appropriate case management.

     We believe that we operate each hospital we acquire in an efficient manner to improve the services it offers. We strive to provide at least 90% of the acute care needs of each community our hospitals serve as well as reduce the outmigration of potential patients to hospitals in larger urban areas. Generally, we have been successful in achieving a significant improvement in the operating performance of our newly acquired facilities within 12-24 months of acquisition, and seek to recover our cash investment in four years or less. Once a facility has matured, we generally achieve additional growth through the continued growth of physicians’ practices and the recruitment of physicians based on community needs, expansion of health care services offered and favorable demographic trends.

     Provide Quality Health Care

     We continually seek to improve the quality of the health care services we deliver with the help of our company-wide proprietary QSM patient quality management program. Surveyed patient’s are asked to fill out a confidential survey that seeks their perception of the hospital’s health care services, including medical treatment, nursing care, the hospital’s attention to patient concerns, the administration process, cleanliness of the facility, and the quality of dietary services. Each hospital management team utilizes information provided by our QSM program to improve and enhance services. The overall results in our QSM program for fiscal 2003 indicated that 95% of our inpatients and emergency room patients surveyed and 98% of our outpatients surveyed rated their experience at one of our hospitals as good or excellent.

     We believe that our commitment to quality health care is evidenced by the achievements and accomplishments awarded to our hospitals by independent companies that rate the quality of health care organizations. During fiscal 2003, such achievements and accomplishments included the following:

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     Utilize Efficient Management

     We consider our management structure to be decentralized. Our hospitals are run by experienced chief executive officers, chief financial officers and chief nursing officers who have both the authority and responsibility for day-to-day hospital operations. Incentive compensation programs have been implemented to reward such managers for accomplishing established goals. We employ a relatively small corporate staff to provide services such as systems design and development, training, human resource management, reimbursement, technical accounting support, purchasing, risk management and construction management. We maintain centralized financial control through fiscal and accounting policies established at the corporate level for use at all of our hospitals. Financial information is consolidated at the corporate level through our proprietary PULSE System^TM and is monitored daily by our management team. We also participate in a group purchasing organization with other proprietary hospital systems for the purchase of medical equipment and supplies. This participation allows us to obtain lower costs for medical equipment and supplies by leveraging the buying power of the organization’s members.

Selected Operating Statistics

     The following table sets forth selected operating statistics for our hospitals for the periods and dates indicated.

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Competition

     Existing hospitals

     In many of the geographic areas in which we operate, there are other hospitals that provide services comparable to those offered by our hospitals. Generally, such competition is limited to a single or small number of competitors in each hospital’s respective market service area. In fact, with respect to the delivery of general acute care services, we believe that most of our hospitals face less competition in their immediate market service areas than they would likely face in larger communities. In market service areas where our hospitals do face increased competition, we believe that they distinguish themselves based on the quality and scope of medical services they provide.

     Certain of our competitors may have greater resources than we do, may be better equipped than we are and could offer a broader range of services than we do. For example, some hospitals that compete with us are owned by governmental agencies and are supported by tax revenues, and others are owned by not-for-profit corporations and may be supported to a large extent by endowments and charitable contributions. Such support is not available to our hospitals. In addition, outpatient treatment and diagnostic facilities, outpatient surgical centers and freestanding ambulatory surgical centers also affect the health care marketplace.

     A majority of our hospitals are located in states that have certificate of need laws. These laws limit competition by placing regulations on the construction of new hospital or health care facilities, the addition of new beds, or the addition of significant new services. We believe that such states have higher barriers to entry and, in many instances, permit us to be the sole or preferred service provider in a geographic area.

     The competitive position of our hospitals is also increasingly affected by our ability to negotiate service contracts with purchasers of group health care services. Such purchasers include employers, preferred provider organizations, or PPOs, and health maintenance organizations, or HMOs. PPOs and HMOs attempt to direct and control the use of hospital services by managing care and either receive discounts from a hospital’s established charges or pay based on a fixed per diem or a capitated basis, where hospitals receive fixed periodic payments based on the number of members of the organization regardless of the actual services provided. To date, HMOs have not affected the competitive position of our hospitals. In addition, employers and traditional health insurers are increasingly interested in containing costs through negotiations with hospitals for managed care programs and discounts from established charges. In return, hospitals secure commitments for a larger number of potential patients. We believe that we have been proactive in establishing or joining such programs to maintain, and even increase, hospital services. We also believe that we are able to compete effectively in our markets, and do not believe such programs will have a significant adverse impact on our business or operations.

     We are in an industry that has a competitive labor market. We face competition for attracting and retaining health care professionals. In recent years there has been a nationwide shortage of qualified nurses. In order to address this shortage, we have been improving hospital working conditions, fostering relationships with local nursing schools, and implementing our NurseSelect^TM internal nursing agency in four of our markets.

     Another important factor contributing to a hospital’s competitive advantage is the number and quality of the physicians on its staff. Physicians make admitting decisions and decisions regarding the appropriate course of a patient’s treatment which, in turn, affects the revenue of the hospital. Admitting physicians may be on the medical staffs of other hospitals in addition to those of our hospitals. By offering quality services and facilities, convenient locations, and state-of-the-art medical equipment, we attempt to attract our physicians’ patients. Our hospitals attempt to increase the number, quality and different specialties of physicians in their respective communities based on community needs. Often times, in consideration for a physician relocating to one of our communities and agreeing to engage in private practice, we may advance money to the physician to provide financial assistance pursuant to a recruiting agreement for the physician to establish a practice. The amounts advanced are dependent upon the financial results of each physician’s practice during a certain period (the “guarantee period”) which generally does not exceed twelve months. The net amounts advanced under these recruiting agreements at the end of the physician’s guarantee period are considered loans and are generally forgiven prorata over a 36 month period contingent upon the physician continuing to practice in the respective community.

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     Acquisitions

     We face competition for the acquisition of hospitals from both proprietary and not-for-profit multi-hospital groups. Some of these competitors may have greater financial and other resources than we do. Historically, we have been able to acquire hospitals at prices we believe to be reasonable. However, increased competition for the acquisition of non-urban acute care hospitals could have an adverse impact on our ability to acquire additional hospitals on favorable terms.

Sources of Revenue

     We record gross patient service charges on a patient-by-patient basis in the period in which services are rendered and patient accounts are billed after the patient is discharged. When a patient’s account is billed, our accounting system calculates the reimbursement we expect to receive based on the type of payor and the contractual terms of such payor. We record the difference between gross patient service charges and expected reimbursement as a contractual adjustment.

     At the end of each month, we estimate expected reimbursement for all unbilled accounts. Estimated reimbursement amounts are made on a payor-specific basis and are recorded based on the best information we believe is available to us at the time regarding applicable laws, rules, regulations, and contract terms. We continually review our contractual adjustment estimation process to consider and incorporate updates to laws, rules and regulations as well as changes to managed care contract terms that result from renegotiations and renewals.

     We receive payment for services rendered to patients from:

     Co-payments and deductibles are a portion of the patient’s bill that many private and governmental payors require the patient to pay for their medical services. Co-payment and deductible amounts vary among payors and are based upon the provisions of the plan in which the patient participates. We do not track and segregate the percentages of co-payments or deductibles we collect at the time of service, nor do we separately track the subsequent collections of these amounts as a percentage of net revenue. Co-payments and deductibles are subject to the same collection practices as any patient accounts receivable.

     Our policy is to verify insurance coverage prior to rendering service in order to facilitate timely identification of payor and benefits covered. However, adherence to this policy is not required when the necessity of service and patient condition (i.e., emergency room services, active labor and other like situations) are present. These conditions preclude the verification of coverage. We do not quantify the percentage of encounters where coverage is not verified prior to service being rendered. Substantially all aspects of our billing system are computerized via our proprietary PULSE System^TM .

     The following table sets forth the approximate percentage of net patient service revenue, defined as revenue from all sources after deducting contractual allowances and discounts from established billing rates, which we derive from the various sources of payment for the periods indicated:

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     Hospital revenues depend upon inpatient occupancy levels, the extent to which ancillary services and therapy programs are ordered by physicians and provided to patients, and the volume of outpatient procedures. Reimbursement rates for routine inpatient services vary significantly depending on the type of service (e.g., acute care, intensive care or psychiatric) and the geographic location of the hospital. The percentage of patient revenues attributable to outpatient services has generally increased in recent years, primarily as a result of advances in medical technology that allow more services to be provided on an outpatient basis as well as from increased pressures from Medicare, Medicaid and private insurers to reduce hospital stays and provide services, where possible, on a less expensive outpatient basis. We believe that our experience with respect to increased outpatient levels mirrors the general trend occurring in the health care industry.

