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UNITED STATES SECURITIES
AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

|x | Annual Report Pursuant to
      Section 13 or 15(d) of the Securities Exchange Act of
      1934
|- | ------------------------------------------------------------------------------------------------
|  | For the Fiscal Year Ended
      September 30,
  2003                                            

OR

|o | Transition Report Pursuant to
      Section 13 or 15(d) of the Securities Exchange Act of
      1934
|- | ----------------------------------------------------------------------------------------------------
|  | For the Transition Period from
      _____________ to _______________                               

Commission File
Number 001-11141

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

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

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

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

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

|Title of Each
Class                  |  | Name of Each
Exchangeon Which Registered
|------------------------------------ |  | ----------------------------------------
|Class A Common Stock, $.01 par value |  | New York Stock Exchange                 

Securities registered
pursuant to Section 12(g) of the Act:Title of Each ClassZero-Coupon Convertible Senior Subordinated Notes due 2022

Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YesxNoo

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

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.) YesxNoo

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

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

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TABLE
OF CONTENTSFORM
10-K ANNUAL REPORTHEALTH
MANAGEMENT ASSOCIATES, INC.Fiscal year
ended September 30, 2003

|         |  | Page                                                                                 
|-------- |  | -------------------------------------------------------------------------------------
|PART I   |  |                                                                                      
|Item 1   |  | Business                                                                             
|Item 2   |  | Properties                                                                           
|Item 3   |  | Legal Proceedings                                                                    
|Item 4   |  | Submission of Matters to a Vote of Security Holders                                  
|         |  |                                                                                      
|PART II  | 
|Item 5   |  | Market for Registrant's Common Equity and Related Stockholder Matters                
|Item 6   |  | Selected Financial Data                                                              
|Item 7   |  | Management's Discussion and Analysis of Financial Condition and Results of Operations
|Item 7A  |  | Quantitative and Qualitative Disclosures about Market Risk                           
|Item 8   |  | Financial Statements and Supplementary Data                                          
|Item 9   |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|Item 9A  |  | Controls and Procedures                                                              
|         |  |                                                                                      
|PART III | 
|Item 10  |  | Directors and Executive Officers of the Registrant                                   
|Item 11  |  | Executive Compensation                                                               
|Item 12  |  | Security Ownership of Certain Beneficial Owners and Management                       
|Item 13  |  | Certain Relationships and Related Transactions                                       
|Item 14  |  | Principal Accounting Fees and Services                                               
|         |  |                                                                                      
|PART IV  | 
|Item 15  |  | Exhibits, Financial Statement Schedule, and Reports on Form 8-K                      

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

i

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PART
I

Item 1.  
Business

Overview

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

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

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

Recent
Transactions

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

| |  | On November 1, 2003, we acquired five non-urban hospitals from subsidiaries of
Tenet Healthcare Corporation. The five hospitals acquired included Seven Rivers
Community Hospital, a 128-bed hospital located in Crystal River, Florida; Harton
Regional Medical Center, a 137-bed hospital located in Tullahoma, Tennessee;
University Medical Center, a two-campus 257-bed hospital located in Lebanon,
Tennessee; Three Rivers Health Care, a two-campus 423-bed hospital located in
Poplar Bluff, Missouri; and Twin Rivers Regional Medical Center, a 116-bed
hospital located in Kennett, Missouri. The aggregate cost of this acquisition
was approximately $515.0 million. This acquisition also represented our initial
operations in the State of Missouri.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | On October 3, 2003, we received approval from the State of Florida Agency for
Health Care Administration to construct our proposed 100-bed Collier Regional
Medical Center in southeast Collier County, Florida. Pending any appeal that
might be made, we anticipate beginning construction of this hospital in the next
12 months. The cost of the project is expected to be approximately $75.0
million.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | On September 15, 2003, we acquired Walton Medical Center, a 135-bed hospital
located in Monroe, Georgia. The aggregate cost of this acquisition was
approximately $40.0 million.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | On August 15, 2003, we acquired the assets of Providence Yakima Medical Center
located in Yakima, Washington and Providence Toppenish Hospital located in
Toppenish, Washington, a 289-bed acute care hospital system. The aggregate cost
of this acquisition was approximately $82.7 million. This transaction also
represented our first geographic expansion into the northwestern United States
and the State of Washington.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

1

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| |  | On January 1, 2003, we acquired, pursuant to a 40-year lease, the Madison County
Medical Center, a 67-bed acute care hospital located in Canton, Mississippi. The
aggregate cost of this acquisition was approximately $9.7 million.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Market

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

| |  | A history of being medically underserved. We believe that we can enhance and
increase the level and quality of health care services in many underserved
markets.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A growing elderly population. We believe that this growing population uses a
higher volume of the services our hospitals provide.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------

| |  | The existence of patient outmigration trends to urban medical centers. In many
instances, based on community needs, we believe that we can recruit new
physicians based on community need and purchase the new equipment necessary to
reverse outmigration trends.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | States in which a certificate of need is required to construct a new hospital
facility or add licensed beds to an existing hospital facility. We believe that
states which require certificates of need have higher barriers to entry and,
in many instances, permit us to be the sole or preferred service provider in a
geographic area.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Areas in which marketing does not play a major role in patients selection
of health care.
|- |  | ------------------------------------------------------------------------------------------

Business
Strategy

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

Improve
Operations of Existing Hospitals

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

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

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

2

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Acquire
Additional Hospitals

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

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

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

Provide
Quality Health Care

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

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

| |  | 22 of our hospitals were surveyed by the Joint Commission on Accreditation of
Health Care Organizations (JCAHO). The hospitals that were surveyed
in fiscal 2003 received an average grade of 94 out of 100.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Charlotte Regional Medical Center in Punta Gorda, Florida, was named, for the
fourth time, one of the Top 100 Cardiac Hospitals in America by Solucient, Inc.,
a provider of independent annual studies that measure the effectiveness of
hospitals clinical practices, operations and financial management.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Williamson Memorial Hospital in Williamson, West Virginia, and Jamestown
Regional Medical Center in Jamestown, Tennessee, were selected as two of the
United States top performing hospitals according to Solucient, Inc.s
100 Top Hospitals.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Community Hospital of Lancaster in Lancaster, Pennsylvania received its first
accreditation by the JCAHO last year. Prior to our acquisition of the hospital
in 1999, it had been operating for more than 50 years without JCAHO
accreditation, and within four years of our acquisition of the facility, it
became fully accredited.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3

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| |  | Womans Hospital at River Oaks in Flowood, Mississippi received a JCAHO
score of 98 out of 100, reflecting our commitment to delivering high quality
womens health care services.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | East Georgia Regional Medical Centers Cardiopulmonary Services Unit in
Statesboro, Georgia received a perfect score of 100 from the JCAHO last year and
was awarded its Gold Seal of Approval for its outstanding achievement.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Utilize
Efficient Management

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

Selected
Operating Statistics

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

|                                                                             | Year Ended September 30,
|---------------------------------------------------------------------------- | ------------------------
|
|Total hospitals owned or leased as of the end of each period                 |                         
|Licensed beds as of the end of each period (1)                               |                         
|Admissions (2)                                                               |                         
|Adjusted admissions (3)                                                      |                         
|Surgeries (4)                                                                |                         
|Patient days (5)                                                             |                         
|Acute care average length of stay in days (6)                                |                         
|Occupancy rate (7)                                                           |                         
|Outpatient utilization (8)                                                   |                         
|Earnings margin, before interest , taxes, depreciation, and amortization (9) |                         

4

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|(1) |  | Licensed beds are beds for which a hospital has obtained approval to operate
from the applicable state licensing agency.
|--- |  | ------------------------------------------------------------------------------------------------------------------------

|(2) |  | Admissions are patients admitted to our hospitals for inpatient treatment. This
statistic is used both by our management and by investors as a measure of
inpatient volume.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Adjusted admissions are total admissions adjusted for outpatient volume.
Adjusted admissions are computed by multiplying admissions (inpatient volume) by
the sum of gross inpatient charges and gross outpatient charges and then
dividing the resulting amount by gross inpatient charges. The adjusted
admissions computation equates outpatient charges to the volume
measure (admissions) used to measure inpatient volume, resulting in a
general measure of combined inpatient and outpatient volume. This statistic is
used both by our management and by investors as a measure of inpatient and
outpatient volume.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | The number of surgeries includes both inpatient and outpatient surgeries. This
statistic is used by our management and by investors as one component of overall
patient volumes and business trends.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Patient days is the number of inpatient days a patient is admitted into a
hospital. This statistic is used by our management and by investors as a measure
of inpatient volume.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) |  | Represents the average number of days admitted patients stay in our hospitals.
This statistic is used by our management and by investors as a measure of our
utilization of resources.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | Hospital occupancy rates are affected by many factors, including the population
size and general economic conditions within a market service area, the degree of
variation in medical and surgical products, outpatient use of hospital services,
quality and treatment availability at competing hospitals, and seasonality.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) |  | Represents outpatient revenue as a percent of total patient service revenue.
Total patient service revenue is defined as revenue from all sources before
deducting contractual allowances and discounts from established billing rates.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) |  | Our earnings margin, before interest, taxes, depreciation and amortization, is
referred to as EBITDA. EBITDA does not represent cash flows from operations as
defined by generally accepted accounting principles in the United States,
commonly known as GAAP, and should not be considered as an alternative to net
income as an indicator of our operating performance or as an alternative to cash
flows as a measure of our liquidity. Nevertheless, we believe that providing
non-GAAP information regarding EBITDA is important for investors, as it provides
a measure of liquidity and performance. The table below reconciles the GAAP
information to EBITDA.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                   | Year Ended September 30,
|-------------------------------------------------- | ------------------------
|
|
|Net patient service revenue                        |                         
|                                                   |                         
|Income before income taxes                         |                         
|Add:                                               |                         
|Interest, net                                      |                         
|Depreciation and amortization (a)                  |                         
|                                                   |                         
|EBITDA                                             |                         
|                                                   |                         
|EBITDA margin = EBITDA/net patient service revenue |                         

|(a) |  | Includes writeoff of deferred financing costs for fiscal 2003.
|--- |  | --------------------------------------------------------------

