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Health Management Associates DEF 14A 2012 Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant x Filed by a Party other than the Registrant ¨ Check the appropriate box:
HEALTH MANAGEMENT ASSOCIATES, INC. (Name of registrant as specified in its charter) (Name of person(s) filing proxy statement, if other than the registrant) Payment of Filing Fee (Check the appropriate box):
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HEALTH MANAGEMENT ASSOCIATES, INC. NOTICE OF ANNUAL MEETING OF STOCKHOLDERS May 22, 2012 The annual meeting of stockholders of Health Management Associates, Inc. will be held at the Ritz-Carlton Golf Resort Naples, 2600 Tiburón Drive, Naples, Florida 34109 on Tuesday, May 22, 2012 at 1:30 p.m., local time, for the following purposes, which are more fully described in the accompanying proxy statement:
The board of directors has fixed the close of business on March 26, 2012 as the record date for the determination of stockholders entitled to notice of and to vote at the annual meeting and at any adjournments thereof.
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Table of ContentsHEALTH MANAGEMENT ASSOCIATES, INC.
PROXY STATEMENT
QUESTIONS AND ANSWERS Why Are These Proxy Materials Being Provided to Stockholders? The board of directors of Health Management Associates, Inc. has made these proxy materials available to you on the Internet or, upon your request, has delivered printed versions to you by mail in connection with the solicitation of proxies by the board for use at the 2012 annual meeting of stockholders. The 2012 annual meeting will be held on Tuesday, May 22, 2012, at 1:30 p.m., local time, or at any adjournment or postponement thereof, for the purposes set forth in this proxy statement and in the accompanying notice of annual meeting of stockholders. Why Did We Mail a Notice Regarding the Internet Availability of Proxy Materials to Stockholders Instead of Mailing a Full Set of Proxy Materials? Instead of mailing a printed copy of our proxy materials to all of our stockholders, we elected to make this proxy statement and our annual report available to our stockholders on the Internet. We encourage you to take advantage of the availability of the proxy materials on the Internet to help reduce printing and shipping costs and lessen the environmental impact of the annual meeting. On or about April 9, 2012, we mailed a notice to stockholders containing instructions on how to access our proxy statement and annual report, and how to vote. INFORMATION REGARDING SOLICITATION AND VOTING Location of the Annual Meeting of Stockholders The annual meeting will be held at the Ritz-Carlton Golf Resort Naples, 2600 Tiburón Drive, Naples, Florida 34109. Principal Executive Offices Our principal executive offices are located at 5811 Pelican Bay Boulevard, Suite 500, Naples, Florida 34108-2710. Our telephone number is 239-598-3131. Record Date and Outstanding Shares Stockholders of record at the close of business on March 26, 2012, the record date for the annual meeting, are entitled to notice of and to vote at the annual meeting. We have one class of shares outstanding, designated class A common stock, $0.01 par value per share, which we refer to as our common stock. As of the record date, 256,333,260 shares of our common stock were issued and outstanding.
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Table of ContentsVoting Each stockholder of record is entitled to one vote for each share of common stock held as of the record date. Instructions for Internet Voting. Stockholders may vote by proxy via the Internet by following the instructions contained in the notice that was delivered by mail. Stockholders who request printed copies of our proxy materials by mail may vote by mail, telephone or via the Internet. When voting on the Internet, stockholders who indicate that they wish to vote in accordance with the recommendations of the board of directors will have their shares voted: (1) FOR the election of the nine director nominees described in this proxy statement; (2) FOR the approval of the compensation of our named executive officers; and (3) FOR the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2012. Such shares may also be voted by the named proxies for such other business as may properly come before the annual meeting or any adjournment or postponement thereof. Instructions for Mail and Telephone Voting. Stockholders who wish to vote by mail or telephone should follow the instructions on the proxy card. Shares voted by telephone or represented by written proxies that are properly dated, executed and returned will be voted at the annual meeting in accordance with the instructions given by telephone or on such written proxies. If no specific instructions are given, shares will be voted: (1) FOR the election of the nine director nominees described in this proxy statement; (2) FOR the approval of the compensation of our named executive officers; and (3) FOR the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2012. Such shares may also be voted by the named proxies for such other business as may properly come before the annual meeting or any adjournment or postponement thereof. Instructions for Voting In Person. Stockholders may vote in person at the annual meeting. Ballots will be provided to stockholders who wish to vote at the annual meeting. Effect of Not Casting Your Vote and Broker Non-Votes If you hold your shares in street name, it is critical that you cast your vote if you want it to count in the election of directors and the advisory vote on the compensation of our named executive officers. If you hold your shares in street name and do not indicate how you want your shares voted in the election of directors and the advisory vote on the compensation of our named executive officers, your bank or broker is not permitted to and will not vote those shares, which we refer to as broker non votes, on your behalf. Your bank or broker will, however, continue to have discretion to vote any non-instructed shares to ratify the selection of our independent registered public accounting firm. If you are a stockholder of record and you do not cast your vote, no votes will be cast on your behalf on any of the items of business at the annual meeting. Broker non-votes are counted for the purpose of determining the presence of a quorum but are not entitled to vote, and thus are not counted for the purpose of determining the number of shares voting in the election of directors or the advisory vote on the compensation of our named executive officers.
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Table of ContentsVote Required The table below indicates the vote required to approve each of the proposals described in this proxy statement, assuming the presence of a quorum, in person or by proxy, at the annual meeting.
Recommendations of our Board of Directors Our board of directors recommends that stockholders vote their shares: (1) FOR the election of each of the nine director nominees; (2) FOR the approval of the compensation of our named executive officers; and (3) FOR the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2012.
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Table of ContentsRevocability of Proxies You can change your vote by revoking your proxy at any time before it is voted at the annual meeting in one of four ways:
Attendance at the annual meeting will not automatically revoke your previously submitted proxy unless you vote again at the meeting or specifically request in writing that your prior proxy be revoked. Please note, however, that if your shares of common stock are held of record by a broker, bank or other nominee and you wish to vote at the annual meeting, you must bring to the annual meeting a letter from such broker, bank or other nominee confirming both (1) your beneficial ownership of such shares on March 26, 2012 and (2) that such broker, bank or other nominee is not voting such shares at the annual meeting. Solicitation of Proxies We are soliciting proxies to provide all stockholders of record on March 26, 2012 with an opportunity to vote on matters that properly come before the annual meeting. We will bear all costs related to this solicitation. In addition, we may reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation materials to such beneficial owners. Proxies may also be solicited on our behalf, in person or by telephone or other telecommunication, by our directors, officers and employees, none of whom will receive additional compensation for doing so. We have retained Georgeson Inc. to assist us in the solicitation of proxies for the annual meeting. We have agreed to pay Georgeson Inc. a fee of approximately $13,000, plus expenses, for its services. Quorum A quorum is required for stockholders to conduct business at the annual meeting. The presence, in person or by proxy, of the holders of a majority of the shares issued and entitled to vote at the annual meeting will constitute a quorum. Effect of Abstentions Abstentions are counted for the purpose of determining the presence of a quorum and the number of shares voting on a proposal. Abstentions will have the same effect as a vote against a proposal requiring the approval of a majority of the shares present, in person or by proxy, and entitled to vote. Where Can Annual Meeting Voting Results Be Found? Preliminary voting results will be announced at the annual meeting. Final voting results will be tallied by the inspectors of election and will be reported on a Current Report on Form 8-K that will be filed with the Securities and Exchange Commission within four business days after the annual meeting.
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Table of ContentsSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The table below presents certain information as of March 26, 2012 regarding shares of common stock held by: (1) each stockholder known by us to be the beneficial holder of more than 5% of our common stock; (2) each of our directors; (3) each of our “named executive officers” (as defined under the heading entitled “Compensation Discussion and Analysis”); and (4) all of our directors and executive officers as a group.
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The address for each director and named executive officer is c/o Health Management Associates, Inc., 5811 Pelican Bay Boulevard, Suite 500, Naples, Florida 34108-2710.
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Table of ContentsOur wholly-owned captive insurance subsidiary that is domiciled in the Cayman Islands maintained an investment with a fair market value of approximately $127,000 in BlackRock, Inc. common stock as of February 29, 2012. Such investment was made on an arms-length basis.
Our wholly-owned captive insurance subsidiary that is domiciled in the Cayman Islands maintained investments with an aggregate fair market value of approximately $15.6 million in publicly-traded Vanguard mutual funds as of February 29, 2012. Such investments were made on an arms-length basis.
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Table of ContentsPROPOSAL ONE - ELECT NINE DIRECTORS The number of directors constituting our board of directors is currently set at nine. At this year’s annual meeting, stockholders will elect nine directors to hold office until the next annual meeting of stockholders or until each of their successors is duly elected and qualified. Based on the recommendations of our corporate governance and nominating committee, we have nominated William J. Schoen, Gary D. Newsome, Kent P. Dauten, Pascal J. Goldschmidt, M.D., Donald E. Kiernan, Robert A. Knox, Vicki A. O’Meara, William C. Steere, Jr. and Randolph W. Westerfield, Ph.D. for election as directors. All director nominees currently serve on our board of directors and we recommend their re-election at the annual meeting. Directors will be elected by a plurality of the shares present, in person or by proxy, that are entitled to vote in the election of directors. If you indicate when voting that you wish to vote in accordance with the recommendations of our board of directors, proxies will be voted FOR the election of each of the nine director nominees. Under our corporate governance guidelines, any director nominee who is elected at an annual meeting but who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election is required to tender a resignation for consideration by the corporate governance and nominating committee, which will recommend to the board of directors the action to be taken with respect to any such tendered resignation. We do not contemplate that any of the director nominees will be unable to serve as a director but, if that event should occur prior to the voting of the proxies, the persons named in the proxy reserve the right to vote for such substitute nominee or nominees as they, in their discretion, shall determine, provided that proxies cannot be voted for a greater number of persons than the number of director nominees named in this proxy statement. The biographies of each of the director nominees below contains information regarding the person’s service as a director, business and related health care industry experience, director positions held currently or at any time during the last five years, information regarding involvement in certain legal or administrative proceedings, if applicable, and the particular experiences, qualifications, attributes or skills that our corporate governance and nominating committee and our board of directors considered when determining that the person should continue to serve as one of our directors. The board of directors unanimously recommends that stockholders vote for each of the nine director nominees.