     Medicare and Medicaid

     Medicare is a federal health insurance program, administered by the United States Department of Health and Human Services, that provides hospital and other medical benefits to individuals age 65 and over, to certain disabled persons, and to individuals with end-stage renal disease. Medicaid is a joint federal-state health care benefit program, operating pursuant to a state plan administered by each participating state and subject to broadly defined federal requirements, that provides hospital and other medical benefits to individuals who are unable to afford health care services. Our hospitals derive a substantial portion of their net revenues from the Medicare and Medicaid programs. Both programs are heavily regulated and subject to frequent changes that typically limit increases in the payments to participating hospitals.

     The Medicare program provides payment for inpatient and outpatient hospital services under a prospective payment system, or PPS. Under the inpatient PPS system, hospitals are paid a prospectively determined fixed amount for each hospital discharge. The fixed payment amount per inpatient discharge is established based upon each patient’s diagnosis related group, or DRG. Each patient admitted for care is assigned to a DRG based upon his or her primary admitting diagnosis. Every DRG is assigned a payment rate based upon the estimated intensity of hospital resources necessary to treat the average patient with that particular diagnosis. The DRG payment rates are based upon national average costs from an historic base period and do not consider the actual costs incurred by a hospital in providing care. Although based upon national average costs, the DRG and capital payment rates are adjusted by the predetermined geographic adjustment factor for the geographic region in which a particular hospital is located and are weighted based upon a statistically normal distribution of severity. DRG rates are usually adjusted by an update factor each federal fiscal year, which begins on October 1. For federal fiscal years 2003 and 2002, the update factors were 2.95% and 2.75%, respectively. For federal fiscal year 2004, the update factor is 3.4%.

     Medicare’s outpatient PPS groups services are clinically related and use similar resources into Ambulatory Payment Classifications, or APCs. Depending on the service rendered during an encounter, a patient may be assigned to a single or multiple group. Medicare pays a set price or rate for each group, regardless of the costs incurred in providing care. Medicare sets the payment rate for each APC based on historical median cost data, subject to geographic modification. The APC payment rates are updated each year. For federal fiscal years 2003 and 2002, the payment rate update factors were 2.3% and 3.5%, respectively. For federal fiscal year 2004, the update factor is 3.4%.

     Changes in government reimbursement programs have resulted in limitations on the growth rates of the reimbursement programs and, in some cases, in reduced levels of reimbursement for health care services and we anticipate that additional changes in government reimbursement programs will occur. The Balanced Budget Act of 1997 included significant reductions in spending levels for the Medicare and Medicaid programs, including:

     The Balanced Budget Refinement Act of 1999 reduced the adverse effects of the Balanced Budget Act of 1997 through a “corridor reimbursement approach”, where a percentage of losses under the Medicare outpatient prospective payment system will be reimbursed through December 31, 2003. Some of our acute care hospitals qualify for relief under this provision.

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     On December 21, 2000, the Medicare, Medicaid and SCHIP (State Children’s Health Insurance Program) Benefits Improvement Act of 2000, known as BIPA, was enacted. BIPA made a number of changes to Medicare and Medicaid affecting payments to hospitals. All of our acute care hospitals qualify for some relief under BIPA. Some of the changes made by BIPA that affect our hospitals include:

     The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the 2003 Act, which was signed into law on December 8, 2003 made a number of significant changes to the Medicare program. In addition to a highly publicized prescription drug benefit that will provide direct relief to Medicare beneficiaries, the 2003 Act provides a number of direct benefits to hospitals including, but not limited to: a provision for an update factor for federal fiscal year 2004 that is the full market basket; a permanent increase in the base payment rate for rural and small urban hospitals by 1.6% up to the large urban payment rate; the cap on disproportionate share payments for rural and small urban hospitals, as of April 1, 2004, is increased to 12.0% of total inpatient payments; extension until January 1, 2006 of the hold harmless provisions for small rural hospitals and sole community hospitals under the OPD (Outpatient Department) reform provisions; and establishment of a physician incentive program for primary care and certain specialty physicians who provide services to individuals in areas having the fewest physicians available to serve Medicare beneficiaries, among others. In addition, for federal fiscal years 2005, 2006, and 2007, hospitals will receive full market basket updates if they provide the Center for Medicare and Medicaid Services with specific quality data relating to the quality of services provided. We intend to comply with this requirement. We believe that the 2003 Act will have a positive impact on our financial operations.

     In addition to the DRG and capital payments, our hospitals may qualify for and receive “outlier” payments. Outlier payments are made for those inpatient discharges where the total cost of care (as determined by using the gross charges adjusted by the hospital’s cost-to-charge ratio) exceeds the total DRG payment plus a fixed threshold amount. In determining the cost-to-charge ratio, Medicare uses the latest of either a hospital’s most recently submitted or most recently settled cost report. The threshold amount used in the outlier computation for federal fiscal years 2003 and 2002 was $33,560 and $21,025, respectively. The amount for federal fiscal year 2004 is $31,000. Approximately 3.8% of our Medicare inpatient payments were from outliers in fiscal 2003.

     Medicare fiscal intermediaries have been given specific criteria for identifying hospitals that may have received inappropriately high outlier payments. The intermediaries are authorized to recover overpayments, including interest, if the actual cost of the DRG stay (which was reflected in the settled cost report) was less than claimed, or if there were indications of abuse. In order to avoid overpayment or underpayment of outlier cases, hospitals may request changes to their cost-to-charge ratio in much the same way that an individual taxpayer can adjust the amount of withholding from income.

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     Each state is responsible for administering its own Medicaid program and payment rates and methodologies as well as covered services vary from state to state. Approximately 50% of Medicaid funding comes from the federal government, with the balance shared by state and local governments. The most common payment methodologies include prospective payment systems and programs that negotiate payment rates with individual hospitals. Generally, Medicaid payments are less than Medicare payments and are often less than a hospital’s cost of services. In 1991 Congress passed legislation limiting the states’ use of provider-specific taxes, donated funds to bolster the states’ share and obtained increased federal Medicaid matching funds. Certain states in which we operate adopted broad-based provider taxes to fund their Medicaid programs in response to the 1991 legislation.

     Hospitals that have an unusually large number of low-income patients (i.e. those with a Medicaid utilization rate of at least one standard deviation above the mean Medicaid utilization, or having a low income patient utilization rate exceeding 25%) are eligible to receive a disproportionate share adjustment. Congress has also established a national limit on disproportionate share hospital adjustments. Although this legislation and the resulting state broad-based provider taxes have affected the payments we receive under the Medicaid program, to date the net impact has not materially adversely affected us.

     Given increasing budget deficits, the federal government and many states are currently considering additional ways in which to limit increases in levels of Medicaid funding, which could also adversely affect future levels of Medicaid payments received by our hospitals. In addition, the uncertainty and fiscal pressures placed upon the federal government as a result of, among other things, the ongoing military engagement in Iraq, the War on Terrorism, economic recovery stimulus packages, or the deficit in general may affect the availability of federal funds to provide additional relief in the future.

     Because we cannot predict what action the federal government or the states will eventually take under existing and future legislation, we are unable to assess the effect any such legislation might have on our business. Like Medicare funding, Medicaid funding may also be affected by health care reform legislation, and it is impossible to predict the effect future legislation could have on our business.

     In addition to statutory changes, the Medicare and each of the Medicaid programs are subject to regulatory changes, administrative rulings, interpretations and determinations, requirements for utilization review and new governmental funding restrictions, all of which may materially increase or decrease program payments as well as affect the cost of providing services and the timing of payments to our facilities. The final determination of amounts we earn under Medicare and Medicaid often takes many years, because of audits by the program representatives, providers’ rights of appeal and the application of numerous technical reimbursement provisions. We believe that we have made adequate provisions for such adjustments. Nevertheless, until final adjustments are made, certain issues remain unresolved and previously determined allowances could become either inadequate or more than ultimately required.

     We expect that efforts to impose reduced reimbursements, greater discounts and more stringent cost controls by government and other payors will continue and believe that if additional reductions in the payments we receive for our services occur, our overall revenues will be affected.