5

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Competition

Existing
hospitals

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

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

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

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

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

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

6

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Acquisitions

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

Sources of
Revenue

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

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

We
receive payment for services rendered to patients from:

| |  | the federal government under the Medicare program;
|- |  | --------------------------------------------------

| |  | each
of the states in which our hospitals are located under the Medicaid program;
|- |  | ---------------------------------------------------------------------------------

| |  | commercial insurance; and
|- |  | -------------------------

| |  | private
insurers and patients.
|- |  | ------------------------------

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

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

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

|                          | Year Ended September 30
|------------------------- | -----------------------
|
|Medicare                  |                        
|Medicaid                  |                        
|Commercial insurance      |                        
|Private and other sources |                        
|                          |                        
|Total                     |                        
|                          |                        

7

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

Medicare
and Medicaid

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

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

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

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

| |  | changes in reimbursement for hospital services; and
|- |  | ---------------------------------------------------

| |  | repeal
of the federal payment standard, which is often referred to as the Boren
Amendment for hospitals and nursing facilities, which resulted in lower
Medicaid reimbursement rates.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

8

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

| |  | the lowering of the threshold by which hospitals qualify as rural or small urban
disproportionate share hospitals;
|- |  | ------------------------------------------------------------------------------------------------------------------

| |  | a decrease in reductions in payments to disproportionate share hospitals that
had been mandated by the Balanced Budget Act of 1997 and other Congressional
enactments;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | an increase in inpatient payments to hospitals;
|- |  | -----------------------------------------------

| |  | an
increase in certain Medicare payments to certain psychiatric hospitals and
units;
|- |  | ------------------------------------------------------------------------------------

| |  | an increase in Medicare reimbursement for bad debt;
|- |  | ---------------------------------------------------

| |  | capping
Medicare beneficiary ambulatory service co-payment amounts; and
|- |  | -----------------------------------------------------------------------

| |  | an increase in the categories and items eligible for increased reimbursement to
hospitals for certain outpatient services rendered on and after April 1, 2001
(which increase includes such items as current cancer therapy drugs,
biologicals, and certain medical devices).
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

9

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

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

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

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

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

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

Commercial
Insurance

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

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

10

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Private
Pay and Other Sources

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

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

Regulation
and Other Factors

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

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

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

Licensure,
Certification and Accreditation

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

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Utilization
Review

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

Certificates
of Need

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

State
Hospital Rate-Setting Activity

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

Anti-kickback
and Self-Referral Regulation

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

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

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

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HIPAA

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

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

Conversion
Legislation

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

Environmental
Regulation

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

Compliance
Program and Ethics Program

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

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Employees
and Medical Staff

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

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

Liability
Insurance

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

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

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

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

Available
Information

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

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

14

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Item 2.  
Properties

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

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

|State       |  | Facility                                 |  | City                |  | LicensedBeds |  | OperationalStatus |  | Date Acquired 
|----------- |  | ---------------------------------------- |  | ------------------- |  | ------------ |  | ----------------- |  | --------------
|Alabama     |  | Riverview Regional Medical Center        |  | Gadsden             |  | 281          |  | Owned             |  | July 1991     
|            |  | Stringfellow Memorial Hospital           |  | Anniston            |  | 125          |  | Managed           |  | January 1997  
|Arkansas    |  | Crawford Memorial Hospital               |  | Van Buren           |  | 103          |  | Leased            |  | May 1987      
|            |  | Southwest Regional Medical Center        |  | Little Rock         |  | 125          |  | Owned             |  | November 1997 
|Florida     |  | Highlands Regional Medical Center        |  | Sebring             |  | 126          |  | Leased            |  | August 1985   
|            |  | Fishermen's Hospital                     |  | Marathon            |  | 58           |  | Leased            |  | August 1986   
|            |  | University Behavioral Center             |  | Orlando             |  | 80           |  | Owned             |  | January 1989  
|            |  | SandyPines                               |  | Tequesta            |  | 74           |  | Owned             |  | January 1990  
|            |  | Heart of Florida Regional Medical Center |  | Greater Haines City |  | 115          |  | Owned             |  | August 1993   
|            |  | Sebastian River Medical Center           |  | Sebastian           |  | 129          |  | Owned             |  | September 1993
|            |  | Charlotte Regional Medical Center        |  | Punta Gorda         |  | 156          |  | Owned             |  | December 1994 
|            |  | Riverside Behavioral Center              |  | Punta Gorda         |  | 52           |  | Owned             |  | December 1994 
|            |  | Brooksville Regional Hospital            |  | Brooksville         |  | 91           |  | Leased            |  | June 1998     
|            |  | Spring Hill Regional Hospital            |  | Spring Hill         |  | 75           |  | Leased            |  | June 1998     
|            |  | Lower Keys Medical Center                |  | Key West            |  | 167          |  | Leased            |  | May 1999      
|            |  | Pasco Regional Medical Center            |  | Dade City           |  | 120          |  | Owned             |  | September 2000
|            |  | Lehigh Regional Medical Center           |  | Lehigh Acres        |  | 88           |  | Owned             |  | December 2001 
|            |  | Santa Rosa Medical Center                |  | Milton              |  | 129          |  | Owned             |  | January 2002  
|Georgia     |  | East Georgia Regional Medical Center     |  | Statesboro          |  | 150          |  | Owned             |  | October 1995  
|            |  | Walton Regional Medical Center           |  | Monroe              |  | 135          |  | Owned             |  | September 2003
|Kentucky    |  | Paul B. Hall Regional Medical Center     |  | Paintsville         |  | 72           |  | Owned             |  | January 1979  
|Mississippi |  | Biloxi Regional Medical Center           |  | Biloxi              |  | 153          |  | Leased            |  | September 1986
|            |  | Natchez Community Hospital               |  | Natchez             |  | 101          |  | Owned             |  | September 1993
|            |  | Northwest Mississippi Regional           |  | Clarksdale          |  | 195          |  | Leased            |  | January 1996  
|            |  | Medical Center                           | 
|            |  | Rankin Medical Center                    |  | Brandon             |  | 134          |  | Leased            |  | January 1997  
|            |  | Riley Hospital                           |  | Meridian            |  | 180          |  | Owned             |  | January 1998  
|            |  | River Oaks Hospital                      |  | Flowood             |  | 110          |  | Owned             |  | January 1998  
|            |  | Woman's Hospital at River Oaks           |  | Flowood             |  | 111          |  | Owned             |  | January 1998  
|            |  | Central Mississippi Medical Center       |  | Jackson             |  | 473          |  | Leased            |  | April 1999    
|            |  | Madison Regional Medical Center          |  | Canton              |  | 67           |  | Leased            |  | January 2003  

15

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|State          |  | Facility                                |  | City                |  | LicensedBeds |  | OperationalStatus |  | Date Acquired 
|-------------- |  | --------------------------------------- |  | ------------------- |  | ------------ |  | ----------------- |  | --------------
|North Carolina |  | Franklin Regional Medical Center        |  | Louisburg           |  | 85           |  | Owned             |  | August 1986   
|               |  | Lake Norman Regional Medical Center     |  | Mooresville         |  | 105          |  | Owned             |  | January 1986  
|               |  | Sandhills Regional Medical Center       |  | Hamlet              |  | 64           |  | Owned             |  | August 1987   
|               |  | Davis Regional Medical Center           |  | Statesville         |  | 149          |  | Owned             |  | October 2000  
|Oklahoma       |  | Medical Center of Southeastern Oklahoma |  | Durant              |  | 120          |  | Owned             |  | May 1987      
|               |  | Midwest Regional Medical Center         |  | Midwest City        |  | 247          |  | Leased            |  | June 1996     
|Pennsylvania   |  | Community Hospital of Lancaster         |  | Lancaster           |  | 154          |  | Owned             |  | July 1999     
|               |  | Lancaster Regional Medical Center       |  | Lancaster           |  | 261          |  | Owned             |  | July 2000     
|               |  | Carlisle Regional Medical Center        |  | Carlisle            |  | 200          |  | Leased            |  | June 2001     
|South Carolina |  | Upstate Carolina Medical Center         |  | Gaffney             |  | 125          |  | Owned             |  | March 1988    
|               |  | Carolina Pines Regional Medical Center  |  | Hartsville          |  | 116          |  | Owned             |  | September 1995
|Tennessee      |  | Jamestown Regional Medical Center       |  | Jamestown           |  | 85           |  | Owned             |  | January 2002  
|Texas          |  | Medical Center of Mesquite              |  | Mesquite            |  | 176          |  | Owned             |  | January 2002  
|               |  | Mesquite Community Hospital             |  | Mesquite            |  | 172          |  | Owned             |  | May 2002      
|Virginia       |  | Lee Regional Medical Center             |  | Pennington Gap      |  | 80           |  | Owned             |  | September 2001
|Washington     |  | Yakima Regional Medical & Heart Center  |  | Yakima              |  | 226          |  | Owned             |  | August 2003   
|               |  | Toppenish Community Hospital            |  | Toppenish           |  | 63           |  | Owned             |  | August 2003   
|West Virginia  |  | Williamson Memorial Hospital            |  | Williamson          |  | 76           |  | Owned             |  | June 1979     
|               |  |                                         |  | Total licensed beds |  |              |  |                   |  |               
|               |  |                                         |  | owned, leased, or   |  |              |  |                   |  |               
|               |  |                                         |  | managed at          |  |              |  |                   |  |               
|               |  |                                         |  | September 30, 2003  |  | 6,479        |  |                   |  |               
|               |  |                                         |  |                     | 

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

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

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

16

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Item 3.  
Legal Proceedings

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

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

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

Executive
Officers of the Registrant

Below
is information regarding our executive officers:

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

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

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

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

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

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

17

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PART
II

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

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

|                                     | High |        | Low
|------------------------------------ | ---- | ------ | ---
|Fiscal Year Ended September 30, 2002 |      |        |    
|First Quarter                        |      | $21.00 |    
|Second Quarter                       |      | $21.00 |    
|Third Quarter                        |      | $22.99 |    
|Fourth Quarter                       |      | $20.75 |    
|Fiscal Year Ended September 30, 2003 |     
|First Quarter                        |      | $22.70 |    
|Second Quarter                       |      | $19.41 |    
|Third Quarter                        |      | $20.10 |    
|Fourth Quarter                       |      | $22.89 |    

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

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

Equity
Compensation Plan Information

|Plan category                          | Number of securitiesto be issuedupon exercise ofoutstanding options,warrants and rights |            | Weighted-averageexercise price ofoutstanding options,warrants and rights |        | Number of securitiesremaining available for futureissuance under equitycompensation plans (excludingsecurities reflected in column (a))
|-------------------------------------- | --------------------------------------------------------------------------------------- | ---------- | ------------------------------------------------------------------------ | ------ | ---------------------------------------------------------------------------------------------------------------------------------------
|
|Equity compensation plans approved     |                                                                                         |            |                                                                          |        |                                                                                                                                        
|by security holders                    |                                                                                         | 19,955,000 |                                                                          | $13.89 |                                                                                                                                        
|Equity compensation plans not approved |                                                                                        
|by security holders                    |                                                                                         |           |                                                                          |       |                                                                                                                                        
|                                       |                                                                                         |            |                                                                          |        |                                                                                                                                        
|Total                                  |                                                                                         | 19,955,000 |                                                                          | $13.89 |                                                                                                                                        
|                                       |                                                                                         |            |                                                                          |        |                                                                                                                                        

18

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Item 6.  
Selected Financial Data

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

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

|                                | Year Ended September 30,
|------------------------------- | ------------------------
|
|Net patient service revenue     |                         
|Costs and expenses(1)           |                         
|Income before income taxes(2)   |                         
|Net income(2)                   |                         
|Net income per share-diluted(2) |                         
|Weighted average number of      |                         
|shares outstanding-diluted      |                         
|Cash dividends per common share |                         

|                            | As of September 30,
|--------------------------- | -------------------
|
|Working capital             |                    
|Total assets                |                    
|Short-term debt             |                    
|Long-term debt              |                    
|Stockholders' equity        |                    
|Book value per common share |                    

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

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

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

19

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

Overview

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

Forward-Looking
Statements

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

Forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, performance, achievements or industry results to
be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among other things, the following:

| |  | possible changes in the levels and terms of reimbursement for our charges by
government programs, including Medicare or Medicaid or other third party payors;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | existing laws and government regulations and changes in or failure to comply
with laws and governmental regulations;
|- |  | --------------------------------------------------------------------------------------------------------------------

| |  | our ability to successfully integrate recent and future acquisitions;
|- |  | ---------------------------------------------------------------------

| |  | competition;
|- |  | ------------

| |  | demographic
changes;
|- |  | --------------------

| |  | technological and pharmaceutical improvements that increase the cost of
providing, or reduce the demand for, our services;
|- |  | --------------------------------------------------------------------------------------------------------------------------

| |  | our ability to attract and retain qualified personnel, including physicians; and
|- |  | --------------------------------------------------------------------------------

| |  | our
ability to finance growth on favorable terms.
|- |  | -------------------------------------------------

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

Critical
Accounting Policies and Estimates

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

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

20

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Net
Patient Service Revenues

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

Provision
for Doubtful Accounts

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

Impairment
of Long-Lived Assets

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

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

21

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Income
Taxes

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

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

Professional
Liability Insurance Claims

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

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

Results of
Operations

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

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

| |  | $128.6 million in net patient service revenue from our acquisitions of an 88-bed
hospital in December 2001, an 85-bed hospital, a 129-bed hospital, and a 176-bed
hospital in January 2002, a 172-bed hospital in May 2002, a 67-bed hospital in
January 2003, a 226-bed hospital and a 63-bed hospital in August 2003, and a
135-bed hospital in September 2003; and
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | a $5.4 million increase in net patient service revenue from our psychiatric
hospitals and other corporate revenue.
|- |  | ------------------------------------------------------------------------------------------------------------------

22

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

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

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

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

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

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

| |  | $240.4 million in net patient service revenue from our acquisitions of a 200-bed
hospital in June 2001, an 80-bed hospital in September 2001, an 88-bed hospital
in December 2001, an 85-bed hospital, a 129-bed hospital, and a 126-bed hospital
in January 2002, and a 172-bed hospital in May 2002; and
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | $2.7 million increase in net patient service revenue from psychiatric hospitals
and corporate.
|- |  | ----------------------------------------------------------------------------------------------

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

23

---

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

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

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

Liquidity,
Capital Resources, and Capital Expenditures

Liquidity

Fiscal
2003 Cash Flows Compared to Fiscal 2002 Cash Flows

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

24

---

Fiscal
2002 Cash Flows Compared to Fiscal 2001 Cash Flows

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

Effect of
Legislative and Regulatory Action on Liquidity

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

Capital
Resources

Credit
Facilities

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

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

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

25

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Outstanding
Debt Securities

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

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

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

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

26

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Capital
Expenditures

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

Transactions
Completed or Pending for Fiscal 2004

| |  | On November 1, 2003, we announced the acquisition of five non-urban hospitals
from subsidiaries of Tenet Healthcare Corporation. The five hospitals acquired
included Seven Rivers Community Hospital, a 128-bed hospital located in Crystal
River, Florida; Harton Regional Medical Center, a 137-bed hospital located in
Tullahoma, Tennessee; University Medical Center, a two-campus 257-bed hospital
located in Lebanon, Tennessee; Three Rivers Health Care, a two-campus 423-bed
hospital located in Poplar Bluff, Missouri; and Twin Rivers Regional Medical
Center, a 116-bed hospital located in Kennett, Missouri. The purchase price was
approximately $515.0 million in cash.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In October 2003, we received approval from the State of Florida Agency for
Health Care Administration to construct our proposed 100-bed Collier Regional
Medical Center in southeast Collier County, Florida. Pending any appeal that
might be made, we anticipate beginning construction in the next 12 months. The
cost of the project is expected to be approximately $75.0 million.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
currently have several hospital renovation and expansion projects underway. We
do not believe that any of these projects are individually significant or that
they represent in the aggregate a significant commitment of our resources. In
addition to our ongoing renovation and expansion projects, over the course of
the next three years we plan to replace three of our existing hospitals
(Brooksville, Florida; Carlisle, Pennsylvania; and Lancaster, Pennsylvania) and
complete our proposed Collier Regional Medical Center in southeast Collier
County, Florida. Regulatory approval to begin construction has been granted. As
of September 30, 2003, we had invested approximately $30.0 million in these
projects. We anticipate spending between approximately $155 and $165 million for
capital equipment, renovations, and replacement hospitals during fiscal 2004.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Transactions
Completed in Fiscal 2003

| |  | On September 15, 2003, we acquired Walton Medical Center, a 135-bed hospital
located in Monroe, Georgia, for approximately $38.7 million in cash and $1.3
million in assumed liabilities.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | On August 15, 2003, we acquired the assets of Providence Yakima Medical Center
located in Yakima, Washington and Providence Toppenish Hospital located in
Toppenish, Washington, a 289-bed acute care hospital system, for approximately
$70.8 million in cash and $11.9 million in assumed liabilities. This transaction
represented our first geographic expansion into the northwestern United States.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | On January 1, 2003, we acquired, pursuant to a 40-year lease, the Madison County
Medical Center, a 67-bed acute care hospital located in Canton, Mississippi, for
approximately $9.7 million in cash.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

27

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Transactions
Completed in Fiscal 2002

| |  | On August 1, 2002, we purchased an office complex in Naples, Florida consisting
of two commercial office buildings, including the building that houses our
corporate headquarters. We paid $25.8 million for this office complex,
consisting of $5.8 million in cash and $20.0 million financed using a 5-year
note, from a commercial bank, bearing interest at the LIBOR rate plus .75%.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Effective May 1, 2002, we acquired all of the assets of Mesquite Community
Hospital from Manor Care, Inc. for $80.0 million in cash and subsequently sold
back to Manor Care, Inc. a 20% equity interest in such hospital for $16.0
million in cash. As part of this transaction, we also sold to Manor Care, Inc. a
20% equity interest in the Medical Center of Mesquite (which was acquired by us
on December 31, 2001) for $16.0 million in cash.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In February 2002, we initiated a stock repurchase program to repurchase up to
5,000,000 shares of our common stock. On August 8, 2002, we announced the
completion of this stock repurchase program. Under this program we used cash on
hand to repurchase a total of 5,000,000 shares of our common stock at an average
purchase price of $18.54 per share.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Effective January 1, 2002, we acquired the stock of four acute care hospitals
from Clarent Hospital Corporation for approximately $170.0 million in cash.
Later the same day we sold one of these hospitals to a third party for $40.0
million in cash.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Effective December 1, 2001 we acquired the assets of East Pointe Hospital,
including substantially all of the hospitals property, plant and
equipment, for approximately $16.5 million in cash.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In September 2001, we initiated a stock repurchase program to repurchase up to
5,000,000 shares of our common stock. On January 29, 2002, we announced the
completion of this stock repurchase program. Under this program we used cash on
hand to repurchase a total of 5,000,000 shares of our common stock at an average
price of $19.29 per share.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Off-Balance
Sheet Arrangements

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

Standby
letters of credit

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

| |  | $16.2 million related to the self insured portions of our insurance programs as
security for the payment of claims;
|- |  | -------------------------------------------------------------------------------------------------------------------

| |  | $22.1 million in performance guarantees for the construction of our Carlisle,
Pennsylvania, and Lancaster, Pennsylvania, replacement hospitals;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------

| |  | $.1 million for obligations related to certain utility companies.
|- |  | -----------------------------------------------------------------