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Table of ContentsBoard Meetings Our board of directors held seven meetings during 2011. Each director attended at least 75% of such board meetings and the meetings of board committees on which he or she served. Board Leadership Structure The board of directors believes that effective corporate governance is best accomplished if the roles of chairman of the board and chief executive officer are separated. The board of directors believes that separating these two positions allows each person to focus on his or her individual responsibilities, which is essential in the current business and economic environment. Under this structure, our chief executive officer can focus his attention on the day-to-day operations and performance of the company and implementing our long-term strategic plans. At the same time, our non-executive chairman of the board can focus his attention on longer-term strategic issues, setting the agenda for, and presiding at, board meetings, working collaboratively with our other board members, and providing insight and guidance to our chief executive officer. In addition to separating the roles of chairman of the board and chief executive officer, our board of directors has also selected Mr. Knox to serve as our lead director, with duties that include: (1) working with the chairman to oversee the performance review of our chief executive officer; (2) leading board meetings when the chairman is not present; (3) providing input to the chairman for the purpose of establishing the agenda for each board meeting; and (4) preparing agendas for executive sessions of the independent directors and presiding over such sessions. Board Committees The board of directors has standing audit, compensation, corporate governance and nominating, and executive committees. The table below indicates the number of meetings held during 2011 and the names of the directors serving on each committee as of March 26, 2012.
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Table of ContentsThe current charter of each board committee, our corporate governance guidelines and our code of business conduct and ethics are available on our website at www.hma.com under the heading “Investor Relations” and the subheading “Corporate Governance.” The information contained on our website is not a part of this proxy statement. Our board of directors has affirmatively determined that Mr. Dauten, Dr. Goldschmidt, Mr. Kiernan, Mr. Knox, Ms. O’Meara, Mr. Schoen, Mr. Steere and Dr. Westerfield are each independent under the independence standards of the New York Stock Exchange. In evaluating independence, our board affirmatively determines each year whether any director has any material relationship with the company. When assessing the materiality of a director’s relationship with the company, the board considers all relevant facts and circumstances, not merely from the director’s standpoint, but also from the standpoint of the persons or organizations with which the director has an affiliation. The board also considers the frequency or regularity of any services provided by directors or persons or organizations with which the director has an affiliation, whether such services are being carried out at arm’s length in the ordinary course of business and whether the services are being provided to the company on substantially the same terms as those available to unrelated parties. The board has affirmatively concluded that no material relationship exists between the company and any of its independent directors, other than each such person’s position as one of our directors. In accordance with the listing standards of the New York Stock Exchange, our non-management directors, all of whom are independent under the independence standards of the New York Stock Exchange, meet in executive session on a regular basis without management present. Mr. Knox, as lead director, presides at these executive sessions. Interested parties may communicate directly with our independent directors by sending correspondence to our corporate secretary in accordance with the stockholder communication procedures described under the heading entitled “Stockholder Communications.” Any such correspondence should be specifically directed to the attention of the independent directors. Audit Committee The board of directors has determined that Mr. Dauten, Mr. Kiernan and Dr. Westerfield each qualifies as an “audit committee financial expert” in accordance with applicable Securities and Exchange Commission rules and based on professional work experience as described in their respective biographies under “Proposal One – Elect Nine Directors.” The audit committee reviews with our independent registered public accounting firm our consolidated financial statements and internal controls over financial reporting, our independent registered public accounting firm’s auditing procedures and fees, and the possible effects of professional services provided to us by our independent registered public accounting firm upon such firm’s independence. The audit committee also provides oversight review of our corporate compliance program. The audit committee works closely with our senior executives, internal auditors and independent registered public accounting firm to assist the board of directors in overseeing our accounting and financial reporting processes and our consolidated financial statement audits. In
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Table of Contentsfurtherance of that role, the audit committee is charged with assisting the board of directors in its oversight of: (1) the integrity of our consolidated financial statements; (2) our compliance with legal and regulatory requirements; (3) the qualifications and independence of our independent registered public accounting firm; and (4) the performance of both our internal auditors and our independent registered public accounting firm. The audit committee, which was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended, is also responsible for preparing the committee’s report that is required by Securities and Exchange Commission rules to be included in our annual proxy statement and performs such other tasks that are consistent with its charter. In February 2012, the audit committee adopted an amended Code of Business Conduct and Ethics which applies broadly throughout our organization and which is designed to enhance adherence by our employees to the highest ethical standards and further support compliance by such persons with all applicable laws. The audit committee’s report appears under the heading entitled “Report of the Audit Committee to Stockholders.” Compensation Committee The compensation committee is responsible for designing and implementing compensation programs for our executives and directors that further the intent and purpose of our company’s fundamental compensation philosophy. The compensation committee is also responsible for: (1) reviewing and discussing with management the compensation discussion and analysis that is required by Securities and Exchange Commission rules to be included in our annual proxy statement; (2) preparing the committee’s report that Securities and Exchange Commission rules require be included in our annual proxy statement; and (3) performing such other tasks that are consistent with its charter. The duties and responsibilities of the compensation committee are set forth in its charter. Each member of the compensation committee has direct experience establishing, reviewing and operating compensation programs for large organizations. The chairman of the compensation committee is responsible for setting the agenda for each committee meeting and for ensuring that meetings are conducted in an effective manner. The compensation committee also regularly engages in discussions regarding executive succession planning and team building. To ensure that it is discharging its duties and responsibilities in an effective and efficient manner, the compensation committee conducts an annual assessment of its operation and function. The compensation committee’s report appears under the heading entitled “Compensation Committee Report.” Corporate Governance and Nominating Committee The corporate governance and nominating committee seeks to enhance the quality and diversity of nominees to our board of directors and is charged with identifying qualified persons, consistent with criteria approved by the board of directors, to become directors and recommending that the board of directors nominate such qualified persons for election as
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Table of Contentsdirectors. The committee is also responsible for shaping corporate governance, overseeing an annual evaluation of the board of directors and management, and performing such other tasks that are consistent with its charter. The corporate governance and nominating committee recommended the nine director nominees described in this proxy statement for election at the annual meeting of stockholders. The corporate governance and nominating committee also considers stockholder recommendations for nominations to the board of directors. The committee evaluates such recommendations using the same evaluation process described under the heading entitled “Director Qualifications and Evaluation Process.” Such recommendations for nominations should be sent to: Health Management Associates, Inc., 5811 Pelican Bay Boulevard, Suite 500, Naples, Florida 34108-2710, Attention: Corporate Secretary. Our corporate secretary will forward such recommendations to the corporate governance and nominating committee. The corporate governance and nominating committee is also responsible for the review, approval and ratification of related party transactions. The corporate governance and nominating committee follows the guidelines set forth under the heading entitled “Certain Transactions” prior to approving any related party transaction. Executive Committee The executive committee is empowered to take such actions and have such responsibilities as the board of directors may determine from time to time that are not the responsibility of any other committee of the board of directors. Committee Self-Assessment Process The corporate governance and nominating committee oversees an annual self-evaluation conducted by the board of directors to determine whether the individual committees and the board are functioning effectively. In addition, the audit, compensation and corporate governance and nominating committees each perform an annual self-assessment to evaluate their effectiveness in fulfilling their obligations. Compliance with the responsibilities listed in each committee’s charter forms the principal criteria for the evaluations, as well as such other factors and circumstances as are determined to be appropriate by the board of directors or the corporate governance and nominating committee. The corporate governance and nominating committee also oversees individual director assessments in connection with the periodic evaluation of directors for purposes of making a recommendation to the board of directors as to the persons who should be nominated for election or re-election at the annual meeting of stockholders. As part of this annual self-assessment process, the corporate governance and nominating committee discusses the diversity of specific skills and characteristics necessary for the optimal functioning of the board in its oversight of the company. The corporate governance and nominating committee then gives consideration to these specific skill sets when considering candidates for nomination.