     Commercial Insurance

     Our hospitals also provide services to individuals covered by private health care insurance. Private insurance carriers typically reimburse the hospital directly after the claim is filed, however, reimbursement can be sent directly to the patient based on the stipulations outlined in the said policy. Reimbursement from private insurance carriers is often based on negotiated rates such as prospective payment systems, per diems, or other discounted fee schedules. Private insurance reimbursement varies among payers and states and is based on the negotiated contract between the hospital and payer.

     In recent years, a number of commercial insurers have undertaken efforts to limit the costs of hospital services by adopting prospective payment or DRG-based systems. To the extent such efforts are successful, and to the extent that the insurers’ systems fail to reimburse hospitals for the costs of providing services to their beneficiaries, such efforts may have a negative impact on the results of operations of our hospitals.

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     Private Pay and Other Sources

     Our hospitals provide services to individuals that do not present any form of health care coverage. Due to the absence of health care coverage, charges are not subject to prospective payment systems, per diem systems, or other discounted fee systems which provide for discounts and adjustments. Such patients are evaluated, at the time of service or shortly thereafter, for their ability to pay based upon federal and state poverty guidelines, qualifications for Medicaid or other state assistance programs, as well as our local hospital’s policy for indigent care. Patients without health care coverage who do not qualify for Medicaid or indigent care writeoffs are offered substantial discounts in efforts to settle their outstanding account balance.

     In addition, our hospitals provide health care services to individuals covered under workers compensation programs, CHAMPUS (for retired military personnel), and other private and governmental programs. These programs pay under prospective payment systems, per-diem systems, or other discounted fee systems.

Regulation and Other Factors

     Companies such as ours that compete in the health care industry are required to comply with many laws, rules and regulations at federal, state and local government levels. These laws, rules and regulations require health care facilities to meet various requirements, including, but not limited to, those relating to the adequacy of medical care, billing for services, equipment, personnel, operating policies and procedures, maintenance of adequate records, compliance with building codes, and environmental protection. In addition, federal and state laws, rules and regulations that govern the health care industry are extremely complex and the industry often does not have the benefit of adequate regulatory or judicial interpretation of many such laws, rules or regulations.

     Health care, as one of the largest industries in the United States, continues to attract much legislative interest and public attention. In recent years, an increasing number of legislative initiatives have been introduced or proposed in Congress and in state legislatures that would affect the health care industry. We cannot predict whether any significant legislative initiatives or proposals will be adopted or, if adopted, whether they will have an adverse effect on our business. In addition, in recent years, significant media and public attention has been focused on the health care industry as a result of investigations related to certain referral, cost reporting and billing practices, laboratory and home health care services and physician ownership of joint ventures involving hospitals. Both federal and state government agencies have announced heightened and coordinated civil and criminal enforcement efforts. Furthermore, the Office of the Inspector General of the United States Department of Health and Human Services and the United States Department of Justice have from time to time established enforcement initiatives that focus on specific billing practices or other suspected areas of fraud and abuse.

     Although we believe that we are in material compliance with all such laws, rules and regulations, if we fail to comply with applicable laws, rules or regulations, we could suffer civil and criminal penalties, including the loss of our licenses to operate facilities and our ability to participate in Medicare, Medicaid, and other federal and state health care programs.

     Licensure, Certification and Accreditation

     Health care facility construction and operation is subject to federal, state and local regulation relating to, among other things, the adequacy of medical care, equipment, personnel, operating policies and procedures, fire prevention, rate-setting and compliance with building codes and environmental protection laws. Facilities are subject to periodic inspection by governmental and other authorities to assure continued compliance with the various standards necessary for licensing and accreditation. Our health care facilities are accredited, meaning that they are properly licensed under appropriate state laws, and that they are certified under the Medicare program and accredited by the Joint Commission on Accreditation of Health Care Organizations or the American Osteopathic Association. We believe that all of our health care facilities are in material compliance with all other applicable federal, state, local and independent review body regulations and standards. The effect of maintaining accredited facilities is to permit such facilities to participate in Medicare and Medicaid. Should any health care facility of ours cease to be accredited, and therefore lose certification under Medicare or Medicaid, such facility would be unable to receive reimbursement from either of these programs. The requirements for licensure, certification and accreditation are subject to change and, in order for all of our facilities to remain accredited, it may be necessary for us to effect changes in our facilities, equipment, personnel and services.

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     Utilization Review

     In order to ensure efficient utilization of facilities and services, federal regulations require that admissions to, and the utilization of, health care facilities by Medicare and Medicaid patients be reviewed by a federally funded peer review organization, or PRO. Pursuant to federal law, PROs must review, where appropriate, the need for hospitalization and the utilization of services, the denial of admission of a patient or the denial of payment for services provided. Each of our facilities has contracted with a PRO and has a quality assurance program that provides for retrospective patient care evaluation and utilization review.

     Certificates of Need

     The construction of new facilities, the acquisition of existing facilities, and the addition of new beds or services at existing facilities may be reviewed by state regulatory agencies under certificate of need laws or related laws. Except for Arkansas, Oklahoma, Pennsylvania, and Texas, all of the states in which our health care facilities are located have certificate of need or equivalent laws. These laws generally require appropriate state agency determination of public need and approval prior to beds or significant services being added to a hospital, or a related capital amount being spent. Failure to obtain necessary state approval could result in our inability to complete a particular proposed hospital acquisition, the imposition of civil or, in some cases, criminal sanctions, our inability to receive Medicare or Medicaid reimbursement and the revocation of a facility’s license.

     State Hospital Rate-Setting Activity

     We currently operate a facility in West Virginia. The West Virginia Health Care Authority requires that requests for increases to hospital charges be submitted annually. Requests for rate increases are reviewed by the West Virginia Health Care Authority and are either approved at the amount requested, approved for lower amounts than requested, or are rejected. As a result, in West Virginia, our ability to increase our rates to compensate for increased costs per admission is limited and the operating margins our hospital located in West Virginia may be adversely affected if we are not able to increase our rates as our expenses increase. We can provide no assurance that other states in which we operate hospitals will not enact similar rate-setting laws.

     Anti-kickback and Self-Referral Regulation

     The health care industry is subject to many laws, rules and regulations designed to deter and prevent practices deemed by the government to be fraudulent or abusive. In particular, the Medicare and Medicaid anti-kickback statute (codified under the Social Security Act) prohibits certain business practices and relationships that might affect the provision and cost of health care services reimbursable under Medicare and Medicaid, such as payment or receipt of remuneration in exchange for the referral of patients whose care will be paid for by Medicare, Medicaid or other government programs. Sanctions for violating the anti-kickback amendments include criminal penalties and civil sanctions, such as fines and possible exclusion from Medicare and Medicaid.

     The United States Department of Health and Human Services has issued regulations, known as “safe harbors,” that describe conduct and business relationships that will be protected from prosecution even though they may violate the anti-kickback statute. The fact that a given business arrangement does not fall within a safe harbor does not automatically render the arrangement illegal. However, business arrangements of health care service providers that fail to clearly satisfy the applicable safe harbor criteria are subject to increased scrutiny by enforcement authorities

     In addition, the Social Security Act contains the Federal Self-Referral Statute, more commonly known as the “Stark Law”. The Stark Law prohibits physicians from referring patients to certain entities for which payment may be made, in whole or in part, by Medicare if the physician or an immediate family member has an ownership or other financial relationships with that entity. Many states have adopted or are considering similar legislative proposals, some of which extend beyond the Medicaid program to prohibit the payment or receipt of remuneration for the referral of patients and physician self-referrals regardless of the source of the payment for the care. Our participation in and development of joint ventures and other financial relationships with physicians could be adversely affected by these laws and similar state enactments. We systematically review all of our operations on an ongoing basis and believe that we are in compliance with the Social Security Act and similar state statutes. In addition, we maintain a company-wide compliance program in order to monitor and promote continuing compliance with these and other statutory prohibitions and requirements. See “Compliance Program and Ethics Program” for further discussion.

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     HIPAA

     The Health Insurance Portability and Accountability Act of 1996, known as HIPAA, among other things, mandates the adoption of security and integrity standards related to patient information. These standards include requirements regarding the handling and exchange of electronic health information and mandates requiring the implementation of new security measures regarding patient information. HIPAA also sets standards for electronic signatures and standardizes the method for identifying providers, employers, health plans and patients. HIPAA has significantly changed the manner in which hospitals communicate with payors and other health care providers.