28

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Lease
Transactions

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

Physician
Guarantees

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

Days Sales
Outstanding

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

|                                     | September 30
|------------------------------------ | ------------
|
|Actual days sales outstanding        |             
|Objective for days sales outstanding |             

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

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

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

29

---

|                            | September 30,
|--------------------------- | -------------
|
|
|
|Due from third party payors |              
|Private pay                 |              
|                            |              
|Total gross discharged      |              
|accounts receivable         |              
|                            |              
|                            |              

Impact of
Seasonality and Inflation

Seasonality

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

Inflation

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

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

30

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Item
7A.  Quantitative and Qualitative Disclosures about Market Risk

Interest
Rates

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

|                          | (in millions, except interest rates)
|------------------------- | ------------------------------------
|
|Long term debt:           |                                     
|Fixed rate long-term debt |                                     
|Average interest rates    |                                     
|Fixed rate convertible    |                                     
|long-term debt            |                                     
|Average interest rate     |                                     
|Variable rate             |                                     
|long-term debt            |                                     
|Average interest rate     |                                     

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

31

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Item 8.  
Financial Statements and Supplementary Data

INDEX TO
FINANCIAL STATEMENTS

|                                                          | Page
|--------------------------------------------------------- | ----
|Health Management Associates, Inc.                        |     
|Consolidated Financial Statements:                        |     
|Report of Independent Certified Public Accountants        |     
|Consolidated Statements of Income - for the years ended   |     
|September 30, 2003, 2002 and 2001                         |     
|Consolidated Balance Sheets - September 30, 2003 and 2002 |     
|Consolidated Statements of Stockholders' Equity - for the |     
|years ended September 30, 2003, 2002 and 2001             |     
|Consolidated Statements of Cash Flows - for the years     |     
|ended September 30, 2003, 2002 and 2001                   |     
|Notes to Consolidated Financial Statements                |     

32

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REPORT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of
Directors and Stockholders  Health Management Associates, Inc.

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

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

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

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

Ernst &
Young LLP

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

33

---

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

|                                                          | Year Ended September 30,
|--------------------------------------------------------- | ------------------------
|
|Net patient service revenue                               |                         
|Costs and expenses:                                       |                         
|Salaries and benefits                                     |                         
|Supplies and other                                        |                         
|Provision for doubtful accounts                           |                         
|Depreciation and amortization                             |                         
|Rent expense                                              |                         
|Interest, net                                             |                         
|Writeoff of deferred financing costs                      |                         
|Non-cash charge for retirement benefits and write down of |                         
|assets held for sale                                      |                         
|Total costs and expenses                                  |                         
|                                                          |                         
|Income before minority interests and income taxes         |                         
|Minority interests in earnings of consolidated entities   |                         
|                                                          |                         
|Income before income taxes                                |                         
|Provision for income taxes                                |                         
|                                                          |                         
|Net income                                                |                         
|                                                          |                         
|                                                          |                         
|                                                          |                         
|Net income per share:                                     |                         
|Basic                                                     |                         
|                                                          |                         
|Diluted                                                   |                         
|                                                          |                         
|                                                          |                         
|Dividends per share                                       |                         
|                                                          |                         
|Weighted average number of shares outstanding:            |                         
|Basic                                                     |                         
|                                                          |                         
|Diluted                                                   |                         
|                                                          |                         

See
accompanying notes.

34

---

HEALTH
MANAGEMENT ASSOCIATES, INC.CONSOLIDATED
BALANCE SHEETSin
thousands)

|                                                                                       | September 30, |             
|-------------------------------------------------------------------------------------- | ------------- | ------------
|
|ASSETS                                                                                 |               |             
|Current assets:                                                                        |               |             
|Cash and cash equivalents                                                              |               | $    395,338
|Accounts receivable, less allowances for doubtful accounts of $151,015 and $138,616 at |               |             
|September 30, 2003 and 2002, respectively                                              |               | 492,787     
|Accounts receivable - other                                                            |               | 34,467      
|Supplies, at cost                                                                      |               | 65,342      
|Prepaid expenses and other assets                                                      |               | 57,905      
|Funds held by trustee                                                                  |               | 17,470      
|Deferred income taxes                                                                  |               | 30,027      
|                                                                                       |               |             
|Total current assets                                                                   |               | 1,093,336   
|Property, plant and equipment:                                                         |              
|Land and improvements                                                                  |               | 94,141      
|Buildings and improvements                                                             |               | 1,077,638   
|Leaseholds                                                                             |               | 116,327     
|Equipment                                                                              |               | 617,818     
|Construction in progress                                                               |               | 77,227      
|                                                                                       |               |             
|                                                                                       |               | 1,983,151   
|Less: accumulated depreciation and amortization                                        |               | (555,436    
|                                                                                       |               |             
|Net property, plant and equipment                                                      |               | 1,427,715   
|Funds held by trustee                                                                  |               | 15,924      
|Excess of cost over acquired net assets, net                                           |               | 397,825     
|Deferred charges and other assets                                                      |               | 44,687      
|                                                                                       |               |             
|                                                                                       |               | $ 2,979,487 
|                                                                                       |               |             

See
accompanying notes.

35

---

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

|                                                                                      | September 30, |             
|------------------------------------------------------------------------------------- | ------------- | ------------
|
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                  |               |             
|Current liabilities:                                                                  |               |             
|Accounts payable                                                                      |               | $    136,136
|Accrued payroll and related taxes                                                     |               | 48,560      
|Accrued expenses and other liabilities                                                |               | 63,401      
|Due to third party payors                                                             |               | 10,019      
|Income taxes - currently payable                                                      |               | 5,400       
|Current maturities of long-term debt                                                  |               | 9,447       
|                                                                                      |               |             
|Total current liabilities                                                             |               | 272,963     
|Deferred income taxes                                                                 |               | 48,984      
|Other long-term liabilities                                                           |               | 58,402      
|Long-term debt                                                                        |               | 924,713     
|Minority interests in consolidated entities                                           |               | 37,350      
|                                                                                      |               |             
|Stockholders' equity:                                                                 |               |             
|Preferred stock, $.01 par value, 5,000 shares authorized                              |              
|Common stock, Class A, $.01 par value, 750,000 shares authorized, 262,705 and 261,067 |               |             
|shares issued September 30, 2003 and 2002, respectively                               |               | 2,627       
|Additional paid-in-capital                                                            |               | 399,782     
|Retained earnings                                                                     |               | 1,535,322   
|                                                                                      |               |             
|                                                                                      |               | 1,937,731   
|Less: treasury stock, 22,500 shares at both                                           |               |             
|September 30, 2003 and 2002, respectively                                             |               | (300,656    
|                                                                                      |               |             
|Total stockholders' equity                                                            |               | 1,637,075   
|                                                                                      |               |             
|                                                                                      |               | $ 2,979,487 
|                                                                                      |               |             

See
accompanying notes.

36

---

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

|                                                | Common Stock |         | Additional |        |  |         
|----------------------------------------------- | ------------ | ------- | ---------- | ------ |  | --------
|
|Balance at September 30, 2000                   |              | 255,357 |            | $2,554 |  | $308,834
|Exercise of stock options and issuance of stock |             
|incentive plan shares                           |              | 2,717   |            | 27     |  | 25,245  
|Income tax benefit from exercise                |              |         |            |        |  |         
|of stock options and issuance of stock          |              |         |            |        |  |         
|incentive plan shares                           |              |        |            |       |  | 6,113   
|Purchase of treasury stock, at cost             |              |        |            |       |  |        
|Net income                                      |              |        |            |       |  |        
|                                                |              |         |            |        |  |         
|                                                |              |         |            |        | 
|Balance at September 30, 2001                   |              | 258,074 |            | 2,581  |  | 340,192 
|Exercise of stock options and issuance of stock |              |         |            |        |  |         
|incentive plan shares                           |              | 2,993   |            | 30     |  | 14,629  
|Income tax benefit from exercise                |             
|of stock options and issuance of stock          |             
|incentive plan shares                           |              |        |            |       |  | 18,393  
|Purchase of treasury stock, at cost             |              |        |            |       |  |        
|Net income                                      |              |        |            |       |  |        
|                                                |              |         |            |        |  |         
|Balance at September 30, 2002                   |              | 261,067 |            | 2,611  |  | 373,214 
|Exercise of stock options and issuance of stock |             
|incentive plan shares                           |              | 1,638   |            | 16     |  | 21,248  
|Income tax benefit from exercise                |              |         |            |        |  |         
|of stock options and issuance of stock          |              |         |            |        |  |         
|incentive plan shares                           |              |        |            |       |  | 5,320   
|Payment of dividends                            |              |        |            |       |  |        
|Net income                                      |              |        |            |       |  |        
|                                                |              |         |            |        |  |         
|Balance at September 30, 2003                   |              | 262,705 |            | $2,627 |  | $399,782
|                                                |              |         |            |        |  |         

See
accompanying notes.

37

---

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

|                                                                   | Year Ended September 30,
|------------------------------------------------------------------ | ------------------------
|
|Cash flows from operating activities:                              |                         
|Net income                                                         |                         
|Adjustments to reconcile net income to net cash provided           |                         
|by operating activities:                                           |                         
|Depreciation and amortization                                      |                         
|Provision for doubtful accounts                                    |                         
|Minority interest in earnings of consolidated entities             |                         
|(Gain)loss on sale of fixed assets                                 |                         
|Change in deferred income taxes                                    |                         
|Writeoff of deferred financing costs                               |                         
|Charges for retirement benefits and write down of                  |                         
|assets held for sale                                               |                         
|Changes in assets and liabilities, net of effects of acquisitions: |                         
|Accounts receivable                                                |                         
|Supplies                                                           |                         
|Prepaid expenses and other assets                                  |                         
|Deferred charges and other assets                                  |                         
|Accounts payable                                                   |                         
|Accrued expenses and other liabilities                             |                         
|Income taxes - currently payable                                   |                         
|Other long-term liabilities                                        |                         
|                                                                   |                         
|Net cash provided by operating activities                          |                         
|                                                                   |                         
|Cash flows from investing activities:                              |                         
|Acquisition of facilities, net of cash acquired and                |                         
|purchase price adjustments                                         |                         
|Additions to property, plant and equipment                         |                         
|Proceeds from sale of property, plant and equipment                |                         
|(Increase) decrease in funds held by trustee                       |                         
|Proceeds from sale of minority interests in                        |                         
|consolidated entities                                              |                         
|                                                                   |                         
|Net cash used in investing activities                              |                         
|                                                                   |                         
|                                                                   |                         

See
accompanying notes.