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Table of ContentsDirector Attendance at Annual Meetings Company policy requires that each director attend our annual meeting of stockholders or provide the chairman of the board with advance notice of the reason for not attending. All of our directors attended the annual meeting of stockholders that was held on May 17, 2011. The Board of Directors’ Role in Risk Oversight The board of directors is actively engaged in the oversight of risks that could affect our company. The Role of Board Committees The audit committee focuses on financial risks, including those that could arise from our accounting and financial reporting processes. Additionally, the audit committee monitors and has oversight of the formal risk management programs and processes implemented by management. Our corporate governance and nominating committee focuses on the management of risks associated with board organization, membership and structure, as well as our corporate governance, and the recruitment and retention of talented board members. The compensation committee focuses on the management of risks arising from our compensation policies and programs and, in particular, our executive compensation programs and policies. The Role of the Board of Directors While our board committees are focused on the above specific areas of risk, the full board of directors retains responsibility for the general oversight of risk. These responsibilities are satisfied through periodic reports from each committee chairman, including information regarding the risk considerations within each committee’s area of expertise, as well as periodic reports to our board of directors or the appropriate committee from our management team, including our Vice President who oversees risk management. Areas of material risk to the company, including operational, financial, legal, regulatory and strategic risks, are reviewed quarterly. The board of directors reviews this information to enable it to understand our risk identification, risk management and risk mitigation strategies. Items within the scope of a particular committee are reviewed by that committee, and the committee chairman subsequently reports to the full board of directors as part of the committee’s report. This enables the board of directors and its committees to coordinate the risk oversight role. Comprehensive 2011 and 2012 Compliance Review We maintain an effective compliance and ethics program. During October 2011, we engaged Strategic Management Services, LLC to perform an independent review of our compliance and ethics program. Over a six-month period, Strategic Management visited many of our hospitals and our home office in Naples, Florida. Strategic Management reviewed numerous documents related to our compliance and ethics program, interviewed over one hundred executives at our hospitals and home office, and conducted on-site focus group meetings with almost ninety employees at our hospitals. Strategic Management’s objective was to independently assess our compliance and ethics program and to ascertain whether we met the standards for an effective compliance program as set forth in the U.S. Department of Health and
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Table of ContentsHuman Services, Office of Inspector General Guidance Documents. During the pendency of Strategic Management’s review, both our chief executive officer and the chairman of our audit committee were periodically advised about the status of the review. During March 2012, our board of directors held a special meeting for Strategic Management to present its findings, observations and results. Our board of directors will continue to oversee our review and response to Strategic Management’s findings, and will periodically review and assess our compliance and ethics program. Director Qualifications and Evaluation Process It is the policy of the corporate governance and nominating committee, consistent with our corporate governance guidelines, that all persons nominated to be a director possess the following qualifications and attributes:
The corporate governance and nominating committee evaluates director candidates, including individuals nominated by stockholders, whom it believes meet the criteria described above through reference and background checks, interviews and an analysis of each candidate’s specific qualifications and attributes in light of the composition of the board of directors and our leadership needs at the time. The corporate governance and nominating committee may also engage the services of an outside consultant to assist it with conducting searches to identify director candidates, evaluating candidates’ qualifications, performing reference and background checks and making initial contact with potential candidates. Women and minority candidates are sought as part of the corporate governance and nominating committee’s director identification and recruitment efforts. Our diversity recruiting efforts are made pursuant to provisions in our corporate governance guidelines and our corporate governance and nominating committee charter, which specifically state that women and minority candidates are sought as part of the director recruitment process.
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Table of ContentsDirector Education We have a program for orienting new directors and providing continuing education for all directors. New directors attend a training session that introduces them to our operations and to our management team. Thereafter, directors are notified on a regular basis about various educational programs offered by governance organizations and other educational institutions on topics such as audit, compensation, regulatory compliance and corporate governance. In addition, we routinely ask outside consultants and professional advisors to attend our board of directors and committee meetings to keep our directors up-to-date on the latest legal, regulatory, industry and governance developments. During 2011, outside consultants and professional advisors also made presentations to the board and provided continuing education to our directors. Stockholder Communications Stockholders may send correspondence by mail to the full board of directors, to specific board committees, or to individual directors (including correspondence recommending nominees to the board of directors as discussed above under “Corporate Governance and Nominating Committee”). Such correspondence should be addressed to the board of directors, the relevant committee or a particular director in care of: Health Management Associates, Inc., 5811 Pelican Bay Boulevard, Suite 500, Naples, Florida 34108-2710, Attention: Corporate Secretary. Our corporate secretary will promptly forward all stockholder correspondence as appropriate. Our corporate secretary is also responsible for identifying correspondence that does not directly relate to matters for which the board of directors is responsible and forwarding such correspondence to the appropriate person(s) within the company, as well as identifying and, if appropriate, responding to inappropriate correspondence.
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Table of ContentsCompensation Discussion and Analysis Introduction This Compensation Discussion and Analysis, which we refer to as CD&A, provides information about the compensation programs for our President and Chief Executive Officer, our Executive Vice President and Chief Financial Officer, as well as each of our next three most highly compensated executive officers employed at the end of 2011, to whom we refer collectively as our “named executive officers.” Our named executive officers for 2011 were:
Executive Summary Our executive compensation programs are founded on the belief that there should be a substantial and meaningful connection between the compensation of our named executive officers and the amount and quality of our earnings. Our compensation programs are designed to provide incentives that drive our financial performance and result in greater stockholder returns. Accordingly, a significant percentage of our executive compensation program is weighted towards company performance. This structure supports our pay-for-performance philosophy. Consistent with our compensation philosophy, we use Adjusted EBITDA (as defined below) to determine the amounts of incentive compensation payable under the annual and long-term incentive compensation programs. The compensation committee elected to use Adjusted EBITDA as the performance metric under the annual and long-term incentive compensation programs because it believes that Adjusted EBITDA provides a simple and understandable measure of our recurring profitability and that it is highly correlated to our stock price performance. Specifically, Adjusted EBITDA:
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Table of ContentsEBITDA is a non-GAAP measure that is defined as consolidated net income before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is EBITDA modified to exclude discontinued operations, net gains/losses on sales of assets, net interest and other income, gains/losses on early extinguishment of debt, write-offs of deferred debt issuance costs and costs for acquisitions, government investigations and restructuring. The compensation committee may exercise its reasonable judgment to include or exclude unique items in the calculation of Adjusted EBITDA for the purpose of determining the amounts of incentive compensation payable under our executive compensation programs. The compensation committee exercised such discretion by including certain acquisition and restructuring costs in the calculation of our 2011 Adjusted EBITDA for the purpose of our executive compensation programs. This had the effect of reducing 2011 Adjusted EBITDA for the purpose of our executive compensation programs. In 2011, we continued to focus on our core operating initiatives of physician recruitment, market service development and emergency room operations, together with our strategy of acquiring hospitals that present meaningful opportunities for Adjusted EBITDA growth and increased stockholder value. The benefits of our continuing focus on strategic acquisitions and on our core operating initiatives have resulted in strong financial results in a challenging economic and regulatory environment. From 2010 to 2011, net revenue increased by $712.3 million, or approximately 14.0%, including 4.8% of same hospital net revenue growth. Adjusted EBITDA grew from $732.5 million in 2010 to $848.2 million in 2011, representing a year-over-year increase of approximately 15.8%. However, due to the exercise of the compensation committee’s discretion as described above, 2011 Adjusted EBITDA for the purpose of our executive compensation programs was $830.5 million, which we refer to in this CD&A as “2011 Modified Adjusted EBITDA.”
Acquisition Activity: Our 2011 net revenue was favorably impacted by our acquisition activity in 2011, 2010 and late 2009. Since December 2009 and through December 31, 2011, we have added approximately $1.3 billion of annual net revenue and increased our total licensed beds by approximately 26%. Physician Recruitment and Retention: During 2011, approximately 650 physicians were recruited or otherwise joined our medical staff, and we continue to invest significant resources in the recruitment and retention of primary care physicians and specialists. Market Service Development: We saw improvement in our market share during 2011, in particular increased surgical volume, as we continued to implement and deploy new technologies and services such as MAKOplasty® and da Vinci® robotic surgical systems at many of our hospitals. Emergency Room Operations: During 2011, we experienced an increase in emergency room visits, which we believe was attributable, in part, to our dedicated focus on emergency room operations, including our continued implementation of ER Extra®, our signature patient-centered emergency room program that is designed to reduce patient wait times, enhance patient satisfaction and improve the quality and scope of patient assessments.
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Table of ContentsMeaningful Use Readiness: During 2011, the efforts of our management team, including our named executive officers, resulted in the certification of our Pulse System® by the Certification Commission for Health Information Technology in accordance with the applicable hospital certification criteria adopted by the Secretary of the U.S. Department of Health and Human Services. This certification supports the Stage 1 meaningful use measures required to qualify our hospitals for additional reimbursements from Medicare and Medicaid.1 We believe that these accomplishments, as well as others, have driven our long-term track record of company performance. In 2011, the compensation committee took the following actions:
Our executive compensation programs contain other key components and features that are designed to reinforce our pay-for-performance philosophy, and that are consistent with market best practices.
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2011 Advisory Vote on Executive Compensation At the 2011 annual meeting of stockholders, we held a non-binding stockholder vote on the compensation of our named executive officers, referred to as a “say-on-pay” vote, along with a non-binding vote to determine how often this vote should be held. Because last year was the first year we held a “say-on-pay” vote, and to give our stockholders the ability to express their opinion on our executive compensation program as frequently as possible, our board of directors recommended that the “say-on-pay” vote take place on an annual basis. At the 2011 annual meeting of stockholders, an overwhelming majority of our stockholders expressed a preference that the “say-on-pay” vote take place on the annual basis as recommended by our board of directors. This preference was subsequently adopted by our board of directors and we are providing our stockholders with a “say-on-pay” vote this year. Also, our stockholders overwhelmingly approved the compensation of our named executive officers with 97% of the shares entitled to vote voting in favor of our executive compensation program. The compensation committee believes that this affirms our stockholders’ support of our approach to executive compensation. Based on the substantial stockholder support of our executive compensation program, the compensation committee did not change its approach to the compensation of our named executive officers in 2011. The compensation committee remains open to any concerns expressed by our stockholders and will continue to consider the outcome of our future “say-on-pay” votes when making compensation decisions for our named executive officers. Overview of Our Executive Compensation Programs Our executive compensation programs are designed to attract, motivate and retain executives and reward outstanding service in an increasingly competitive market for executive talent. As discussed in greater detail below, our fundamental compensation philosophy is that there should be a substantial and meaningful connection between the total direct compensation of our named executive officers and the amount and quality of our earnings. We use the term “total direct compensation” to refer to the sum of base salary, annual incentive compensation and long-term incentive compensation.