     Final rules implementing the security and integrity portions of HIPAA were adopted on February 20, 2003 with a mandatory implementation date of April 20, 2005, at which time all of our facilities must comply with the security and integrity rules and requirements. We believe that we are in compliance with final rules implementing the privacy portions of HIPAA, which became effective for us April 14, 2003. The privacy rules give patients greater access to their own medical records and more control over how their personal health information is used and disclosed as well as address the obligations of health care providers to protect health information. Implementation of HIPAA is significant and the cost of continued compliance with HIPAA will be significant. In addition, HIPAA contains criminal and civil penalties for violators and expands the reach of existing fraud and abuse laws to cover private as well as governmental health insurance programs.

     Conversion Legislation

     Many states have enacted or from time to time consider enactment of laws that affect the conversion or sale of not-for-profit hospitals. These laws generally require prior approval from state attorney’s general, advance notification and community involvement. In addition, state attorney’s general in states without specific conversion legislation may exercise authority over such transactions based upon existing law. We believe that states are showing an increased interest in overseeing the sales or conversions of not-for-profit hospitals. The adoption of conversion legislation and the increased review of not-for-profit hospital conversions may make it more difficult for us to acquire not-for-profit hospitals, or could increase our acquisition costs.

     Environmental Regulation

     Our health care operations generate medical waste that must be disposed of in compliance with federal, state and local environmental laws, rules and regulations. Our operations, as well as our purchases and sales of health care facilities, are also subject to compliance with various other environmental laws, rules and regulations. Such compliance costs are not significant and we do not anticipate that such compliance costs will be significant in the future.

     Compliance Program and Ethics Program

     In 1997, we implemented a corporate compliance program to supplement and enhance our then existing corporate ethics program. Our corporate compliance program, which includes our Code of Business Conduct and Ethics, covers our employees, officers (including our chief executive officer, chief financial officer, and persons performing similar functions) and directors. Our corporate compliance program contains standards designed, among other things, to promote honest and ethical conduct and compliance with all the applicable laws, rules and regulations. As part of this program, we provide ethics and compliance training to each of our employees, officers, and directors. The program also requires the reporting, without fear of retaliation, of any suspected illegal or ethical violation. Our corporate compliance program is updated by us from time to time to comply with applicable laws, rules and regulations. Most recently, we updated our Code of Business Conduct and Ethics and Corporate Governance Guidelines to comply with the Sarbanes-Oxley Act of 2002 and recently adopted New York Stock Exchange rules.

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Employees and Medical Staff

     As of September 30, 2003, we had approximately 24,000 full-time and part-time employees, approximately 1,300 of whom were covered by six collective bargaining agreements. Our corporate office staff consisted of approximately 100 people at that date. We believe that our relations with employees are satisfactory.

     In general, although our medical staff consists of physicians with certain services and specialities, the staff physicians at our hospitals are not our employees. Such physicians may also be staff members of other hospitals. Nevertheless, we do employ approximately 165 physicians, approximately one-half of whom are primary care physicians located at clinics we own and operate. In addition, our hospitals provide emergency room, radiology, pathology and anesthesiology services by entering into service contracts with physician groups, which contracts are generally cancelable on 90 days notice.

Liability Insurance

     As is typical in the health care industry, we are subject to claims and legal actions by patients in the ordinary course of business. The health care industry has seen a significant increase in malpractice insurance expense due to unfavorable pricing and a decreasing number of insurers in the professional liability markets. We expect that this trend will continue.

     In response to such unfavorable pricing and a decreasing number of insurers, on October 1, 2002, we formed a wholly-owned insurance subsidiary to self-insure a substantial portion of our professional and general liability risk. This captive subsidiary reinsures risk up to $1.0 million per claim and $3.0 million in the aggregate per hospital and also acts as an excess insurer for all of our hospitals in combination with three commercial insurance companies.

     In addition to the reserves recorded by our captive insurance subsidiary, we maintain reserves for our self-insured professional liability risks. We determine these accruals using asserted and unasserted claims identified by our incident reporting system and actuarially-determined estimates based on both our and industry historical loss payment patterns and have discounted such accruals to their present value using a discount rate of 4.5%. Although the ultimate settlement of these accruals may vary from our estimates, we believe that the amounts provided in our consolidated financial statements are adequate. If actual payments of claims exceed our projected estimates of claims, our insurance accruals could be materially adversely affected.

     We also maintain directors and officers, property and other typical insurance coverages with commercial carriers subject to certain self-insurance retention levels. We believe that our insurance is adequate in amount and coverage. However, in the future, insurance may not be available at reasonable prices or we may have to increase our levels of self-insurance.

Available Information

     We maintain an internet website located at www.hma-corp.com. On our website we make available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed with or furnished to the SEC. We make this information available as soon as reasonably practicable after we electronically file such material with, or furnish such information to, the SEC. Our SEC reports can be accessed through the Investor Relations section of our website. The other information found on our website is not part of this or any other report we file with or furnish to the SEC.

     Our Code of Business Conduct and Ethics and Corporate Governance Guidelines is posted on our website under the heading “Investor Relations”.

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Item 2.   Properties

     Our acute care hospitals offer a broad range of medical and surgical services, including general surgery, internal medicine, obstetrics, emergency room care, radiology, oncology, diagnostic care, coronary care, pediatric services, behavioral health services and psychiatric care and, in several of our hospitals, specialized services such as open-heart surgery and neuro-surgery. We also provide outpatient services such as one-day surgery, laboratory, x-ray, respiratory therapy, cardiology and physical therapy. Some of our hospitals provide specialty services such as oncology, radiation therapy, CT scanning, MRI imaging, lithotripsy and full-service obstetrics.

     The following table presents certain information with respect to our facilities as of September 30, 2003. For more information regarding the utilization of our facilities, see Item 1 “Business — Selected Operating Statistics”.

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     As indicated in the above table, we currently lease certain facilities pursuant to long-term leases which provide us with the exclusive right to use and control each respective hospital’s operations. The facilities we lease and the year of lease expiration are as follows: Highlands Regional Medical Center (2025), Fishermen’s Hospital (2011), Biloxi Regional Medical Center (2040), Crawford Memorial Hospital (2027), Northwest Mississippi Regional Medical Center (2025), Midwest Regional Medical Center (2026), Rankin Medical Center (2026), Brooksville Regional Hospital/Spring Hill Regional Hospital (2028 provided however this lease will be extended by ten (10) years upon completion of a replacement hospital in Brooksville), Central Mississippi Medical Center (2040), Lower Keys Medical Center (2029), Carlisle Regional Medical Center (2006 – this lease can be extended until our replacement facility is completed), and Madison Regional Medical Center (2042).

     Our corporate headquarters are located in an office building complex in Naples, Florida, which we purchased during our fiscal year ended September 30, 2002. We use approximately 20% of the complex and lease the remaining space. We have an outside property management company that manages this complex on our behalf.

     We believe that all of our facilities are suitable and adequate for our needs. Certain of our hospitals are subject to mortgages securing various borrowings. See Note 3.c. of the Notes to the Consolidated Financial Statements in Item 8.

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Item 3.   Legal Proceedings

     We are subject to claims and legal actions by patients and others in the ordinary course of business. We believe that all such claims and actions are either adequately covered by insurance or are unlikely, individually or in the aggregate, to have a material adverse effect on our financial condition. See “Critical Accounting Policies and Estimates — Professional Liability Insurance Claims” in Item 7.

Item 4.   Submission of Matters to a Vote of Security Holders

     No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2003.

Executive Officers of the Registrant

     Below is information regarding our executive officers:

     William J. Schoen, age 68, has served as our Chairman of the Board since April 1986. He joined our Board of Directors in February 1983, became our President and Chief Operating Officer in December 1983, Co-Chief Executive Officer in December 1985 and Chief Executive Officer in April 1986. He served as our President until April 1997 and Chief Executive Officer until January 2001. From 1982 to 1987, Mr. Schoen was Chairman of Commerce National Bank, Naples, Florida, and from 1973 to 1981 he was President, Chief Operating Officer and Chief Executive Officer of The F&M Schaefer Corporation, a consumer products company. From 1971 to 1973, Mr. Schoen was President of the Pierce Glass subsidiary of Indian Head, Inc., a diversified company.