38

---

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

|                                                                     | Year Ended September 30,
|-------------------------------------------------------------------- | ------------------------
|
|Cash flows from financing activities:                                |                         
|Proceeds from long-term borrowings                                   |                         
|Principal payments on debt                                           |                         
|Purchase of treasury stock, at cost                                  |                         
|Proceeds from issuance of common stock                               |                         
|Payment of interest on debentures                                    |                         
|Payment of dividends                                                 |                         
|                                                                     |                         
|Net cash provided by (used in) financing activities                  |                         
|                                                                     |                         
|Net increase in cash and cash equivalents                            |                         
|Cash and cash equivalents at beginning of year                       |                         
|                                                                     |                         
|Cash and cash equivalents at end of year                             |                         
|                                                                     |                         
|Supplemental schedule of noncash investing and financing activities: |                         
|Fair value of assets acquired (including cash)                       |                         
|Consideration: Cash paid                                             |                         
|                                                                     |                         
|Liabilities assumed                                                  |                         
|                                                                     |                         

See
accompanying notes.

39

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTSSeptember
30, 2003

1.     Business
and summary of significant accounting policies

Health
Management Associates, Inc. (the Company), through its subsidiary
companies, substantially all of which are wholly-owned, provides health care
services to patients in owned and leased facilities primarily in the southeast
and southwest United States. The Company consistently applies the following
significant accounting policies:

a.  Principles of consolidation

The
consolidated financial statements include the accounts of the Company and its
subsidiaries, all of which are controlled by the Company through majority voting
control. All significant intercompany accounts and transactions have been
eliminated.

b.  Cash
equivalents

The
Company considers all highly liquid investments purchased with a maturity of
less than three months to be cash equivalents. The Companys cash
equivalents consist principally of investment grade instruments.

c.  Property,
plant and equipment

Property,
plant and equipment are carried at cost and include major expenditures which
increase their values or extend their useful lives. Depreciation and
amortization are computed using the straight-line method based on estimated
useful lives. Estimated useful lives for buildings and improvements range from
twenty to forty years and for equipment range from three to ten years.
Leaseholds are amortized on a straight-line basis over the terms of the
respective leases. Depreciation expense was $105.0 million, $91.9 million and
$77.3 million for the years ended September 30, 2003, 2002 and 2001,
respectively.

d.  Excess of
cost over acquired net assets, net and deferred charges and other assets

Prior
to October 1, 2001, excess of cost over acquired net assets (goodwill) had been
amortized on a straight-line basis over lives ranging from three to twenty-five
years. As of October 1, 2001, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 142, Goodwill and Other
Intangible Assets(SFAS No. 142). SFAS No. 142 requires that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead be tested for impairment at least annually in accordance
with the provisions of SFAS No. 142. The transition provisions of SFAS No. 142
required the completion of a transitional impairment test within six months of
adoption of SFAS No. 142. The Company tests goodwill annually for impairment.
There was no goodwill impairment for the years ended September 30, 2003, 2002 or
2001. During the year ended September 30, 2001, the Company recorded $9.2
million of goodwill amortization expense which reduced earnings by $5.5 million
(net of tax expense of approximately $3.7 million) or approximately $0.02 per
share on a diluted basis.

Deferred
charges and other assets consist principally of deferred financing costs and
certain non-productive assets held for sale. The financing costs are being
amortized over the life of the related debt. The accumulated amortization of
deferred financing costs was $2.5 million and $4.5 million at September 30, 2003
and 2002, respectively.

Certain
long-lived assets may become impaired, requiring a write down of the assets to
their estimated fair values. The Company periodically reviews future cash flows
related to these assets and, if necessary, will reduce such assets to their
estimated fair values.

e.  Use of
estimates

The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management of the Company to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could
differ from those estimates.

40

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Business
and summary of significant accounting policies (continued)

f.  Net
patient service revenue and cost of revenue

The
Company recognizes gross patient service charges on the accrual basis in the
period that services are rendered. Net patient service revenue represents gross
patient service charges less provisions for contractual adjustments.
Approximately 57%, 59% and 59% of gross patient service charges for the years
ended September 30, 2003, 2002 and 2001, respectively, related to services
rendered to patients covered by the Medicare and Medicaid programs. Payments for
services rendered to patients covered by these programs are generally less than
billed charges. Provisions for contractual adjustments are made to reduce the
charges to these patients to estimated receipts based upon the programs
principles of payment/reimbursement (either prospectively determined or
retrospectively determined costs). Final settlements under these programs are
subject to administrative review and audit, and provision is currently made for
adjustments which may result. Such adjustments were not material to the
Companys operations for the years ended September 30, 2003, 2002, and
2001. Laws and regulations governing the Medicare and Medicaid programs are
extremely complex and subject to interpretation. As a result, there is a
possibility that recorded estimates may change in the future. Revenues and
receivables from government programs are significant to the Companys
operations, but the Company does not believe that there are significant credit
risks associated with these government programs.

The
Company grants credit without collateral to its patients, most of whom are local
to the area where the hospitals reside and are insured under third-party payor
agreements. The Company does not charge interest on accounts receivable. The
credit risk for non-government program concentrations of receivables is limited
due to the large number of insurance companies and other payors that provide
payments for services. Accounts receivable are reported net of an estimated
allowance for uncollectible accounts in the accompanying financial statements.

Estimates
for contractual allowances under managed care health plans are based primarily
on the payment terms of contractual arrangements such as predetermined rates per
diagnosis, per diem rates or discounted fee for service rates.

Net
patient service revenue is presented net of provisions for contractual
adjustments and other allowances of $5,427 million, $4,121 million and $2,981
million for the years ended September 30, 2003, 2002 and 2001, respectively, in
the accompanying consolidated statements of income. In the ordinary course of
business, the Company renders services in its facilities to patients who are
financially unable to pay for their hospital care. The value of these services
to patients who are unable to pay is not material to the Companys
consolidated results of operations.

The
Companys presentation of costs and expenses does not differentiate between
cost of revenues and non-cost of revenues because substantially all of the
Companys costs and expenses are related to providing health care services.
Furthermore, the Company believes that the natural classification of expenses is
a more meaningful presentation of the Companys cost of doing business.

g. Accounts
receivable and provision for doubtful accounts

The
collection of receivables from third party payors and patients is the
Companys primary source of cash and is critical to its operating
performance. The primary collection risks relate to uninsured patient accounts
and patient accounts for which the primary insurance payer has paid, but patient
responsibility amounts (generally deductibles and co-payments) remain
outstanding. Provisions for doubtful accounts are estimated based primarily upon
the age of the patients account, the patients economic ability to
pay and the effectiveness of collection efforts. Accounts receivable balances
are routinely reviewed in conjunction with historical collection rates and other
economic conditions which might ultimately affect the collectibility of patient
accounts when considering the adequacy of the amounts recorded as allowances for
doubtful accounts. Accounts receivable are written off after collection efforts
have been followed in accordance with the Companys policies. Accounts
written off as uncollectible are deducted from the allowance for uncollectible
accounts while subsequent recoveries are netted against provision for doubtful
accounts expense. Significant changes in payer mix, business office operations,
economic conditions or trends in federal and state governmental health care
coverage could affect the Companys collection of accounts receivable, cash
flows and results of operations.

41

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Business
and summary of significant accounting policies (continued)

h.  Professional liability insurance claims

Accruals
for self-insured professional liability risks are determined using asserted and
unasserted claims identified by the Companys incident reporting system and
actuarially-determined estimates based both on industry and the Companys
historical loss payment patterns and have been discounted to their present value
using a discount rate of 4.5%. Although the ultimate settlement of these
accruals may vary from these estimates, the Company believes that the amounts
provided in the consolidated financial statements are adequate. If actual
payments of claims exceed the Companys projected estimates of claims, the
insurance accruals could be materially adversely affected.

i.  Funds
held by trustee

Funds
held by trustee consist primarily of investments held by the Companys
insurance subsidiary to be used to pay losses and loss expenses of the insurance
subsidiary. The current and long-term classification of these funds is based on
the projected timing of the corresponding professional liability claims
payments. These funds are primarily invested in short-term mutual and money
market funds.

j.  Minority
interests in consolidated entities

The
consolidated financial statements include all assets, liabilities, revenues and
expenses of majority-owned, but less than 100% owned, entities controlled by the
Company. Accordingly, the Company has recorded minority interests in the
earnings and equity of such entities.

k.  Income
taxes

The
Company accounts for income taxes under SFAS No. 109, Accounting for Income
Taxes (SFAS No. 109). Deferred income tax assets and
liabilities are determined based upon the difference between financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse (see Note 5). Management must make estimates in recording the
Companys provision for income taxes, including determination of deferred
tax assets and deferred tax liabilities and any valuation allowance that might
be required against the deferred tax asset. Management believes that future
income will enable the Company to realize these benefits in the future.
Therefore, the Company has not recorded a valuation allowance against the
deferred tax asset.