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Table of ContentsThe components of our annual total direct compensation are:
Target total direct compensation is established for the named executive officers each year. In certain years, including 2011, the compensation committee’s independent compensation consultant, Towers Watson, provides research and analysis to assist in establishing the target total direct compensation. The compensation committee endeavors to align base salary within a reasonable range around the median of our competitive market, and to align performance-based incentive compensation above the median range of our competitive market. Consistent with the overall structure that we have used for our executive compensation program since 2008, the compensation committee established a target mix of base salary, annual cash incentive compensation and long-term cash and equity incentive compensation for each of our named executive officers. Base salary represents approximately 14% of total target direct compensation for our chief executive officer, and approximately 28% of total target direct compensation, on average, for our other named executive officers. Base salary is the only part of total direct compensation that is fixed, subject to periodic adjustments to remain competitive with the market. The rest of total direct compensation, consisting of annual cash incentive compensation and long-term cash and equity incentive compensation, is directly linked to company performance. In setting the mix between the different elements of executive compensation, the compensation committee generally focuses more heavily on incentive compensation, consisting of both cash and equity incentives, rather than targeting a specific allocation mix. Base salary and annual incentives are intended to reward short-term objectives, while long-term incentives, comprised of both service-based and performance-based components, are intended to reward long-term goal attainment and provide our executives with an incentive to remain our employees. Annual incentives are based on one-year financial performance metrics, and such awards vest and are payable in full soon after compensation committee approval is obtained. Long-term incentives are also based on one-year financial performance metrics, but generally require continued service over a four-year period. Total incentive compensation levels and the mix of short-term and long-term incentives vary for each named executive officer based on each officer’s level of responsibility, including strategic and operational responsibilities, anticipated performance requirements, contributions of each named executive officer, retention needs and peer group data.
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Table of ContentsThe total incentive opportunity, including both annual cash incentive compensation and long-term cash and equity incentive compensation, represent the majority of target total direct compensation. For 2011, the target total direct compensation opportunity for our chief executive officer, and the average for all of our other named executive officers, was as follows:
We also provide compensation and benefits to our named executive officers through the following programs:
Fundamental Compensation Philosophy and Objectives
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Table of ContentsThe compensation committee believes that our ability to grow and be successful in the long-term is enhanced by a comprehensive compensation program that attracts, motivates and retains executives and rewards outstanding service, including awards that link compensation to performance. We seek to not only pay a competitive base salary to our executives, but also rely heavily on annual and long-term incentive compensation to attract and retain highly qualified executives and motivate them to perform to the best of their abilities on behalf of our company and stockholders. The compensation committee believes that our named executive officers should be rewarded for their individual contributions to our success through a combination of cash and equity-based incentive awards, with a particular emphasis on long-term equity-based awards. Participants in the Compensation-Setting Process The following table identifies the various individuals and groups who participated in the compensation-setting process for 2011, as well as their responsibilities in connection with such participation.
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Table of ContentsUse of Peer Group Compensation Data and Tally Sheets Peer Group Compensation Data. When making compensation decisions each year, the compensation committee considers named executive officer compensation and programs at a group of companies in our industry considered to be our peers. The composition of our peer group is reviewed periodically and revised from time to time by the compensation committee with assistance from Towers Watson. For 2011, based on the data provided by Towers Watson, our peer group was revised to include more companies with comparable lines of business. The companies selected to be in our peer group met the following criteria:
The following companies met these criteria for 2011 and comprised the largest peer group that we reviewed in making compensation determinations for 2011:
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We use an initial peer group of over 15 companies because it presents a larger group from which to conduct a statistically robust and relevant compensation analysis of the industries in which we compete for executive talent. However, we also review a more refined peer group composed of fewer companies that we directly compete with in the acute care hospital business. We use this additional targeted peer group because these companies are subject to the same level of regulatory oversight, have similar complex business models and are companies that we view as direct competitors for executive talent. These companies consist of the following:
Our practice is to align base salaries within a reasonable range around the median of our peer group companies, and to align performance-based incentive compensation above the median range of our peer group companies, in each case, taking into account factors such as individual experience or tenure with our company, specialized skills, achievement of performance goals, retention, the compensation committee’s desire to achieve a specified mix of compensation and other market factors. Based on a review of the compensation data from both sets of peer group companies, the compensation committee determined that no adjustments to target total direct compensation were warranted during 2011, other than an increase in Mr. Newsome’s annual base salary, as described in more detail below.
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Table of ContentsTally Sheets. When making compensation decisions, the compensation committee periodically analyzes tally sheets prepared for each named executive officer. Tally sheets present the dollar amount of each component of compensation for each named executive officer. The purpose of tally sheets is to bring together, in summary form, all of the elements of actual and potential future compensation for our named executive officers, so that the compensation committee may analyze both the individual elements of compensation (including the weighting of each element as compared to each other element) and the aggregate amount of actual and potential compensation. During early 2012, the compensation committee used tally sheets and similar analytical tools, including a summary presentation of total direct compensation, to assist in its review of the compensation of our named executive officers who were then serving as executive officers. No compensation changes were made in early 2012 based on that review. Key Elements of Compensation Base Salary Base salaries are determined by analyzing the scope of each named executive officer’s responsibilities and taking into account market compensation information received by the compensation committee as part of the compensation setting process. The compensation committee endeavors to set base salaries at levels that it believes to be within a reasonable range around the median of the base salaries paid to highly qualified senior executives at other companies engaged in businesses similar to ours, as described under the heading entitled “Use of Peer Group Compensation Data and Tally Sheets.” Based on a report prepared by Towers Watson, the compensation committee reviewed Mr. Newsome’s performance and his 2011 base salary within the context of his overall target cash compensation and in comparison to our peer group. Based on this review and the compensation committee’s assessment of Mr. Newsome’s performance and leadership, the compensation committee approved a $100,000 increase in annual base salary for Mr. Newsome to $1,000,000 that became effective on August 1, 2011. No other modifications to the base salaries of our named executive officers were made during 2011. Annual and Long-Term Incentive Compensation The fundamental purpose of our incentive compensation programs is to challenge our named executive officers to achieve company performance targets for the benefit of stockholders and to enhance our ability to retain such executives. The compensation committee awards incentive compensation to our named executive officers in the form of annual incentive cash compensation to reward short-term performance and long-term incentive cash and equity compensation designed to reward long-term commitment to our company. The structure of our current annual incentive cash compensation program and our long-term incentive cash and equity compensation program was established by the compensation committee in 2008. Under this structure, a formulaic target percentage of base salary is established each year for each named executive officer’s annual and long-term incentive compensation. Annual incentive compensation is delivered in the form of cash. A specific mix of various types of equity compensation and cash is also established for each named executive officer’s long-term incentive compensation.
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Table of ContentsThe compensation committee awards incentive compensation under our Amended and Restated 1996 Executive Incentive Compensation Plan, which we refer to as the EICP. The EICP is a comprehensive executive compensation plan that provides for the granting of stock options, stock appreciation rights, restricted stock, deferred stock and other stock-related awards, as well as other awards that may be settled in cash or other property. The compensation committee endeavors to align incentive compensation above the median range of the incentive compensation that is earned, or may be earned, by senior executives at other companies engaged in businesses comparable to ours, as described under the heading entitled “Use of Peer Group Compensation Data and Tally Sheets.” Annual Incentive Cash Compensation. Annual incentive cash compensation for our named executive officers is intended to reward exemplary financial performance. Each of our named executive officers participates in the annual cash incentive compensation program. The amount that may be earned under the annual cash incentive compensation program is based on three components:
Annually, the board of directors approves what it believes to be a challenging internal profit plan. The compensation committee then approves an incentive plan based on that profit plan, providing for the payment of incentive cash compensation under the EICP for the upcoming year. After our year-end results are finalized, the compensation committee reviews our financial performance and approves the payment of cash awards based on achievement against the profit plan. The compensation committee believes that the use of Adjusted EBITDA as a performance measure is consistent with our overall compensation philosophy that there should be a substantial and meaningful connection between the compensation of our named executive officers and the amount and quality of our earnings. For purposes of both our annual incentive cash compensation and long-term incentive cash and equity compensation programs, the compensation committee established a 2011 Adjusted EBITDA target of $800.3 million, which we refer to as our 2011 profit plan. At the time the 2011 profit plan was established, the compensation committee believed that it was challenging based on our historical Adjusted EBITDA performance, our projections for 2011 and the state of the economy.
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Table of ContentsAs illustrated by the chart below, the 2011 annual incentive cash compensation program provided that:
For 2011, profit plan achievement was measured based on our 2011 Modified Adjusted EBITDA. Effective February 21, 2012, it was determined that we achieved the following performance level:
This achievement resulted in an earned amount equal to 108% of the target cash award. The table below summarizes the amounts earned by our named executive officers under the 2011 annual incentive cash compensation program.
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Table of ContentsLong-Term Incentive Cash and Equity Compensation. Long-term incentives have typically been provided through stock awards, performance-based cash and stock awards and service-based cash and stock awards under the EICP. The compensation committee has the authority to determine to whom such awards are granted, the number of shares or the amount of cash subject to each grant and the terms on which the grants are made, including vesting and performance criteria. By granting stock awards and performance-based stock awards, we provide our named executive officers with the opportunity to build a meaningful equity stake in our company. These equity awards allow our named executive officers to meet our required stock ownership objectives, assist us with the retention of our named executive officers and align the long-term interests of our named executive officers with both the amount and quality of our earnings and stockholder value. On February 15, 2011, the compensation committee implemented the 2011 long-term incentive cash and equity compensation program, which pertains to our performance during 2011 and which we refer to as the 2011 Program. The 2011 Program was substantially the same as the 2010 long-term incentive cash and equity compensation program. The amount that could be earned under the 2011 Program was based on three components:
The compensation committee selected Adjusted EBITDA as the performance measure under the 2011 Program because it is a key indicator of our success, as described above under the subheading entitled “Executive Summary.” The mix of incentive compensation awarded to our named executive officers under the 2011 Program was as follows:
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Table of ContentsThe table below summarizes the awards under the 2011 Program for our named executive officers.