     Joseph V. Vumbacco, age 58, became our Chief Executive Officer in January 2001. Prior to that and since April 1997, he has been our President, and has also served as our Chief Administrative Officer and Chief Operating Officer. He joined us as an Executive Vice President in January 1996 after 14 years with The Turner Corporation (construction and real estate), most recently as an Executive Vice President. Prior to joining Turner, he served as the Senior Vice President and General Counsel for The F&M Schaefer Corporation, and previously was an attorney with the Manhattan law firm of Mudge, Rose, Guthrie & Alexander. Mr. Vumbacco joined our Board of Directors in May 2001.

     Robert E. Farnham, age 48, became our Senior Vice President and Chief Financial Officer in March 2001. He joined us in 1985 and most recently served as our Senior Vice President and Controller. Prior to joining us, Mr. Farnham, who is a C.P.A., was employed by the accounting firm of PricewaterhouseCoopers LLP, formerly known as Coopers & Lybrand LLP.

     Timothy R. Parry, age 49, is our Senior Vice President, General Counsel and Corporate Secretary. He joined us in February 1996 as a Divisional Vice President and Assistant General Counsel after 12 years with the law firm of Harter, Secrest & Emery LLP, the last seven years as a partner. He became our General Counsel in 1997. Prior to joining Harter, Secrest & Emery LLP, he was an Assistant Ohio Attorney General for two years and before that a law clerk for the United States District Court for the Southern District of Ohio.

     Peter M. Lawson, age 41, became one of our Executive Vice Presidents-Hospital Operations in January 2003. He previously and since January 2000 served as a Senior Vice President, overseeing our regional hospitals in the Midwest. Prior to that, Mr. Lawson was a Divisional Vice President-Operations and served as Executive Director of our 255-bed Midwest Regional Hospital in Midwest City, Oklahoma. Before joining us, Mr. Lawson worked with several proprietary health care companies. In 1995, Mr. Lawson received the Modern Healthcare “Up and Comer” Award.

     Jon P. Vollmer, age 45, became one of our Executive Vice Presidents-Hospital Operations in January 2003. He previously and since January 2000 served as a Senior Vice President, overseeing our regional hospitals in the Southeast. Prior to that, Mr. Vollmer was a Divisional Vice President-Operations, having joined us in 1991 as the Executive Director of our 281-bed Riverview Regional Medical Center in Gadsden, Alabama. Prior to joining us, Mr. Vollmer worked with several proprietary health care companies.

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PART II

Item 5.   Market for the Registrant’s Common Equity and Related Stockholder Matters

     Our common stock is listed on the New York Stock Exchange under the symbol “HMA”. At December 16, 2003 there were approximately 242,786,806 shares of our common stock outstanding held by approximately 1,500 record holders. The following table sets forth, for the periods indicated, the high and low sale prices per share of our common stock on the New York Stock Exchange:

     On October 29, 2002, we initiated a quarterly cash dividend policy. We declared cash dividends of $0.02 per share on our common stock on each of October 29, 2002, January 28, 2003, April 29, 2003, July 29, 2003, and October 28, 2003. We can provide no assurance that we will pay cash dividends for any future period or that our cash dividends will remain constant.

     At September 30, 2003 and 2002, we had approximately 10.6 million shares of our common stock reserved for future issuance upon the conversion of our Zero-Coupon Convertible Senior Subordinated Notes due 2022 and approximately 21.0 million shares of our common stock reserved for future issuance upon conversion of our 1.50% Senior Subordinated Convertible Debentures due 2023. See Note 3.b. to our Consolidated Financial Statements in Item 8.

Equity Compensation Plan Information

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Item 6.   Selected Financial Data

     The following table summarizes certain of our selected financial data and should be read in conjunction with our consolidated financial statements and accompanying notes in Item 8.

HEALTH MANAGEMENT ASSOCIATES, INC.
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
(Dollars in thousands, except per share data)

     (1)   For the year ended September 30, 2003 and 2002, amount includes minority interests in earnings of consolidated entities.

     (2)   As discussed in Note 1 to our consolidated financial statements in Item 8, in accordance with SFAS No. 142, we discontinued the amortization of goodwill effective October 1, 2001. The selected financial data summarized for the years ended September 30, 1999 through September 30, 2001 has not been adjusted for the effect of this accounting change.

     The above table reflects acquisitions made by us in furtherance of our business strategy. See “Business-Recent Transactions” in Item 1.

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Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

     At September 30, 2003 we owned and operated 47 acute care and psychiatric hospitals in non-urban communities located in Alabama, Arkansas, Florida, Georgia, Kentucky, Mississippi, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington and West Virginia.

Forward-Looking Statements

     This report and other documents we file with the SEC contain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended.

     Forward-looking statements 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 following:

     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 report in order to reflect future events or developments.

Critical Accounting Policies and Estimates

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes.

     We consider our critical accounting policies to be those that require us to make more significant judgments and estimates when we prepare our financial statements, including the following:

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     Net Patient Service Revenues

     We derive a significant portion of our revenues from the Medicare and Medicaid programs and from managed care health plans. Payments for services we render to patients covered by these programs are generally less than billed charges. For Medicare and Medicaid revenues, provisions for contractual adjustments are made to reduce the charges to these patients to estimated receipts based upon the programs’ principles of payment or reimbursement (either prospectively determined or retrospectively determined costs). Final payment under these programs is subject to administrative review and audit, and we currently make provisions for any adjustments which may result. Our provisions for contractual allowances under managed care health plans are based primarily on payment terms of contractual arrangements such as predetermined rates per diagnosis, per diem rates or a discounted percent from charges. We closely monitor our historical collection rates as well as changes in applicable laws, rules and regulations and contract terms to help assure that provisions are made using the most accurate information we believe to be available. However, due to the complexities involved in these estimations, actual payments we receive could be different from the amounts we estimate and record.

     Provision for Doubtful Accounts

     Collection of receivables from third party payors and patients is our primary source of cash and is critical to our operating performance. Our primary collection risks relate to uninsured patient accounts and patient accounts for which the primary insurance payor has paid, but patient responsibility amounts (generally deductibles and co-payments) remain outstanding. We estimate provisions for doubtful accounts based primarily upon the age of patient’s account, the economic ability of patients to pay and the effectiveness of our collection efforts. We routinely review accounts receivable balances in conjunction with our historical collection rates and other economic conditions which might ultimately affect the collectibility of patient accounts when we consider the adequacy of the amounts we record as reserves for doubtful accounts. Significant changes in payer mix, business office operations, economic conditions or trends in federal and state governmental health care coverage could affect our collection of accounts receivable, cash flows and results of operations.

     Impairment of Long-Lived Assets

     Long-lived assets – In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we review our long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of our asset based on our estimate of its undiscounted future cash flows. If these estimated future cash flows are less than the carrying value of the asset, an impairment charge is recognized for the difference between the asset’s estimated fair value and its carrying value. As of the date of these financial statements, we were not aware of any items or events that would cause us to adjust the recorded value of our long-lived assets, including amortizable intangible assets, for impairment.

     Goodwill – In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, goodwill is not amortized. Goodwill is reviewed for impairment at the reporting unit level, as defined by SFAS No. 142, on an annual basis or sooner if indicators of impairment arise. We periodically evaluate each reporting unit for potential impairment indicators. Our judgments regarding the existence of impairment indicators are based on market conditions and operational performance of each reporting unit. During the fourth quarter of 2003, we completed our annual impairment review of our goodwill. The impairment review indicated that our goodwill was not impaired. Future changes in the estimates used to conduct the impairment review, including revenue and profitability projections or market values could cause our analysis to indicate that our goodwill is impaired in subsequent periods and result in a write-off of a portion or all of our goodwill.

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     Income Taxes

     We must make estimates in recording provision for income taxes, including determination of deferred tax assets and deferred tax liabilities and any valuation allowances that might be required against the deferred tax assets. We believe that future income will enable us to realize these benefits, and, therefore, we have not recorded any valuation allowance against the deferred tax asset.

     We operate in multiple states with varying tax laws. We are subject to both federal and state audits of tax returns. Our federal income tax returns have been examined by the Internal Revenue Service through fiscal year 1999, which resulted in no material adjustments. Our fiscal year 2000 and 2001 federal income tax returns are currently being audited by the Internal Revenue Service. We make estimates we believe are accurate in order to determine that tax reserves are adequate to cover any potential audit adjustments.