The
Company operates in multiple states with varying tax laws. The Company is
subject to both federal and state audits of tax returns. Management must make
estimates to determine that tax reserves are adequate to cover any potential
audit adjustments. Actual results of audits, if any, could vary from the
estimates recorded by management.

l.  Earnings
per share

Earnings
per share is based on the weighted average number of common and common
equivalent shares (stock options and convertible debt) outstanding during the
periods presented. (see Note 7)

42

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Business
and summary of significant accounting policies (continued)

m.  Segment
reporting

The
Companys business of providing health care services to patients in owned
and leased facilities comprises a single reportable operating segment under SFAS
No. 131, Disclosures About Segments of an Enterprise and Related Information.

n.  Guarantees

The
Company has committed to provide certain financial assistance pursuant to
recruiting agreements with various physicians practicing in the communities that
the Company serves. In consideration for a physician relocating to one of its
communities in need of the physicians services, the Company may advance
money to the physician in order for such physician to establish his or her
practice. The Company had committed to advance approximately $13.3 million as of
September 30, 2003. The actual amount of such commitments is dependent upon the
financial results of each physicians private practice during the guarantee
period, which generally does not exceed twelve months. The net amounts advanced
under these recruiting agreements at the end of the individuals guarantee period
are considered loans and are generally forgiven pro rata over a period of 36
months contingent upon the physician continuing to practice in the respective
community. The Company expenses these advances on a straight-line basis as they
are paid over the guarantee period.

o.  Stock compensation

The
Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25). Under APB
25, since the exercise price of the Companys employee stock options equals
the market price of the underlying stock on the date of grant, no compensation
expense is recognized. As a result, pro forma disclosure of alternative fair
value accounting is required under SFAS No. 123, Accounting for Stock-Based
Compensation, utilizing an option valuation model.

For
purposes of pro forma disclosures, the estimated fair value of the options is
amortized to expense over the options vesting period. The Companys
pro forma information is as follows (in thousands, except per share data):

|                                        | Year Ended September 30,
|--------------------------------------- | ------------------------
|
|Net income, as reported                 |                         
|Deduct:  Total stock-based employee     |                         
|compensation expense determined under   |                         
|fair value based method for all awards, |                         
|net of related tax effects              |                         
|                                        |                         
|Pro forma net income                    |                         
|                                        |                         
|Pro forma earnings per share:           |                         
|Basic - as reported                     |                         
|Basic - pro forma                       |                         
|Diluted - as reported                   |                         
|Diluted - pro forma                     |                         

43

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Business
and summary of significant accounting policies (continued)

The
fair value for these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions for 2003, 2002 and 2001: (i) risk-free interest rate of 2.34%,
4.60%, and 5.51%; (ii) .4% dividend yield for 2003, no dividends for 2002 and
2001 ; (iii) volatility factor of the expected market price of the
Companys common stock of .529, .536, and .489; (iv) and weighted-average
expected lives of the options of 5, 5 and 7 years. The weighted-average fair
value of options granted in 2003, 2002, and 2001 was $8.59, $10.23, and $9.59,
respectively.

The
Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Companys employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
managements opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.

p.  Recent Accounting Pronouncements

In
November 2002, the Financial Accounting Standards Board (the FASB)
issued Interpretation No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission
of FASB Interpretation No. 34 (FIN 45). FIN 45 elaborated on the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and measurement provisions of
this interpretation are applicable, on a prospective basis, to guarantees issued
or modified after December 31, 2002. The Companys adoption of FIN 45 did
not have a material effect on its consolidated financial statements. (see Note
1.n.)

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of Accounting Research Bulletin
No. 51(FIN 46). FIN 46 requires the
consolidation of entities in which an enterprise absorbs a majority of the
entitys expected losses, receives a majority of the entitys expected
residual returns, or both, as a result of ownership, contractual or other
financial interests in the entity. FIN 46 also requires disclosure about
variable interest entities that a company is not required to consolidate, but in
which it has a significant variable interest. The consolidation requirements of
FIN 46 apply immediately to variable interest entities created after
January 31, 2003 and to existing entities in the first fiscal year or
interim period ending after December 15, 2003. Certain of the disclosure
requirements apply to all financial statements issued after January 31,
2003, regardless of when the variable interest entity was established. The
Companys adoption of FIN 46 is not expected to have a material effect on
its consolidated financial statements.

On
January 1, 2003, the Company adopted SFAS No. 145Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections (SFAS No.145). SFAS No.145 rescinds SFAS No. 4
Reporting Gains and Losses From Extinguishment of Debt. SFAS No. 145
requires any gains or losses on extinguishment of debt that do not meet the
criteria in Accounting Principles Board Opinion No. 30 Reporting the Results
of Operations  Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions for classification as an extraordinary item shall be classified
in income from operations. The Company incurred a writeoff of deferred financing
costs related to the early extinguishment of debt in the fourth quarter of the
year ended September 30, 2003. This writeoff of deferred financing costs loss
was recorded in income from operations pursuant to the requirements of SFAS No.
145.

44

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.     Business
and summary of significant accounting policies (continued)

In
December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensationan amendment of FASB Statement No. 123(SFAS No.
148). SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based
Compensation to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. SFAS No. 148
is effective for annual and interim periods beginning after December 15, 2002.
The Company has elected not to change to the fair value based method of
accounting for stock-based employee compensation, therefore, the adoption of
SFAS No. 148 did not have an impact on the Companys consolidated financial
position or consolidated results of operations.

q.  Reclassifications

Certain
amounts have been reclassified in prior years to conform with the current year
presentation.

2.     Acquisitions and dispositions

During
the year ended September 30, 2003, the Company acquired certain assets of four
hospitals through purchase agreements for $119.1 million in cash and the
assumption of $13.3 million in liabilities. During the year ended September 30,
2002, the Company acquired certain assets of two hospitals and the stock of
three hospitals through purchase agreements for $226.2 million in cash and the
assumption of $1.0 million in liabilities. During the year ended September 30,
2001, the Company acquired certain assets of two hospitals through purchase
agreements for $59.4 million in cash and the assumption of $3.6 million in
liabilities. The foregoing acquisitions were accounted for by the Company using
the purchase method of accounting. The allocation of the purchase price was
determined by the Company at acquisition based upon available information and is
subject to further refinement.

As
part of a group purchase of four hospitals during the year ended September 30,
2002, the Company acquired one acute care hospital and sold it on the same day
for $40.0 million in cash.

The
operating results of the above hospitals have been included in the accompanying
consolidated statements of income from the date of each respective
hospitals acquisition. The following unaudited pro forma combined summary
of operations of the Company for each of the years in the three year period
ended September 30, 2003 give effect to the operation of the hospitals purchased
in the years ended September 30, 2003, 2002 and 2001 as if the acquisitions had
occurred as of October 1, 2001, 2000 and 1999, respectively:

|                               | Year Ended September 30,
|------------------------------ | ------------------------
|
|
|Net patient service revenue    |                         
|Net income                     |                         
|Net income per share - Basic   |                         
|Net income per share - Diluted |                         

The
changes in the carrying amount of goodwill are as follows:

|                                          | September 30,
|----------------------------------------- | -------------
|
|
|Balance at beginning of the year          |              
|Goodwill acquired during the year         |              
|Impairment losses                         |              
|Goodwill written off related to disposals |              
|Adjustments to purchase price allocation  |              
|                                          |              
|Balance at end of year                    |              
|                                          |              

45

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.     Long-term
debt

The
Companys long-term debt consists of the following:

|                                                                   | September 30,
|------------------------------------------------------------------ | -------------
|
|
|Revolving Credit Agreements (a)                                    |              
|Zero-Coupon Convertible Senior Subordinated Debentures due 2020 at |              
|3%, net of discount of $184.9 million at September 30, 2002 (b)    |              
|Zero-Coupon Convertible Senior Subordinated Notes due 2022         |              
|at 0.875%, net of discount of $48.8 million and $51.2 million at   |              
|September 30, 2003 and 2002, respectively (b)                      |              
|1.50% Convertible Senior Subordinated Notes due 2023 (b)           |              
|Mortgage notes, secured by real and personal property (c)          |              
|Various mortgage and installment notes and debentures, some        |              
|secured by equipment, at interest rates ranging from               |              
|prime plus 1% to 6%, payable through 2009                          |              
|Industrial Revenue Bond Issue                                      |              
|Capitalized lease obligations (see Note 4)                         |              
|                                                                   |              
|                                                                   |              
|Less current maturities                                            |              
|                                                                   |              
|                                                                   |              
|                                                                   |              

a.  Revolving
Credit Agreements

The
Company currently has a 5-year $450 million Credit Agreement (the Credit
Agreement) due November 30, 2004. The Credit Agreement is a term loan
agreement which permits the Company to borrow under an unsecured revolving
credit loan at any time through November 30, 2004, at which time the agreement
terminates and all outstanding amounts become due and payable. The Company may
choose a Base Rate Loan (prime interest rate) or a Eurodollar Rate Loan. The
interest rate for a Eurodollar Rate Loan is currently the LIBOR interest rate
plus 1.00 percent, and will increase or decrease in relation to a change in the
Companys credit rating. Monthly or quarterly interest payments are
required depending on the type of loan chosen by the Company. The interest rate
at September 30, 2003 and 2002 was 2.1% and 2.8%, respectively. As of September
30, 2003 and 2002, there were no amounts outstanding under the Credit Agreement.
In October 2003, the Company borrowed $275.0 million under the Credit Agreement
to partially finance the acquisition of certain hospitals. (see Note 12)

The
Company also has a $15 million unsecured revolving credit commitment with a
bank. The $15 million credit commitment is a working capital commitment which is
tied to the Companys cash management system and renews annually on
November 1. Currently, interest on any outstanding balance is payable monthly at
a fluctuating rate not to exceed the banks prime rate less .25%. The
interest rate at September 30, 2003 and 2002 was 3.75% and 4.5%, respectively.
As of September 30, 2003 and 2002, there were no amounts outstanding under this
credit commitment.

In
addition, the Company is obligated to pay certain commitment fees based upon
amounts available for borrowing during the terms of the credit agreements
described above.

The
credit agreements described above contain covenants which, without prior consent
of the banks, limit certain activities, including those relating to mergers,
consolidations and the Companys ability to secure additional indebtedness,
make guarantees, grant security interests and declare dividends. The Company
must also maintain minimum levels of consolidated tangible net worth, debt
service coverage and interest coverage. At September 30, 2003 and 2002, the
Company was in compliance with these covenants.