To satisfy the performance criterion under the 2011 Program, we needed to achieve at least 90% of our 2011 profit plan before any vesting of the performance-based awards could occur. The 2011 Program also provided for a “look-back” feature whereby a failure to vest in 2011 could be made up based on Adjusted EBITDA performance during 2012. The relationship between Adjusted EBITDA attainment and the percent of long-term incentive cash and equity awards that are eligible for vesting is set forth in the table below.
The performance-based cash and equity awards granted under the 2011 Program, as well as the service-only equity awards under such program, require continuous employment with us over a four-year period, which period commenced on March 1, 2011, with 25% of such awards vesting on each subsequent March 1. Based on our achievement of approximately 104% of our 2011 profit plan, the compensation committee concluded on February 21, 2012 that our named executive officers had earned 100% of the performance-based awards under the 2011 Program, which correlates to the amounts set forth in the table below.
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Table of ContentsUnder the terms of the 2011 Program, the earned performance-based awards and the service-only awards do not fully vest until the continuous employment requirement has been met on each of March 1, 2012, 2013, 2014 and 2015. Because our named executive officers maintained continuous employment with us through March 1, 2012, 25% of their service-only and earned performance-based awards vested on such date, as set forth in the table below.
On February 21, 2012, the compensation committee also applied the look-back feature of our 2008 long-term incentive compensation program and determined that we cumulatively achieved approximately 90% of our targeted 2008 Adjusted EBITDA, which resulted in incremental incentive compensation being earned by our named executive officers who participated in that program. Such earned amounts, which vested on February 21, 2012, were as follows (cash and shares of our common stock, respectively): Mr. Curry ($70,313 and 13,342 shares); Mr. Farnham ($29,167 and 5,535 shares); Mr. Meek ($7,031 and 1,334 shares); and Mr. Parry ($18,229 and 3,458 shares). Because he commenced employment with us in September 2008, Mr. Newsome did not participate in the 2008 long-term incentive compensation program. The look-back period under the 2008 Incentive Program has lapsed and, accordingly, all remaining unearned incentive awards thereunder have been forfeited. Perquisites and Other Personal Benefits We provide limited perquisites to our named executive officers. Our named executive officers are entitled to an annual automobile allowance or a company-leased vehicle and a $3,000 annual allowance for a club membership. Our named executive officers are entitled to the use of our aircraft for personal reasons; however, such use must be approved by our chief executive officer or his designee in advance. We do not provide any tax gross-up payments or other compensation to our named executive officers to cover their personal federal or state income tax obligations, except in the case of relocation costs or upon a change of ownership under the Health Management Associates, Inc. Supplemental Executive Retirement Plan, which we refer to in this proxy statement as the Supplemental Plan. The Supplemental Plan, which became effective on May 1, 1990, is discussed under the headings entitled “Pension Benefits at December 31, 2011” and “Potential Payments Upon Termination or Change in Control.”
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Table of ContentsRetirement Benefits The Supplemental Plan, which is a defined benefit plan that is not intended to be tax-qualified, was established to provide a retirement benefit to executive officers and others who provide a minimum number of years of service to us and, accordingly, it provides an incentive for long-term retention. Each of our named executive officers participates in the Supplemental Plan. We believe that the benefits provided by the Supplemental Plan for our named executive officers are relatively modest in relation to similar retirement benefits provided by comparable companies, both in terms of the benefits payable upon retirement and the number of persons who participate in the plan. We also maintain the Health Management Associates, Inc. Retirement Savings Plan, which we refer to in this proxy statement as the Retirement Savings Plan. The Retirement Savings Plan is a tax-qualified 401(k) plan that provides for both employer and employee contributions. Plan participants, including our named executive officers, can contribute a percentage of their eligible compensation to the Retirement Savings Plan, subject to limits prescribed by the Internal Revenue Service. Use of Stock Ownership Objectives The compensation committee believes that our named executive officers should hold a meaningful amount of our common stock in order to further align their interests and actions with the interests of our stockholders. Our stock ownership objectives are summarized below.
Holdings of each of the following are included in determining compliance with our stock ownership objectives:
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Table of ContentsIf circumstances warrant, the compensation committee has the discretion to modify the objectives for one or more of our named executive officers. On March 14, 2012, the compensation committee reaffirmed our stock ownership objectives and reviewed the compliance of our named executive officers who were then serving as executive officers. As part of that review, the compensation committee determined that Mr. Newsome and Mr. Curry had met their stock ownership objectives. Recoupment Policy for Incentive Compensation We maintain a recoupment policy covering all incentive compensation arrangements with our employees, including our named executive officers. Our corporate governance guidelines were amended on February 15, 2011 to clarify the application and scope of our recoupment policy. The recoupment policy provides that, in appropriate circumstances, the board of directors will require reimbursement of any annual or long-term incentive payment to an employee where: (1) the payment was based in whole or in part on achieving certain financial results that were subsequently the subject of a restatement of our consolidated financial statements; and (2) no payment or a lower payment would have been made to the employee based on the restated financial results. Since the adoption of our recoupment policy, all performance-based incentive compensation awarded to our named executive officers, including both annual and long-term incentive compensation, has been made subject to such policy. If necessary, the compensation committee expects to further amend the recoupment policy upon issuance of regulations implementing the incentive compensation recovery requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Hedging Policy Pursuant to our insider trading policy, our directors, executive officers and certain designated employees, including our named executive officers, are prohibited from speculating in our securities or engaging in transactions designed to hedge their ownership interests. Certain Tax and Accounting Implications The Impact of Deductibility of Compensation. Section 162(m) of the Internal Revenue Code of 1986, as amended, generally disallows a tax deduction to a public company for compensation in excess of $1.0 million for its chief executive officer and the three most highly compensated named executive officers as of the end of any fiscal year, excluding the chief financial officer. However, the statute exempts qualifying performance-based compensation from the deduction limit if certain conditions are met. While the tax impact of any compensation arrangement is one factor that is considered by the compensation committee when evaluating and setting compensation, such tax impact is also evaluated by the compensation committee in light of our overall compensation philosophy and objectives. The EICP is structured so that annual and long-term incentive awards granted thereunder may qualify for the exemption from Section 162(m) for qualifying performance-based compensation. The compensation committee believes that circumstances exist where providing compensation that is not fully deductible for tax purposes may be necessary to achieve its compensation philosophy and objectives and may be in the best interests of our company and
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Table of Contentsour stockholders. Accordingly, the compensation committee has granted, and may continue to grant, awards such as time-based restricted stock and enter into arrangements under which the related compensation is not fully deductible under Section 162(m) if and when the compensation committee determines such arrangements are in the best interests of our stockholders. We do not represent that the compensation of our named executive officers will be fully deductible for federal income tax purposes. Accounting for Stock-Based Compensation. We account for stock-based compensation in accordance with the requirements of U.S. generally accepted accounting principles (“GAAP”), as discussed at Note 8 (Stock-Based Compensation) to the Consolidated Financial Statements in our annual report on Form 10-K for the year ended December 31, 2011. Events Subsequent to December 31, 2011 In early January 2012, Mr. Parry indicated his intent to resign as our General Counsel and Corporate Secretary effective immediately and retire effective March 2, 2012. In recognition of his sixteen years of service with us, one of our subsidiaries entered into an agreement with Mr. Parry on January 19, 2012 regarding his retirement. Under this agreement, shortly after Mr. Parry retired on March 2, 2012, he received a payment of $329,004 and payment for twenty days of unused vacation time. Mr. Parry will also receive a payment of $229,004 on or about each of March 2, 2013 and March 2, 2014. Also, under this agreement, if Mr. Parry elects to purchase health insurance continuation coverage for himself and his eligible dependents, we will pay the premiums during the three-year period ending March 2, 2015. Lastly, our board of directors waived the requirement that Mr. Parry be employed by us until age 62 to allow Mr. Parry to qualify for benefits under the Supplemental Plan upon his retirement. Compensation Committee Report1 The compensation committee, which is comprised entirely of independent directors, has reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy statement in accordance with Item 402(b) of Regulation S-K, as promulgated by the Securities and Exchange Commission. Based on such review and discussion, the committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement and our annual report on Form 10-K for the year ended December 31, 2011.
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Table of ContentsCompensation Program Risk Assessment As part of the board’s oversight of the material risks that face our company (as described under the heading entitled “The Board of Directors’ Role in Risk Oversight”), the compensation committee is charged with the management of compensation-related risks. These risks include those associated with balancing short-term and long-term awards, as well as risks related to attracting and retaining experienced and proven leadership talent. The compensation committee considers the evaluation of compensation-related risks to be inherent in its responsibilities and evaluates the risks that we could face as a company as part of its design, implementation and ongoing monitoring of our compensation programs. When setting the performance goals for our named executive officers’ incentive compensation programs, the compensation committee meets with management to review current budgets and financial projections along with any current initiatives that could impact our anticipated results for the upcoming fiscal year. The compensation committee believes that the achievement of a financial target is the appropriate measure on which to base our incentive compensation programs for our named executive officers. When setting the performance goals for our employees other than our named executive officers, the compensation committee, or its designee, considers additional quality metrics and other goals that are more readily within an employee’s control. With respect to our named executive officers, the compensation committee believes that the combination of a competitive base salary, annual incentive cash compensation tied to the achievement of challenging financial goals, and long-term incentive cash and equity compensation also tied to those goals, with four-year vesting periods, results in an appropriate mix of short-term and long-term awards that align compensation with the interests of our stockholders, while at the same time appropriately motivating our executives to successfully implement our business plans. When evaluating compensation-related risks, the compensation committee also considers various risk mitigation features in our executive compensation programs, including maximum caps on our incentive compensation programs and our recoupment policy for incentive compensation. In addition, when calculating whether the financial target used for incentive compensation purposes has been met, the compensation committee has the discretion to include or exclude unique items. Moreover, our named executive officers are subject to robust stock ownership objectives. Our stock ownership objectives require our chief executive officer to hold shares of our common stock with an aggregate value equal to at least five times his combined annual base salary and annual incentive cash compensation. Our stock ownership objectives require each of our other named executive officers to hold shares of our common stock with an aggregate value equal to at least four times their combined annual base salary and annual incentive cash compensation. We believe that establishing stock ownership objectives that are determined based on multiples of base salary and annual incentive cash compensation has the effect of making those objectives more rigorous than those maintained by many of our peers, and helps to enhance the alignment between our named executive officers and our stockholders. The compensation committee believes that any risks arising from our compensation policies and programs for our named executive officers and our other employees are not reasonably likely to have a material adverse effect on us. The compensation committee assesses the risks of our compensation policies and programs at least annually.