     Professional Liability Insurance Claims

     In response to the difficulty we encountered in obtaining primary insurance from commercial companies at reasonable rates, on October 1, 2002 we formed a wholly-owned insurance subsidiary in order to self-insure a greater portion of our primary professional and general liability risk. Our captive subsidiary reinsures risk up to $1.0 million per claim and $3.0 million in the aggregate per hospital, and further acts as an excess insurer for all of our hospitals in combination with three commercial insurance companies. The total cost of our profesional liability program was approximaley 1.4 % of net revenue in fiscal 2003 and 1.3% in fiscal 2002.

     We determine our accruals for self-insured professional liability risks using asserted and unasserted claims identified by our incident reporting system as well as by using actuarially-determined estimates based on our internal as well as industry-wide historical loss payment patterns. We have discounted our accruals for self-insured professional liability risks to their present value using a discount rate of 4.5%. Although the ultimate settlement of these accruals may vary from our estimates, we believe that the amounts provided in our consolidated financial statements are adequate. However, if the actual payments of claims exceed our projected estimates of claims, our insurance accruals could be materially adversely affected.

Results of Operations

     Fiscal Year Ended September 30, 2003 Compared to Fiscal Year Ended September 30, 2002

     Our net patient service revenue for the fiscal year ended September 30, 2003, or fiscal 2003, was $2,560.6 million. This compares to $2,262.6 million in net revenue for our fiscal year ended September 30, 2002, or fiscal 2002. This represented an increase in our net patient service revenue of $298.0 million, or 13.2%. Hospitals in operation for the entire period of fiscal 2003 and fiscal 2002, which we refer to as same hospitals, provided $164.0 million of the increase in net patient service revenue, which resulted both from an increase in inpatient and outpatient volumes and from rate increases. Net revenue per adjusted admission at our same hospitals increased 4.9% for fiscal 2003. A contributing factor to the rate increases and the net per adjusted admission increase was the renegotiation of 209 managed care contracts during fiscal 2003, or 17% of the total number of contracts. The average increase was approximately 9%. Commercial and managed care revenue represented approximately 41% of our total net revenue during fiscal 2003. The source of the remaining net increase of $134.0 million in net patient service revenue included:

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     In fiscal 2003, our hospitals generated 1,079,865 patient days of service, which produced an overall occupancy rate of 48.5%. During fiscal 2002, our hospitals generated 1,000,480 patient days of service, which produced an overall occupancy rate of 47.9%. Admissions in same hospitals for fiscal 2003 increased 2.9%, from 198,214 to 203,875. Same hospital adjusted admissions, which adjusts admissions for outpatient volume, for our hospitals during fiscal 2003 were 325,137, up 2.8% from 316,239 adjusted admissions during fiscal 2002.

     Our salaries and benefits, supplies and other expenses and provision for doubtful accounts for fiscal 2003 were $1,917.4 million, or 74.9% of net patient service revenue, as compared to $1,698.0 million, or 75.0% of net patient service revenue for fiscal 2002. Of the total $219.4 million increase, approximately $111.2 million related to same hospitals and is largely attributable to increased inpatient and outpatient volumes. Another $96.7 million of our increased operating expenses related to the acquisitions, described above, which we completed in fiscal 2003. The remaining increase of $11.5 million represented an increase in our corporate and miscellaneous other operating expenses. In addition, during fiscal 2003, our rent expense increased by $3.4 million primarily as a result of the acquisitions we completed during the year and the expansion of services provided in our hospitals.

During fiscal 2003, our depreciation and amortization costs increased by $14.5 million. This increase in depreciation and amortization resulted primarily from the acquisitions we completed during fiscal 2003. As a result of the repayment of our Convertible Senior Subordinated Debentures due 2020 on August 16, 2003 and lower interest rates on our remaining debt, our interest expense decreased $0.6 million. Our writeoff of $4.9 million of unamortized deferred financing costs is a result of the repayment of our Convertible Senior Subordinated Debentures due 2020 on August 16, 2003.

     Our income before income taxes was $458.7 million for fiscal 2003 and $405.7 million for fiscal 2002, an increase of $53.0 million or 13.1%. Our increased profitability resulted from increased volumes, rate increases, and from the acquisitions we completed in fiscal 2003. Our provision for income taxes was $175.3 million for fiscal 2003 as compared to $159.2 million for fiscal 2002. Our provision for income taxes reflected an effective income tax rate of approximately 38.2% for fiscal 2003 and 39.3% for fiscal 2002. As a result, our net income was $283.4 million for fiscal 2003 and $246.4 million for fiscal 2002.

     Fiscal Year Ended September 30, 2002 Compared to Fiscal Year Ended September 30, 2001

     Our net patient service revenue for fiscal 2002 was $2,262.6 million, as compared to $1,879.8 million for our fiscal year ended September 30, 2001, or fiscal 2001. This represented an increase in net patient service revenue of $382.8 million, or 20.4%. Hospitals in operation for all of fiscal 2002 and 2001, which we refer to as same hospitals, provided $139.7 million of the increase in our net patient service revenue, which resulted primarily from inpatient and outpatient volume and rate increases. Net revenue per adjusted admission at our same hospitals increased 3.5% for fiscal 2002. A contributing factor to the rate increases and the net per adjusted admission increase was the renegotiation of 81 managed care contracts during fiscal 2002, or 8% of the total number of contracts. The average increase exceeded 10%. Commercial and managed care revenue represented approximately 40% of our total net revenue during fiscal 2002. The source of our remaining net increase of $243.1 million included:

     Our hospitals generated 1,000,480 patient days of service in fiscal 2002, which produced an overall occupancy rate of 47.9%. During fiscal 2001, our hospitals generated 880,624 patient days of service for an overall occupancy rate of 47.2%. Admissions in same hospitals for fiscal 2002 increased 2.2%, from 184,533 to 188,576. Same hospital adjusted admissions, which adjusts admissions for outpatient volume, for our hospitals during fiscal 2002 were 298,348, up 4.0% from 287,000 adjusted admissions during fiscal 2001.

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     Our salaries and benefits, supplies and other expenses and provision for doubtful accounts for fiscal 2002 were $1,698.0 million, or 75.0% of our net patient service revenue, as compared to $1,390.4 million, or 74.0% of net patient service revenue for fiscal 2001. Of the total $307.6 million increase, approximately $94.9 million related to same hospitals and was largely attributable to increased inpatient and outpatient volumes. Another $199.5 million of the increase related to the acquisitions, described above, which we completed in fiscal 2002. The remaining increase of $13.2 million represented an increase in our corporate and miscellaneous other operating expenses. Our fiscal 2002 rent expense increased by $6.2 million, primarily as a result of the acquisitions we completed during the year as well as our expansion of services provided in our hospitals.

     Between fiscal 2001 and 2002 our depreciation and amortization costs increased by $4.7 million. The increase primarily resulted from the acquisitions described above, offset by a decrease in amortization expense related to our adoption of SFAS No. 142 on October 1, 2001. Our interest expense decreased $4.4 million due to paydowns on higher interest rate debt and lower interest rates on our remaining overall outstanding debt. Our non-cash charge of $17.0 million consists of $13.6 million for the present value of the future costs of retirement benefits granted to our chairman pursuant to an agreement which became effective January 2, 2001 and $3.4 million for the write down of two hospital assets held for sale in conjunction with their respective replacement. The two hospital assets that were written down were facilities for which replacement facilities were completed in June 1999 and March 2000. The charge for the write down of these facilities was recorded in our quarter ended March 31, 2001. During the period between completion of the new facilities and the recording of the charge, we were evaluating our options for the sale of the facilities that had been replaced. During the period ended March 31, 2001, we finalized our plans for the old facilities and obtained the information necessary to estimate the loss on sale.

     Our income before income taxes was $405.7 million for fiscal 2002 as compared to $321.0 million for fiscal 2001. This represents an increase of $84.7 million or 26.4%. Excluding the non-recurring charge for retirement benefits and write down of assets held for sale of $17.0 million in fiscal 2001, our income before taxes was $338.0 million in fiscal 2001 as compared to $405.7 million for fiscal 2002, an increase of $67.7 million or 20.0%. Our increased profitability resulted from increased volumes, rate increases, and from the acquisitions we completed in fiscal 2002. Our provision for income taxes was $159.2 million for fiscal 2002 as compared to $126.0 million for fiscal 2001. Our provision for income taxes reflected an effective income tax rate of approximately 39.3% for both fiscal 2002 and 2001. As a result, our net income was $246.4 million for fiscal 2002 and $195.0 million for fiscal 2001, including the non-cash charge, and $205.3 million excluding such charge.