46

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.     Long-term
debt (Continued)

b.  Subordinated Convertible Notes and Debentures

On
August 16, 2000, the Company sold $488.8 million face value of Zero-Coupon
Subordinated Convertible Debentures due 2020 (the Debentures) for
gross proceeds of $287.7 million. The Debentures were to mature on August 16,
2020, unless converted or redeemed earlier. The Debentures were convertible into
the Companys common stock at a conversion rate of 29.5623 shares of common
stock for each $1,000 principal amount of the Debentures. Interest on the
Debentures was payable semiannually in arrears on August 16 and February 16 of
each year at a rate of .25% per year on the principal amount at maturity. The
rate of cash interest and accrual of original issue discount represented a yield
to maturity of 3% per year calculated from August 16, 2000. The Company redeemed
all of the Debentures on August 16, 2003 for $310.8 million in cash, the
accreted value of the debentures. A writeoff of $4.9 million for the
unamortized, remaining deferred financing costs related to the Debenture
issuance was recorded in the fourth quarter of fiscal 2003.

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

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

On
July 29 and August 8, 2003, the Company sold an aggregate of $575.0 million in
face value of 1.50% Convertible Senior Subordinated Notes due 2023 (the
2023 Notes). The 2023 Notes were sold at their principal face
amount, plus accrued interest from July 29, 2003. The sale of the 2023 Notes
resulted in net proceeds to the Company of approximately $563.5 million. The
Company used approximately $310.8 million of the proceeds to redeem all of its
Debentures in August 2003. The 2023 Notes are general unsecured obligations and
are subordinated in right of payment to the Companys existing and future
senior indebtedness that is not expressly subordinated or equal in right of
payment to the 2023 Notes. The 2022 Notes, which are discussed above, rank
equally with the 2023 Notes. The 2023 Notes mature on August 1, 2023, unless
they are converted or redeemed earlier. Upon the occurrence of certain events,
the 2023 Notes become convertible into shares of the Companys common stock
at a conversion rate of 36.5097 shares of common stock for each $1,000 principal
amount of 2023 Notes converted (subject to adjustment in certain events). The
equivalent number of shares associated with any conversion of the 2023 Notes
will become dilutive (and thus included in the Companys earnings per share
calculation) when the Companys common stock trades at a level of $36.097
for at least 20 out of 30 trading days prior to the conversion of the 2023 Notes
or the 2023 Notes otherwise become convertible. Upon certain conditions,
contingent interest could be paid by the Company.

47

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.     Long-term
debt (Continued)

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

c.  Mortgage
Notes

The
Company had three mortgage notes outstanding at September 30, 2003 and four
mortgage notes outstanding at September 30, 2002. The mortgage notes are secured
by all the real and personal property related to certain Company facilities with
an aggregate net book value of $53.3 million and $64.5 million at September 30,
2003 and 2002, respectively. The mortgage notes are payable in various
installments with maturity dates ranging through 2007 and carry interest rates
ranging from prime (4.0% and 4.75% at September 30, 2003 and 2002, respectively)
to 11.5%.

As
of September 30, 2003 and 2002, the quoted market price for the 2022 Notes was
approximately $293.7 million and $287.9 million, respectively. As of September
30, 2003, the quoted market price for the 2023 Notes was approximately $603.8
million. The fair value of the other debt included above, based on available
market information, approximates its carrying value.

Maturities
of long-term debt and capital leases for the next five fiscal years and
thereafter are as follows (in thousands):

|2004       |  | $    9,447 | 
|---------- |  | ---------- | 
|2005       |  | 8,785      | 
|2006       |  | 7,936      | 
|2007       |  | 16,143     | 
|2008       |  | 4,280      | 
|Thereafter |  | $887,569   | 

The
Company paid interest of $28.1 million, $7.4 million, and $14.9 million for the
years ended September 30, 2003, 2002 and 2001, respectively. Capitalized
interest was $.6 million for the year ended September 30, 2003. There was no
capitalized interest for the years ended September 30, 2002 and 2001.

48

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.     Leases

The
Company leases real estate properties, equipment and vehicles under cancelable
and non-cancelable leases. Future minimum operating and capital lease payments,
including amounts relating to leased hospitals, are as follows at September 30,
2003 (in thousands):

|                         | Operating |          | Capital
|------------------------ | --------- | -------- | -------
|
|2004                     |           | $  7,747 |        
|2005                     |           | 7,094    |        
|2006                     |           | 6,018    |        
|2007                     |           | 5,509    |        
|2008                     |           | 4,876    |        
|Thereafter               |           | 20,184   |        
|                         |           |          |        
|Total minimum payments   |           | $51,428  |        
|                         |           |          |        
|Less amounts             |          
|representing interest    |           |          |        
|                         |           |          |        
|Present value of minimum |           |          |        
|lease payments           |           |          |        
|                         |           |          |        

The
Company entered into several real property master leases with certain
non-affiliated entities in the ordinary course of business during the year ended
September 30, 2003. These leases are for buildings on or near hospital property
that the Company subleases to third parties. Amounts received as rental income
are offset against the expense. The Company has not engaged in any transaction
with an unconsolidated entity that is reasonably likely to affect liquidity.

The
following summarizes amounts related to assets leased by the Company under
capital leases (in thousands):

|                              | September 30,
|----------------------------- | -------------
|
|Cost                          |              
|Less accumulated amortization |              
|                              |              
|Net book value                |              
|                              |              

The
Company entered into capitalized leases for equipment of $2.9 million, $5.9
million and $4.0 million for the years ended September 30, 2003, 2002 and 2001,
respectively.

49

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5.     Income taxes

The
significant components of the provision for income taxes are as follows (in
thousands):

|              | Year ended September 30,
|------------- | ------------------------
|
|Federal:      |                         
|Current       |                         
|Deferred      |                         
|              |                         
|Total Federal |                         
|State:        |                         
|Current       |                         
|Deferred      |                         
|              |                         
|Total State   |                         
|Total         |                         
|              |                         

An
analysis of the Companys effective income tax rates is as follows:

|                               | Year ended September 30,
|------------------------------ | ------------------------
|
|
|Statutory income tax rate      |                         
|State income taxes, net        |                         
|of Federal benefit             |                         
|Other items (each less than 5% |                         
|of computed tax)               |                         
|                               |                         
|Total                          |                         
|                               |                         

The
tax effects of temporary differences that give rise to significant portions of
the Federal and state deferred income tax assets and liabilities are comprised
of the following:

|                                          | September 30,
|----------------------------------------- | -------------
|
|
|Deferred income tax assets:               |              
|Allowance for doubtful accounts           |              
|Accrued liabilities                       |              
|Self insurance liability risks            |              
|Other                                     |              
|                                          |              
|                                          |              
|Less:  Valuation allowance                |              
|                                          |              
|Net deferred income tax assets            |              
|Deferred income tax liabilities:          |              
|Depreciable assets                        |              
|Accrued liabilities and other             |              
|                                          |              
|Net deferred income tax (liability) asset |              
|                                          |              

SFAS
No. 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, management has
determined that a valuation allowance is not necessary as of September 30, 2003
and 2002, respectively.

Income
taxes paid (net of refunds) amounted to $174.7 million, $139.7 million, and
$126.1 million for the years ended September 30, 2003, 2002 and 2001,
respectively.

50

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.     Retirement plans

The
Company has a defined contribution retirement plan which covers substantially
all eligible employees at its hospitals and the corporate office. This plan
includes a provision for the Company to match a portion of employee
contributions. Total retirement program expense under this plan was $6.7
million, $6.0 million and $4.5 million for the years ended September 30, 2003,
2002 and 2001, respectively.

In
addition, the Company maintains a supplemental retirement plan for certain
Company executives which provides for predetermined annual payments to these
executives after the attainment of age 62, if still employed by the Company at
that time. These payments generally continue for the remainder of the
executives life. (see Note 10)

7.     Earnings
per share

The
following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share data):

|                                               | Year ended September 30,
|---------------------------------------------- | ------------------------
|
|Numerator:                                     |                         
|Numerator for basic earnings                   |                         
|per share - net income                         |                         
|Effect of interest expense on convertible debt |                         
|                                               |                         
|Numerator for diluted                          |                         
|earnings per share                             |                         
|                                               |                         
|Denominator:                                   |                         
|Denominator for basic earnings                 |                         
|per share-weighted average shares              |                         
|Effect of dilutive securities:                 |                         
|Employee stock options                         |                         
|Convertible debt                               |                         
|                                               |                         
|Denominator for diluted                        |                         
|earnings per share                             |                         
|                                               |                         
|Basic earnings per share                       |                         
|                                               |                         
|Diluted earnings per share                     |                         
|                                               |                         

Outstanding
options to purchase 2.7 million, 2.8 million, and 1.2 million shares of the
Companys common stock were not included in the computation of earnings per
share for the years ended September 30, 2003, 2002, and 2001, respectively,
because the options exercise prices were greater than the average market
price of the Companys common stock.

51

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.     Stockholders equity

The
Company has a 1991 Stock Option Plan, a 1993 Stock Option Plan and a 1996
Executive Incentive Compensation Plan for the granting of options to its key
employees to purchase common stock. All options granted have 10 year terms and
vest and become fully exercisable at the end of either 3 or 4 years of continued
employment.