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Table of Contents2011 Summary Compensation Table The table below presents information regarding the compensation of our president and chief executive officer (our principal executive officer), our executive vice president and chief financial officer (our principal financial officer) and certain other highly compensated executive officers for services rendered to us in all capacities during each of the years ended December 31, 2011, 2010 and 2009.
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In addition to the items in the above table, during 2011 Mr. Newsome received $80,432 for reimbursed relocation costs and a related tax gross up payment of $28,925.
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Table of Contents2011 Grants of Plan-Based Awards The table below presents information regarding grants of annual and long-term incentive cash awards, restricted stock awards and deferred stock awards to our named executive officers during the year ended December 31, 2011. There can be no assurances that the grant date fair values of the awards described below will ever be realized by the named executive officers.
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Table of ContentsOther Material Information We do not maintain employment agreements with any of our named executive officers. As discussed in greater detail in the CD&A, annual incentive cash compensation awards were granted under the EICP, with the earned amount determined based on the achievement of an annual financial target. Annual incentive cash compensation awards are fully vested when earned. The information in the 2011 Summary Compensation Table and the 2011 Grants of Plan-Based Awards Table include the grant date fair values of awards granted under our long-term incentive equity compensation programs. The value awarded under the 2009 Program was reduced by the compensation committee in response to the distressed equity and credit markets in 2009. The compensation committee took this approach to develop appropriate incentives for our management team while at the same time mitigating the dilutive effects to our stockholders. If not for this decision to reduce the value awarded under the 2009 Program, at a time when our stock price was depressed due to broader market conditions, the grant date fair value of the 2009 long-term incentive equity compensation awards would have been equal to the grant date fair value of the 2010 and 2011 long-term incentive equity compensation awards, except for Mr. Meek, who did not receive a long-term incentive equity compensation award under the 2009 Program. The material terms of our named executive officers’ annual compensation, including annual base salary, annual incentive cash compensation, long-term incentive cash and equity compensation, perquisites and other personal benefits and retirement benefits are described more fully in the CD&A. We encourage you to read the above tables and the related footnotes in conjunction with such information.
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Table of ContentsOutstanding Equity Awards at December 31, 2011 The table below presents information regarding the number of unexercised stock options, the number of shares and value of unvested deferred stock awards and the number and value of unvested restricted stock awards at December 31, 2011.
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Option Exercises and Stock Vested in 2011 The table below presents information regarding the number and value of stock awards vested and stock options exercised during 2011 for each of our named executive officers.
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Table of ContentsPension Benefits at December 31, 2011 The table below presents information as of December 31, 2011 regarding retirement benefits and payments made to each of our named executive officers who participated in the Supplemental Plan.
The Supplemental Plan is a deferred compensation plan for key executives and is not intended to be tax-qualified. The Supplemental Plan was established to provide a retirement benefit to key executives who provide a minimum number of years of service to our company. Historically, the retirement benefit each participant is eligible to receive under the Supplemental Plan is determined by the compensation committee in consultation with the board and is based on the responsibilities of the participant. The level of benefits payable under the Supplemental Plan may be changed periodically by the compensation committee to reflect a change in an executive’s title, responsibilities and accomplishments. The annual payment to each of our named executive officers, upon each named executive officer reaching age 62 and assuming he qualifies for payments under the Supplemental Plan at such time, is estimated to be as follows: Mr. Newsome - $400,000; Mr. Curry- $150,000; Mr. Farnham - $121,000; Mr. Meek - $100,000; and Mr. Parry - $121,000. Furthermore, Mr. Newsome is entitled to a reduced annual payment of $250,000 if he retires between age 55 and 62. Under the Supplemental Plan, except as set forth below, a participant qualifies for benefits upon the later of (1) the date the participant reaches age 62; or (2) five years after commencing participation in the plan. Additionally, a participant must not compete with us while receiving benefits under the Supplemental Plan. Assuming he satisfies the other Supplemental Plan requirements, Mr. Newsome can avail himself of a reduced early retirement benefit if he retires between age 55 and 62 as described above. The retirement benefit that each of the above participants receives will be paid monthly for the longer of ten years or the remainder of the participant’s life. In the event that a participant dies after qualifying for retirement benefits under the Supplemental Plan but before the end of the ten-year period, the remaining benefits payable will be paid to the participant’s designated beneficiary or legal representative. With respect to participants who have met the above qualifications, a “rabbi trust” can also be established to hold our contributions. Generally, no benefit is paid under the Supplemental Plan if employment is terminated before a participant reaches age 62 (or age 55 in the case of Mr. Newsome), regardless of the reason. However, benefits are payable following a change of ownership of the company as described below under “Potential Payments Upon Termination or Change in Control.” Also, our board of directors, in its sole discretion, may waive the continuous employment requirement,
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Table of Contentswith the result that a participant would not forfeit his or her benefit under the Supplemental Plan upon a termination of employment prior to reaching age 62 (or age 55 in the case of Mr. Newsome). In the event that our board took such action, as it did in connection with Mr. Parry’s retirement, payments would commence upon the participant’s termination of employment, subject to the applicable six-month delay in payment under Section 409A of the Code. No retirement benefit payments will be made to a named executive officer or his beneficiary under the Supplemental Plan if the named executive officer engages in “competitive activities” without the prior written consent of our board of directors. Competitive activities under the Supplemental Plan include (1) directly or indirectly engaging in a business similar to the business of the company and/or (2) owning, managing, operating, controlling, being employed by or having a financial interest in, or being connected in any manner with, the ownership, management, operation or conduct of any such similar business. Mere ownership (directly, indirectly or beneficially) of the stock of a publicly traded corporation representing less than five percent of such corporation’s outstanding stock is not considered a competitive activity under the Supplemental Plan. We used actuarially-based techniques and methodologies to develop a model designed to estimate the present values of the accumulated benefits presented in the above table. The model we developed used discount rates of 4.32% and 5.02% at December 31, 2011 and 2010, respectively, and the Male RP 2000 Mortality Table (combined healthy rates) projected to 2011 at December 31, 2011 and projected to 2010 at December 31, 2010. Potential Payments Upon Termination or Change in Control General. We do not maintain employment agreements with any of our named executive officers and do not have a formal severance policy that provides for payments or benefits to a named executive officer in the event of a termination of employment, other than with respect to a change of ownership, as described below. The compensation committee has the discretion to determine the amount, if any, of severance payments and benefits that will be offered to a named executive officer in the event of a termination of employment. The plans discussed below provide for payments to each of our named executive officers in the event of a change of ownership or a change in control of the company. In addition, the awards to our named executive officers under our long-term incentive cash and equity compensation programs provide for accelerated vesting and/or payment in the event of death or disability. No amounts would be payable to our named executive officers in the event of a voluntary termination of employment or any involuntary termination of employment other than due to death, disability or retirement. As of December 31, 2011, none of our named executive officers would have been retirement eligible under the terms of our compensation arrangements. Supplemental Plan. Our named executive officers are eligible to receive payments under the Supplemental Plan, if certain criteria are met upon eligible retirement, as described under the subheading entitled “Pension Benefits at December 31, 2011,” or following a change in ownership of the company. A change of ownership of the company is generally defined under the Supplemental Plan as (1) the acquisition, whether directly, indirectly, beneficially or of record, by any person or
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Table of Contentsentity (including any group of associated persons acting in concert), of our common stock that results, after such acquisition, in such person or entity owning 25% or more of our common stock, or (2) a change in the ownership of more than 33% of the fair market value of our assets, excluding the value of any liabilities underlying such assets. A change in ownership is generally not deemed to occur if such acquisition is by us or any employee benefit plan of ours within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended. Upon a change of ownership, a “rabbi trust” must be established for each participant who has not yet reached his or her normal retirement date (the later of attaining age 62 or the fifth anniversary of the date upon which the participant commenced participation in the Supplemental Plan). Such rabbi trust is required to be funded with the actuarial equivalent of a participant’s retirement benefit under the Supplemental Plan, which benefit is required to be paid to the participant from the trust in a lump sum as soon as practicable after the termination of the participant’s employment for any reason. If a change of ownership occurs after a participant has reached his or her normal retirement date, the actuarial equivalent of the remaining benefits must be paid directly to the participant in a lump sum. Additional rules apply if the change of ownership constitutes a “change in ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the corporation” as defined under Section 409A of the Code. Any benefits payable to our named executive officers upon their termination of employment will be paid after a six-month holding period. In the event of a change in ownership, we must also compensate each participant in the Supplemental Plan, on an after-tax basis, for: (1) Medicare and FICA taxes; (2) the increase in the effective rate of federal and state income taxes resulting from such lump sum payment; and (3) any excise taxes resulting from the lump sum actuarial payment, such amounts being referred to below as the “tax gross up.” For participants in the Supplemental Plan who have reached their normal retirement date, we are required to make such tax gross up payments directly to the participant. For participants who have not yet reached their normal retirement date, we are required to make an additional deposit to the rabbi trust described above in an amount equal to the tax gross up, based on the tax rates in effect for the participant on the date of such deposit. At the time a participant in the Supplemental Plan receives a distribution from the rabbi trust, if the amount held in the trust for such participant is insufficient to make the actual tax payments designed to be covered by the tax gross up deposit, we are required to make a payment for the difference. Similarly, any funds held in the rabbi trust in excess of the amounts necessary to make the required tax gross up payments to a participant will be returned to us. EICP. If a change of control occurs, awards made under the EICP will be impacted as follows:
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A change of control is deemed to occur under the EICP upon:
A change of control will not be deemed to occur under the EICP upon (1) consummation of a transaction with any entity that immediately prior to the transaction was a subsidiary of ours or an employee benefit plan of ours, if immediately following the transaction the surviving entity is controlled by such employee benefit plan and/or the persons who controlled the company immediately prior to such transaction, as the case may be, and (2) consummation of any transaction pursuant to which more than 50% of our shares of common stock remain owned by substantially the same persons and in substantially the same proportions as existed prior to the transaction. We believe that accelerating the vesting of outstanding equity awards in the event of a change in control is common both in our industry and in similarly situated companies outside our industry. We believe that accelerating the vesting of outstanding equity awards in the event of a change in control aligns the interests of our named executive officers with the interests of our stockholders by motivating each named executive officer to work toward the completion of a transaction and incentivizing them to remain with us prior to the occurrence of such an event. Additionally, an acquiring company may not desire to, or be able to, replace such outstanding awards with comparable awards, and we do not believe that our named executive officers should lose the benefit of their outstanding awards in such a situation.