Liquidity, Capital Resources, and Capital Expenditures

Liquidity

     Fiscal 2003 Cash Flows Compared to Fiscal 2002 Cash Flows

     Our working capital increased to $820.4 million at September 30, 2003 from $422.0 million at September 30, 2002. This increase resulted from our receipt of proceeds from the sale of our 1.50% Convertible Senior Subordinated Notes due 2023, or 2023 Notes, as well as from increased business volumes and our continued efficient management of working capital. Our cash flows from operating activities decreased by $20.2 million from $354.1 million in fiscal 2002 to $333.9 million in fiscal 2003. Our improved profitability was offset by a decrease in working capital which resulted in an overall decrease in cash flows from operations in fiscal 2003 compared to fiscal 2002. Our use of cash in investing activities decreased by $23.4 million from $343.5 million in fiscal 2002 to $320.1 million in fiscal 2003. This decrease resulted primarily from our acquisition of four hospitals in fiscal 2003 compared to our acquisition of five hospitals in fiscal 2002. Our cash flows provided by financing activities increased $214.9 million from $42.9 million in fiscal 2002 to $257.8 million in fiscal 2003. The increase is primarily the result of borrowings of $575.0 million in connection with the issuance of the 2023 Notes, offset by $310.8 million used for the repayment of our Convertible Senior Subordinated Debentures due 2020.

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     Fiscal 2002 Cash Flows Compared to Fiscal 2001 Cash Flows

     Our working capital increased to $422.0 million at September 30, 2002 from $377.1 million at September 30, 2001. This increase resulted primarily from increased business volumes as well as from continued efficient management of our working capital. Our cash flows from operating activities increased by $57.9 million from $296.2 million in fiscal 2001 to $354.1 million in fiscal 2002. Our improved profitability contributed to the majority of this net increase. Our use of cash in investing activities increased from $170.1 million in fiscal 2001 to $343.5 million in fiscal 2002. This increase resulted from our acquisition of five hospitals in fiscal 2002 compared to two hospitals in 2001. Our cash flows from financing activities increased $115.1 million from $72.2 million used in fiscal 2001 to $42.9 million provided in fiscal 2002. The increase is primarily the result of net proceeds on borrowing of $215.8 million which was offset by $186.4 million used for stock repurchases in fiscal 2002.

     Effect of Legislative and Regulatory Action on Liquidity

     The Medicare and Medicaid reimbursement programs are subject to ongoing changes as a result of legislative and regulatory actions. We believe that these changes will continue to limit payment increases under these programs. However, we do not believe that these changes will have a material adverse effect on our future revenue or our liquidity. Nevertheless, within the statutory framework of the Medicare and Medicaid programs, there are substantial areas subject to administrative rulings, interpretations and discretion which may further affect payments made under those programs. In the future, both the federal and state governments might reduce the funds available under those programs or require more stringent utilization and quality reviews of hospital facilities, either of which could have a material adverse effect on our future revenue and our liquidity. Additionally, any future restructuring of the financing and delivery of health care in the United States and the continued rise in managed care programs could have an effect on our future revenue and liquidity.

Capital Resources

     Credit Facilities

     We currently have a 5-year $450 million credit agreement due November 30, 2004. This credit agreement is a term loan agreement which permits us to borrow under an unsecured revolving credit line at any time through November 30, 2004, at which time the agreement will terminate and all outstanding amounts owed by us will become due and payable. If we choose to borrow under the credit agreement, we may choose a loan based on an interest rate equal to the prime interest rate or an interest rate based on the LIBOR interest rate. Under the credit agreement, the interest rate for a loan based on the LIBOR interest rate is currently the LIBOR rate plus 1.00 percent. This interest rate under the credit agreement is subject to change should our credit rating change. Assuming we were to choose an interest rate based on the LIBOR interest rate, the applicable interest rate under the credit agreement would have been 2.1% and 2.8% at September 30, 2003 and 2002, respectively. As of September 30, 2003 and 2002, we did not have any outstanding borrowings under the credit agreement. In October 2003, we borrowed $275.0 million under the credit agreement to partially finance the acquisition of five hospitals on November 1, 2003. See “Business – Recent Transactions” in Item 1.

     We also have a $15 million unsecured revolving working capital credit commitment with a commercial bank. This credit commitment is tied to our cash management system and renews annually each November 1. We must pay interest on any outstanding balance monthly at a fluctuating rate not to exceed the bank’s prime rate less 0.25%. The interest rate at September 30, 2003 and 2002 was 3.75% and 4.5%, respectively. As of September 30, 2003 and 2002, we did not have any amounts outstanding under the credit commitment.

     During the term of the credit agreement, we are obligated to pay certain commitment fees based upon amounts available to us for borrowing. In addition, each of the above credit facilities contains covenants which, without prior consent of the lenders under such facilities, limit certain of our activities, including those relating to mergers, consolidations and our ability to borrow additional money, make guarantees, grant security interests and declare dividends. Furthermore, each of the credit facilities requires us to maintain minimum levels of consolidated tangible net worth, debt service coverage and interest coverage. At September 30, 2003 and 2002, we were in compliance with all of these covenants.

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     Outstanding Debt Securities

     2022 Notes. On January 28, 2002, we sold $330.0 million in face value of our Zero-Coupon Convertible Senior Subordinated Notes due 2022, or 2022 Notes. Our sale of 2022 Notes resulted in gross proceeds to us of approximately $277.0 million. The 2022 Notes are our general unsecured obligations and are subordinated in right of payment to our existing and future indebtedness that is not expressly subordinated or equal in right of payment to the 2022 Notes. Our 2023 Notes, which are discussed below, rank equally with our 2022 Notes. The 2022 Notes mature on January 28, 2022, unless they are converted or redeemed earlier. Upon the occurrence of certain events, the 2022 Notes become convertible into shares of our common stock at a conversion rate of 32.1644 shares of common stock for each $1,000 principal amount of 2022 Notes converted (which conversion rate is subject to adjustment in certain events). The equivalent number of shares of our common stock associated with any conversion of the 2022 Notes will become dilutive (and thus included in our earnings per share calculation) when our common stock trades at a level of $31.33 for at least 20 out of 30 trading days prior to the conversion of the 2022 Notes or the 2022 Notes otherwise become convertible. The accrual of the original issue discount on the 2022 Notes represents a yield to maturity of 0.875% per year calculated from January 28, 2002, excluding any contingent interest which could be payable under certain circumstances in accordance with the terms of the Notes.

     Holders may require us to purchase all or a portion of their 2022 Notes on January 28, 2005, January 28, 2007, January 28, 2012 and January 28, 2017 for a purchase price per note of $862.07, $877.25, $916.40 and $957.29, respectively, plus accrued and unpaid interest to each purchase date. We will pay cash for all 2022 Notes so purchased on January 28, 2005. We may choose to pay the purchase price in cash or common stock or a combination of cash and common stock for purchases on or after January 28, 2007. In addition, if we undergo certain types of fundamental changes on or before January 28, 2007, each holder of the 2022 Notes may require us to purchase all or a portion of their 2022 Notes. We may choose to pay the purchase price in cash or common stock or a combination of cash and common stock. In addition, we may redeem all or a portion of the 2022 Notes at any time on or after January 28, 2007 for cash. We have reserved approximately 10.6 million shares of our common stock for issuance in the event the 2022 Notes are converted.

     2023 Notes. On July 29 and August 8, 2003, we sold an aggregate of $575.0 million in face value of our 1.50% Convertible Senior Subordinated Notes due 2023. The 2023 Notes were sold at their principal face amount, plus accrued interest, if any, from July 29, 2003. Our sale of 2023 Notes resulted in gross proceeds to us of approximately $563.5 million. We used $310.8 million of the proceeds to redeem all of our Convertible Senior Subordinated Debentures due 2020 on August 16, 2003. The balance of the proceeds was used to partially fund our acquisition of five hospitals on November 1, 2003. The 2023 Notes are our general unsecured obligations and are subordinated in right of payment to our existing and future indebtedness that is not expressly subordinated or equal in right of payment to the 2023 Notes. Our 2022 Notes, which are discussed above, rank equally with our 2023 Notes. The 2023 Notes mature on August 1, 2023, unless they are converted or redeemed earlier. Upon the occurrence of certain events, the 2023 Notes become convertible into shares of our common stock at a conversion rate of 36.5097 shares of common stock for each $1,000 principal amount of 2023 Notes converted (which conversion rate is subject to adjustment in certain events). The equivalent number of shares of our common stock associated with any conversion of the 2023 Notes will become dilutive (and thus included in our earnings per share calculation) when our common stock trades at a level of $36.5097 for at least 20 out of 30 trading days prior to the conversion of the 2023 Notes or the 2023 Notes otherwise become convertible.

     Holders may require us to purchase all or a portion of their 2023 Notes on August 1, 2006, August 1, 2008, August 1, 2013 and August 1, 2018 for a purchase price per note equal to 100% of its principal face amount, plus accrued but unpaid interest. We will pay cash for all 2023 Notes so purchased on August 1, 2006. We may choose to pay the purchase price in cash or common stock or a combination of cash and common stock for purchases on or after August 1, 2008. In addition, if we undergo certain types of fundamental changes on or before August 1, 2008, each holder of the 2023 Notes may require us to purchase all or a portion of their 2023 Notes. We may choose to pay the purchase price in cash or common stock or a combination of cash and common stock. In addition, we may redeem all or a portion of the 2023 Notes at any time on or after August 5, 2008 for a redemption price per note equal to its principal face amount, plus accrued but unpaid interest. We may choose to pay the redemption price in cash or common stock or a combination of cash and common stock. We have reserved approximately 21.0 million shares of our common stock for issuance in the event the 2023 Notes are converted.

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Capital Expenditures

     Our business strategy calls for us to continue to acquire hospitals that meet our acquisition criteria. The acquisition of hospitals accounted for a significant portion of our capital expenditures in each of fiscal 2002 and fiscal 2003. We generally fund acquisitions, replacement hospitals and other ongoing capital expenditure requirements from cash on hand generated from our operating cash flows and from availability under our credit agreement. During fiscal 2004, excess proceeds from the 2023 Notes sold in July and August 2003 also provided a source of funding for our five hospital acquisition completed on November 1, 2003.

     Transactions Completed or Pending for Fiscal 2004

     Transactions Completed in Fiscal 2003

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     Transactions Completed in Fiscal 2002

Off-Balance Sheet Arrangements

     At September 30, 2003, we were party to certain off balance sheet arrangements. These consisted of obligations under standby letters of credit, lease transactions and contractual obligations to provide financial assistance to physicians relocating to our communities.

     Standby letters of credit

     Standby letters of credit outstanding, as of September 30, 2003, were approximately $38.4 million. These outstanding letters of credit consisted of the following:

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     Lease Transactions

     Obligations under operating leases for real property, real property master leases and equipment totaled approximately $184.1 million. The real property master leases are leases for buildings on or near hospital property for which we guarantee a certain level of rental income. We sublease space in these buildings and any amounts received under these subleases are offset against the expense. The minimum payments under all operating lease arrangements are detailed in note 4 in the notes to our consolidated financial statements in Item 8.

     Physician Guarantees

     In consideration for a physician relocating to one of our communities and agreeing to engage in private practice, we may advance money to the physician to assist in the establishment of the physician’s practice. We have committed to advance approximately $13.3 million at September 30, 2003 under these arrangements. The actual amount of these commitments is dependent upon the financial results of each physician’s private practice during the guarantee period, which generally does not exceed twelve months. The net amounts advanced under these recruiting agreements at the end of the individual’s guarantee period are considered loans and are generally forgiven pro rata over a period of 36 months contingent upon the physician continuing to practice in the respective community. Our practice is to expense these advances on a straight-line basis as they are paid over the guarantee period.

Days Sales Outstanding

     At the beginning of each fiscal year, we announce a number of financial and quality objectives for the coming fiscal year, including days sales outstanding (“DSO”). Our DSO is calculated by dividing the quarterly net revenue by the number of days in the quarter. The result is divided into the accounts receivable balance at the end of the quarter to obtain the DSO. This statistic is an important measure of collection of our accounts receivable. Below is a table of actual days compared to our objectives.

     * The variance from the prior year and our objective resulted from the acquisitions we completed during the fourth quarter of fiscal 2003. We are currently in the process of obtaining Medicare and Medicaid provider numbers for these newly acquired hospitals. Until provider numbers are obtained, these hospitals will continue to treat patients under the Medicare and Medicaid programs, but will be unable to bill Medicare and Medicaid. Once we obtain these provider numbers, we will be able to bill for all Medicare and Medicaid patients previously treated. This contributed 3 days of the 4 day increase. Net of such acquisitions, our DSO would have been 71 days.

     Our PULSE System ^TM provides a weekly aging of our outstanding accounts receivable. The primary uses of this aging are to manage and evaluate the collectibility of our receivables and calculate the adequacy of allowances. Our hospitals provide services to patients with health care coverage as well as those without health care coverage. Those patients with health care coverage are often responsible for a portion of the bill referred to as the co-payment or deductible. This portion is determined by the specific plan in which the patient participates. Patients without health care coverage are evaluated at the time of service or shortly thereafter, for their ability to pay based on federal and state poverty guidelines, qualification for Medicaid or other state assistance programs, as well as the local hospital’s policies for indigent care. After payment is received from a third party, if any, statements are sent indicating the outstanding balance on the account. If the account is still outstanding after a period of time, the account is referred to a primary collection agency for assistance in collecting the amount due. The primary collection agency begins the process of debt collection to include contact with the patient via mail and phone. The purpose of this process is to work with the patient to resolve the outstanding debt. All non-governmental accounts over 150 days old from date of discharge are 100% reserved for in our allowance for bad debts.

     The following table is an aging of our gross (prior to allowances for contractual adjustments and doubtful accounts) discharged accounts receivable:

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Impact of Seasonality and Inflation

     Seasonality

     We typically experience higher patient volumes and net patient service revenue in the second and third quarters of each fiscal year. We typically experience such seasonal volume and revenue peaks because more people generally become ill during the winter months, which in turn results in significant increases in the number of patients we treat during those months.

     Inflation

     The health care industry is labor intensive and is subject to wage and other expense increases, especially during periods of inflation and when shortages of skilled labor occur. There is currently a shortage of skilled nursing staff industry-wide, which has caused nursing salaries to increase. We have addressed the nursing staffing needs in our markets through increasing wages, improving hospital working conditions, fostering relationships with local nursing schools, and implementing our NurseSelect^TM internal nursing agency program in four of our markets. We do not believe that the inflationary trend in nursing salaries or the nursing shortage will have an adverse effect on our net income.

     In addition, suppliers pass along rising costs to us in the form of higher prices. Thus far, we believe that we have been able to offset increases in our operating costs through a combination of increasing prices, achieving quantity discounts for purchases under our group purchasing agreement, and by more efficient utilization of resources. Although we have implemented cost control measures to curb increases in operating costs and expenses, we cannot predict our ability to cover or offset future cost increases.

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Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

Interest Rates

     We are exposed to interest rate fluctuations, primarily as a result of our $450 million credit agreement that has an interest rate subject to market fluctuations. However, we do not currently use derivative instruments to alter the interest rate characteristics of any of our debt. The following table summarizes principal cash flows and related weighted average interest rates by expected maturity dates. At September 30, 2003 the fair value of our fixed rate debt was $957.9 million, while the carrying value was approximately $916.7 million. At September 30, 2003 the fair value of our variable rate debt was $17.5 million, while the carrying value was approximately $17.5 million.

     * The interest rate is LIBOR plus 0.75 %. The interest rate on the outstanding balance at September 30, 2003 was 1.9%.

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Item 8.   Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
Health Management Associates, Inc.

     We have audited the accompanying consolidated balance sheets of Health Management Associates, Inc. as of September 30, 2003 and 2002, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2003. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

     We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Health Management Associates, Inc. at September 30, 2003 and 2002 and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 30, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

     As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for the excess of cost over acquired net assets during the year ended September 30, 2002.

Ernst & Young LLP

Tampa, Florida
October 21, 2003, except for
    Note 12, as to which the
    date is November 1, 2003

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HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)

See accompanying notes.

34

HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
in thousands)

See accompanying notes.

35

HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)

See accompanying notes.

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HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years Ended September 30, 2003, 2002 and 2001
(in thousands)

See accompanying notes.

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HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)