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Table of ContentsThe table below outlines the potential payments and benefits payable to each named executive officer in the event of a change of ownership under the Supplemental Plan, a change of control under the EICP and death or disability, in each case as if such events had occurred on December 31, 2011. Unless otherwise specified, all potential payments in the table below are assumed to have been made by the company in a lump-sum. For purposes of the table below, a change of ownership and a change of control are collectively referred to as a “change of control.”
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Table of ContentsDIRECTOR COMPENSATION Attracting and retaining highly qualified directors is fundamental to our company’s success. The compensation paid to our independent directors for service on the board of directors and board committees is determined by the compensation committee. Generally, the compensation committee sets director compensation at a level that is intended to provide an incentive for current directors to continue in their roles and for new directors to join our board of directors. Our director compensation program consists of both cash and equity components. We also reimburse our directors for reasonable expenses incurred in connection with their attendance at board and committee meetings and educational seminars. Only our independent directors receive the compensation described below under “Cash Compensation” and “Stock Compensation.” Mr. Newsome, our president and chief executive officer, is not considered to be independent under applicable New York Stock Exchange and Securities and Exchange Commission rules. Therefore, Mr. Newsome did not receive the compensation described in this section. All compensation paid to Mr. Newsome is presented in the 2011 Summary Compensation Table above. Mr. Schoen, our non-executive chairman of the board, is presently receiving $1.0 million per year under the Supplemental Plan, which he is entitled to receive during his lifetime due to his prior service as our chief executive officer. Mr. Schoen’s benefit under the Supplemental Plan is not related to or otherwise increased or enhanced based on his service as a member of our board of directors or as our non-executive chairman of the board. In the event Mr. Schoen’s spouse survives him, the Supplemental Plan provides that she will continue to receive the same annual retirement payment for her life, but in no event for more than ten years after his death. For more information regarding the Supplemental Plan, see the heading entitled “Pension Benefits at December 31, 2011.” Cash Compensation Each of our independent directors was paid a quarterly cash retainer of $15,000 during 2011 for his or her service as a director. The chairman of each of the audit committee, compensation committee, and corporate governance and nominating committee received an additional $5,000 per year. During 2011, each independent director also received $5,000 for each board meeting attended and each committee member received the following fees: $3,000 for each audit committee meeting attended; $2,000 for each corporate governance and nominating committee meeting attended; and $2,000 for each compensation committee meeting attended. In addition to the independent director fees described above, Mr. Knox received $25,000 of supplemental compensation for his service as our lead director in 2011. Mr. Schoen’s duties and responsibilities include, among other things, scheduling meetings of the board of directors, preparing agendas and reviewing our business plans, budgets, business strategies, financial statements and other financial information. Mr. Schoen also periodically reviews our commercial and investment banking relationships and any contemplated capital markets transactions. Mr. Schoen receives the independent director fees as described above, as well as supplemental consideration of $200,000, for his service as our non-executive chairman.
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Table of ContentsStock Compensation On January 1, 2011, each of our independent directors received a deferred stock award under the EICP valued at approximately $145,000. Deferred stock awarded to directors under the EICP vests on a pro rata basis over a four-year period, assuming continuous service on the board of directors during such period. Prior to the delivery of any shares of deferred stock under the EICP, a director does not have any of the rights of a stockholder with respect to such shares, including the right to receive dividends and the right to vote such shares at any stockholders’ meeting. However, directors are entitled to dividend equivalents on their deferred stock. Any such dividend equivalents are subject to the same vesting conditions and are payable in cash, without interest, at the same time that the deferred stock vests. If a director dies or becomes disabled prior to the complete vesting of a deferred stock award under the EICP, the unvested portion of the stock award will immediately vest. If a director voluntarily resigns from the board of directors on or after his or her 65th birthday, the unvested portion of the stock award will continue to vest over the remainder of the four-year service period. If our board of directors so determines, in its discretion, we may make a cash payment to a director in connection with: (1) the award of restricted stock and/or deferred stock; (2) the vesting or lapsing of restrictions applicable to restricted stock and/or deferred stock; or (3) the payment by a director of any taxes related thereto. No such payments were made by us during 2011. Stock Ownership Objective On February 21, 2012, the corporate governance and nominating committee reaffirmed our stock ownership objective for independent directors, which is summarized below.
Our board of directors believes that stock ownership by directors strengthens their commitment to the long-term future of our company and further aligns their interests with those of our stockholders. Accordingly, our corporate governance and nominating committee monitors the progress made by our independent directors in meeting our independent director stock ownership objective. During February 2012, the corporate governance and nominating committee reviewed director compliance with the above stock ownership objective and determined that all of our directors were compliant. Dr. Goldschmidt, who joined our board of directors on June 2, 2011, has five years from such date to meet the stock ownership objective.
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Table of Contents2011 Director Compensation Table The table below presents information regarding the compensation of our independent directors during the year ended December 31, 2011.
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Table of ContentsPROPOSAL TWO – APPROVE, ON AN ADVISORY BASIS, THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS We ask that you indicate your support for our executive compensation programs as described in the CD&A, accompanying tables and related narrative contained in this proxy statement. Your vote is advisory and so it will not be binding on our board of directors. However, the board will review the voting results and take them into consideration when making future decisions regarding our executive compensation programs. Before you vote on the resolution below, please read the entire CD&A carefully. The CD&A contains important information about our executive compensation programs and philosophy. It also explains how and why the compensation committee made specific decisions about the named executive officers’ 2011 compensation. For your convenience, we have highlighted information that we believe is particularly important in helping you decide how to vote on this proposal in the first few pages of the CD&A under the subheading “Executive Summary.” In summary, our compensation philosophy is that there should be a substantial and meaningful connection between the compensation of our named executive officers and the amount and quality of our earnings. As such, the compensation committee aligns our executive compensation programs to support our core operating initiatives, achieve our financial goals, and attract, motivate and retain key executives who are crucial to our long-term success. The compensation committee believes that our compensation programs, policies and procedures, along with the 2011 compensation decisions described in this proxy statement, are effective in implementing our compensation philosophy and achieving our goals, appropriately reward our named executive officers for their performance, and assist us in retaining our senior leadership team. Consistent with this philosophy, a significant portion of the total compensation available to each of our named executive officers is directly related to our performance, as measured against our strategic plan and results of operations. As described in the CD&A, we measure our performance against our Adjusted EBITDA. The compensation committee believes the use of Adjusted EBITDA as a performance goal on a short-term and long-term basis focuses our named executive officers on activities that cause us to generate sustained earnings growth, a key factor in increasing stockholder value. As discussed in greater detail in the first few pages of the CD&A, our 2011 Modified Adjusted EBITDA resulted in achievement of 104% of our 2011 profit plan. Based on our financial performance, our named executive officers earned 108% of their 2011 annual incentive cash compensation and 100% of their long-term incentive cash and equity compensation. The accomplishments that impacted our performance included, among other things:
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We are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we are asking our stockholders to vote FOR the following resolution at our annual meeting: “RESOLVED, that the stockholders of Health Management Associates, Inc. approve the compensation of the named executive officers as such information is disclosed in this proxy statement, including the Compensation Discussion and Analysis, compensation tables and other narrative disclosures.” Although the advisory vote on the compensation of our named executive officers is non-binding, the compensation committee and board of directors will review the results of the vote and evaluate whether any actions are necessary to address such results. The board of directors unanimously recommends that stockholders vote for this proposal approving the compensation of our named executive officers as disclosed in this proxy statement, including the CD&A, compensation tables and other narrative disclosures.
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Table of ContentsPROPOSAL THREE – RATIFY THE SELECTION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP, which we refer to as E&Y, served as our independent registered public accounting firm for the year ended December 31, 2011. The audit committee of our board of directors has selected E&Y as our independent registered public accounting firm for the year ending December 31, 2012. This selection will be presented to stockholders for ratification at the annual meeting. The audit committee will consider the outcome of this vote in its future deliberations regarding the selection of our independent registered public accounting firm. The board of directors recommends a vote in favor of the proposal to ratify the selection of E&Y as our independent registered public accounting firm for the year ending December 31, 2012 and the persons named in this proxy statement (unless otherwise instructed) will vote such proxies FOR this proposal. We have been advised that an E&Y representative will be present at the annual meeting and that such representative will be available to respond to appropriate questions. Such representative will also be given an opportunity to make a statement if he or she should so desire. Audit Fees The table below presents recent fees for professional services provided by E&Y.
Audit Fees were primarily for professional services rendered for audits of our 2011 and 2010 consolidated financial statements, audits of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, reviews of our quarterly reports on Form 10-Q and services for other statutorily required audits. Audit Fees for 2011 included $78,000 for comfort letter procedures in connection with a restructuring of our long-term debt in November 2011. Audit-Related Fees were for assurance and other services that related to the performance of audits and reviews of our consolidated financial statements. These services primarily consisted of audits of employee benefit plans and various other permitted consulting services, including general accounting research.
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Table of ContentsTax Fees - Preparation and Compliance related to review and assistance with federal and state income tax filings and notices. Tax Fees - Other related to tax planning and advisory services. E&Y provided no services in 2011 or 2010 other than those presented above. Policy on Pre-Approval of Retention of Independent Registered Public Accounting Firm In accordance with applicable laws, rules and regulations, the audit committee charter requires that the audit committee have the sole authority to review in advance and pre-approve all audit and non-audit fees and services provided to us by our independent registered public accounting firm. Accordingly, all audit and permitted non-audit services for which E&Y was engaged were pre-approved by the audit committee. The engagement of E&Y for non-audit accounting and tax services is limited to those circumstances where the services are considered integral to the related audit services or where there is another compelling reason for using E&Y’s services. Report of the Audit Committee to Stockholders1 The audit committee is currently comprised of four members of the board of directors. In addition to meeting the independence standards of the New York Stock Exchange, the board of directors has determined that all of the members of the audit committee are independent for purposes of the applicable Securities and Exchange Commission rules. The duties and responsibilities of the audit committee are set forth in the audit committee charter, in the form adopted by the board of directors and most recently amended on December 1, 2009. The audit committee reviews the company’s consolidated financial statements and internal accounting procedures with the company’s independent registered public accounting firm. The audit committee also discusses the possible effects of professional services impacting the independence of the company’s independent registered public accounting firm, provides oversight review of the company’s corporate compliance and internal audit programs, assists the board of directors in overseeing the company’s accounting and financial reporting processes and financial statement audits, and has other duties and functions as described in its charter. The audit committee has:
1 The material in this report is not “soliciting material,” is not deemed to be filed with the Securities and Exchange Commission and is not incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filings.
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When evaluating E&Y’s independence, the audit committee considered a number of factors, including whether E&Y’s provision of services to the company beyond those rendered in connection with their audits and reviews of the company’s consolidated financial statements were compatible with maintaining auditor independence. The audit committee also reviewed the fees paid to E&Y for audit and permitted non-audit services. The audit committee discussed with E&Y, the company’s financial management and internal auditors the overall scope and plans for the respective audits. The audit committee meets with E&Y and the internal auditors with and without management present to discuss the results of their examinations, their evaluations of the company’s internal controls and the overall quality of the company’s financial reporting. Based on the audit committee’s discussions with E&Y, the company’s financial management and internal auditors and reviews of related reports, subject to the limitations on the committee’s role and responsibilities contained in the audit committee charter, the audit committee recommended to the board of directors that the company’s audited consolidated financial statements for the year ended December 31, 2011 be included in its annual report on Form 10-K filed with the Securities and Exchange Commission. The audit committee selects the company’s independent registered public accounting firm annually. The audit committee has submitted such selection for the year ending December 31, 2012 for ratification at the annual meeting of stockholders.
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Table of ContentsCOMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During 2011, no member of the compensation committee: (1) was an officer or employee of ours or any of our subsidiaries; (2) was formerly an officer of ours or any of our subsidiaries; or (3) had any relationship requiring disclosure in this proxy statement pursuant to Securities and Exchange Commission rules. In addition, no executive officer served: (1) as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on the compensation committee; (2) as a director of another entity, one of whose executive officers served on the compensation committee; or (3) as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on our board of directors. CERTAIN TRANSACTIONS Transactions between the company and an executive officer or director or his or her immediate family members are subject to review and approval by our board of directors or by the corporate governance and nominating committee. More information regarding the corporate governance and nominating committee can be found under the heading “Corporate Governance and Nominating Committee.” During March 2012, the corporate governance and nominating committee recommended, and our board of directors approved, a conflict of interest policy that requires disclosure of potential conflicts of interest by our employees, and the review and approval by our board of directors or the governance and nominating committee of any potential conflicts of interest involving our executive officers, directors, senior management personnel, or their respective immediate family members. When evaluating a related party transaction, the board or the committee considers, among other factors:
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Table of ContentsIf a related party transaction subject to review by our board of directors or the corporate governance and nominating committee directly or indirectly involves a member of our board of directors or the corporate governance and nominating committee (or an immediate family member or domestic partner), the remaining board or committee members and our general counsel conduct such review. The law firm of Fann & Petruccelli, P.A. represents us and our subsidiaries in connection with certain medical malpractice defense and other litigation matters in Florida. Michael A. Petruccelli, one of three shareholders in such firm, is married to Linda A. Epstein, our acting general counsel. Our engagement of Fann & Petrucelli, P.A. preceded Ms. Epstein’s appointment as an executive officer. Following her appointment as an executive officer, the corporate governance and nominating committee evaluated our engagement of Fann & Petrucelli, P.A. in light of the factors described above, and established a policy under which the assignment of any litigation matter to Fann & Petrucelli, P.A. is approved in advance by company personnel with no reporting relationship to Ms. Epstein. Moreover, all billings for Fann & Petrucelli, P.A. are subject to review and approval by a third-party administrator, and by company personnel with no reporting relationship to Ms. Epstein. An aggregate of $2,280,485 in legal fees and related costs were paid by us to Fann & Petruccelli, P.A. during the year ended December 31, 2011. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE During 2011, all of our directors and executive officers complied in a timely manner with the filing requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended. In making this statement, we relied solely on the written representations of our directors and executive officers and copies of the reports that they have filed with the Securities and Exchange Commission. STOCKHOLDER PROPOSALS FOR 2013 ANNUAL MEETING Proposals Submitted for Inclusion in Our Proxy Materials We will include in our proxy materials for the 2013 annual meeting of stockholders any stockholder proposals that comply with Rule 14a-8 under the Securities Exchange Act of 1934, as amended. Among other things, Rule 14a-8 requires that we receive such proposals no later than 120 days prior to the one-year anniversary of this proxy statement. Thus, for the 2013 annual meeting of stockholders, we must receive stockholder proposals submitted for inclusion in our proxy materials no later than December 10, 2012. We will not include in our proxy materials stockholder proposals received after that date. Stockholder proposals submitted for inclusion in our proxy materials should be mailed to the following address: Health Management Associates, Inc., 5811 Pelican Bay Boulevard, Suite 500, Naples, Florida 34108-2710, Attention: Corporate Secretary. Proposals Not Submitted for Inclusion in Our Proxy Materials Under our bylaws, stockholder proposals that are not submitted for inclusion in our proxy materials pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended, as described above, may be brought before the 2013 annual meeting of stockholders if we receive such proposals no earlier than 120 days and no later than 90 days prior to the one-year anniversary of the date of our 2012 annual meeting. Thus, for the 2013 annual meeting of
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Table of Contentsstockholders, we must receive stockholder proposals that are not submitted for inclusion in our proxy materials between January 22, 2013 and February 21, 2013. We will not permit stockholder proposals that do not comply with the foregoing notice requirement to be brought before the 2013 annual meeting of stockholders. Stockholder proposals that are not submitted for inclusion in our proxy statement pursuant to Rule 14a-8 should be mailed to the following address: Health Management Associates, Inc., 5811 Pelican Bay Boulevard, Suite 500, Naples, Florida 34108-2710, Attention: Corporate Secretary. DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS To curtail waste and reduce costs, and in accordance with Securities and Exchange Commission rules, we deliver only one set of required proxy materials to multiple stockholders sharing an address, unless we receive contrary instructions from one or more of such stockholders. Notwithstanding the foregoing, we will deliver promptly, upon written or oral request to the Broadridge Householding Department at the telephone number and address noted below, a separate copy of our proxy materials to each stockholder at a shared address to which a single copy of the materials was delivered. Stockholders who wish to receive a separate copy of our required proxy materials in the future should contact Broadridge’s Householding Department, either by calling toll free at (800) 542-1061, or by writing to Broadridge, Attn: Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Finally, stockholders sharing an address who currently receive multiple copies of our required proxy materials, but who wish to receive only a single copy of such materials, can request that only a single copy be provided by contacting Broadridge’s Householding Department at the same number or address. ANNUAL REPORT TO STOCKHOLDERS AND ANNUAL REPORT ON FORM 10-K You can obtain a copy of our annual report to stockholders and our annual report on Form 10-K for the year ended December 31, 2011 by accessing our Internet website at www.hma.com under the heading “Investor Relations.” These reports include our audited consolidated financial statements along with other information about us, which we encourage you to read. The information contained on our website is not a part of this proxy statement. You can also obtain a copy of all other periodic reports and information that we file with, or furnish to, the Securities and Exchange Commission from the Securities and Exchange Commission’s EDGAR database at www.sec.gov. If you would like a copy of our 2011 Form 10-K, excluding certain exhibits, please contact Health Management Associates, Inc., 5811 Pelican Bay Boulevard, Suite 500, Naples, Florida 34108-2710, Attention: Corporate Secretary. We will provide a copy without charge.
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Table of ContentsOTHER MATTERS As of the date of this proxy statement, the board of directors does not know of any other matters that may be presented for action at the annual meeting. Should any other matters come before the annual meeting, the persons named in this proxy statement will have discretionary authority to vote all proxies with respect to such matters in accordance with their judgment.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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