Pertinent
information covering the plans is summarized below:

|                              | Shares |        | PriceRange |              | WeightedAverage Price
|----------------------------- | ------ | ------ | ---------- | ------------ | ---------------------
|
|Balance at September 30, 2000 |        | 21,833 |            | $1.24-$21.63 |                      
|Granted                       |        | 2,804  |            | 16.60-21.25  |                      
|Exercised                     |        | (2,553 | )          | 1.24-13.00   |                      
|Terminated                    |        | (1,506 | )          | 12.13-21.63  |                      
|                              |        |        |           
|Balance at September 30, 2001 |        | 20,578 |            | 2.07-21.63   |                      
|Granted                       |        | 1,808  |            | 19.10-19.95  |                      
|Exercised                     |        | (2,847 | )          | 2.07-19.63   |                      
|Terminated                    |        | (320   | )          | 8.25-21.63   |                      
|                              |        |        |           
|Balance at September 30, 2002 |        | 19,219 |            | 2.07-21.63   |                      
|Granted                       |        | 2,023  |            | 18.56        |                      
|Exercised                     |        | (1,490 | )          | 2.07-21.63   |                      
|Terminated                    |        | (417   | )          | 12.13-21.63  |                      
|                              |        |        |           
|Balance at September 30, 2003 |        | 19,335 |            | $4.49-$21.63 |                      
|                              |        |        |           

Stock
options exercisable at September 30, 2003, 2002, and 2001 were 14,336, 14,073,
and 15,144 at weighted average exercise prices of $12.51, $12.14, and $10.35,
respectively.

The
following table summarizes information concerning currently outstanding and
exercisable options:

|Options Outstanding |  | Options Exercisable
|------------------- |  | -------------------
|
|$4.49-$12.13        |  | 5,166,000          
|$12.72-$17.13       |  | 9,471,000          
|$18.56-$21.63       |  | 4,698,000          

52

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued))

8.     Stockholders equity (continued)

At
September 30, 2003, there were approximately 11.2 million shares of common stock
reserved for future issuance under the plans. In addition, the Company has
granted options for shares of its common stock to seven non-employee directors.
At September 30, 2003, there were approximately 170,000 options outstanding at
exercise prices ranging from $4.49 to $21.63 per share, expiring in 2004 through
2013.

The
Company also has a Stock Incentive Plan for corporate officers and management
staff. This plan provides for the awarding of additional compensation to key
personnel in the form of Company common stock. Under this plan, stock will be
issued to the grantee four years after the date of grant, provided the
individual is still an employee of the Company. At September 30, 2003, there
were approximately 450,000 shares reserved under the plan, for which the Company
has recorded $2.9 million, $2.9 million and $2.0 million of compensation expense
for the years ended September 30, 2003, 2002 and 2001, respectively.

In
September 2001, the Board of Directors approved a stock repurchase program to
repurchase up to 5,000,000 shares of the Companys common stock. On January
29, 2002, the Company announced that it had completed the stock repurchase
program by purchasing a total of 5,000,000 shares of its common stock at an
average purchase price of $19.29 per share.

In
February 2002, the Board of Directors approved a stock repurchase program to
repurchase up to 5,000,000 shares of the Companys common stock. On August
8, 2002, the Company announced that it had completed the stock repurchase
program by purchasing a total of 5,000,000 shares of its common stock at an
average purchase price of $18.54 per share.

At
September 30, 2003 and 2002, there were approximately 10.6 million shares of
common stock reserved for future issuance upon the conversion of the
Companys 2022 Notes.At September 30, 2003, there were
approximately 21.0 million shares of common stock reserved for future issuance
upon the conversion of the Companys 2023 Notes.

53

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.     Professional liability risks

Through
September 30, 2002, the Company was insured for professional liability risks
under a claims-made basis policy, whereby each claim was covered up
to $1.0 million per occurrence, subject to a $100,000 deductible (with an annual
deductible cap of $6.1 million). Liabilities in excess of these amounts were
covered through a combination of limits provided by commercial insurance
companies and a self-insurance program.

Accruals
for self-insured professional liability risks are determined using asserted and
unasserted claims identified by our incident reporting system and
actuarially-determined estimates based both on industry and our own historical
loss payment patterns and have been discounted to their present value using a
discount rate of 4.5%. Although the ultimate settlement of these accruals may
vary from these estimates, the Company believes that the amounts provided in the
consolidated financial statements are adequate. If actual payments of claims
exceed the Companys projected estimates of claims, the insurance accruals
could be materially adversely affected.

Effective
October 1, 2002, in response to difficulty in obtaining primary insurance from
commercial companies at reasonable rates, the Company formed a wholly-owned
insurance subsidiary in order to self-insure a greater portion of its primary
professional and general liability risk. The captive subsidiary insures risk up
to $1.0 million per claim and $3.0 million in the aggregate per hospital and
substantially all of the Companys approximately 165 employed physicians,
and further acts as an excess insurer for all hospitals in combination with
three commercial insurance companies. If actual payments of claims exceed
projected estimates of claims, the Companys insurance accruals for the
insurance subsidiary could be materially adversely affected.

10.     Non-cash
charge

The
amount recorded as a non-cash charge of $17.0 million during the year ended
September 30, 2001 consists of $13.6 million for the present value of the future
costs of retirement benefits granted to the Companys chairman pursuant to
an agreement which became effective January 2, 2001 and $3.4 million for the
write down of two hospital assets held for sale in conjunction with their
respective replacement. The two hospital assets that were written down were
facilities for which replacement facilities were completed in June 1999 and
March 2000. The charge for the write down of these facilities was recorded in
the Companys quarter ended March 31, 2001. During the period between
completion of the new facilities and the recording of the charge, the Company
was in the process of evaluating its options for the sale of the facilities that
had been replaced. During the quarter ended March 31, 2001, the Company
finalized its plans for the old facilities and obtained the information
necessary to estimate the loss on sale.

11.     Commitments

A
number of hospital renovation and/or expansion projects were underway at
September 30, 2003. None of these projects are individually significant nor do
they represent a significant commitment in total at September 30, 2003. In
addition, the Company plans to replace three of its existing hospitals
(Brooksville, Florida; Carlisle, Pennsylvania; and Lancaster, Pennsylvania) and
build one new hospital (Naples, Florida) over the next four years. As of
September 30, 2003, the construction cost of these four hospitals is expected to
be approximately $190.0 million. Regulatory approval, subject to appeal, to
begin construction on all these hospitals has been granted. The Company is also
obligated to construct a new facility at its Monroe, Georgia location within the
next five years. The cost for this hospital has not yet been determined.

54

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12.     Subsequent events

On
October 28, 2003, the Companys Board of Directors declared a quarterly
cash dividend of $0.02 per share of the Companys common stock payable on
December 1, 2003 to stockholders of record at the close of business on November
7, 2003.

On
November 1, 2003, the Company acquired five non-urban hospitals from Tenet
Healthcare Corporation. The five hospitals included Seven Rivers Community
Hospital, a 128-bed hospital located in Crystal River, Florida; Harton Regional
Medical Center, a 137-bed hospital located in Tullahoma, Tennessee; University
Medical Center, a two-campus 257-bed hospital located in Lebanon, Tennessee;
Three Rivers Healthcare, a two-campus 423-bed hospital located in Poplar Bluff,
Missouri; and Twin Rivers Regional Medical Center, a 116-bed hospital located in
Kennett, Missouri. The aggregate cost of this acquisition was approximately
$515.0 million. This transaction was financed through a combination of cash on
hand and through borrowing $275.0 million under the Companys Credit
Agreement.

55

---

HEALTH
MANAGEMENT ASSOCIATES, INC.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13.     Quarterly data (unaudited)

Years ended
September 30, 2003 and 2002(in thousands, except per share data)

|                                   | Quarter |              | Year Ended
|---------------------------------- | ------- | ------------ | ----------
|
|2003                               |         |              |           
|Net patient service revenue        |         | $609,419     |           
|Income before income taxes         |         | $  97,784    |           
|Net income                         |         | $  59,656    |           
|Net income per share:              |        
|Basic                              |         | $        .25 |           
|Diluted                            |         | $        .24 |           
|Weighted average number of shares: |         |              |           
|Basic                              |         | 238,589      |           
|Diluted                            |         | 257,255      |           
|2002                               |         |              |           
|Net patient service revenue        |         | $495,821     |           
|Income before income taxes         |         | $  83,072    |           
|Net income                         |         | $  50,466    |           
|Net income per share:              |        
|Basic                              |         | $        .21 |           
|Diluted                            |         | $        .20 |           
|Weighted average number of shares: |         |              |           
|Basic                              |         | 243,649      |           
|Diluted                            |         | 263,365      |           

56

---

Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

| |  | None.
| |  | -----

Item 9A.    Controls and Procedures

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

|(b) |  | Changes In Internal Controls Over Financial Reporting.
There has been no change in our internal control over financial reporting that
occurred during the fourth quarter of the fiscal year covered by this Form 10-K
that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

57

---

PART III

Item 10.  Directors and Executive Officers of the Registrant

The
information required by this Item 10 is: (i) incorporated into this Form 10-K by
reference to our proxy statement to be issued in connection with our Annual
Meeting of Stockholders to be held on February 17, 2004 under the headings
Election of Directors, Election of Directors  Board
Meetings and Committees of the Board, and Election of Directors 
Section 16(a) Beneficial Ownership Reporting Compliance, which proxy statement will
be filed within 120 days after the end of our fiscal year ended September 30,
2003; and (ii) set forth under Executive Officers of the Registrant
in Part I, Item 4 of this Form 10-K.

We
have adopted a Code of Business Conduct and Ethics that applies to our principal
executive officer, principal financial officer, principal accounting officer,
controller and persons performing similar functions. Our Code of Business
Conduct and Ethics also applies to all of our other employees and, to the extent
set forth therein, to our directors. Our Code of Business Conduct and Ethics is
posted on our website located at www.hma-corp.com under the heading
Investor Relations. We intend to satisfy any disclosure requirements
under Item 10 of Current Report on Form 8-K regarding any amendment to, or a
waiver from, certain provisions of our Code of Business Conduct and Ethics by
posting such information on our website under the Investor Relations
heading.

Item 11.  Executive Compensation

The
information required by this Item 11 is incorporated into this Form 10-K by
reference to our proxy statement to be issued in connection with our Annual
Meeting of the Stockholders to be held on February 17, 2004 under the heading
Executive Compensation, which proxy statement will be filed within
120 days after the end of our fiscal year ended September 30, 2003.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

The
information required by this Item 12 is incorporated into this Form 10-K by
reference to our proxy statement to be issued in connection with our Annual
Meeting of Stockholders to be held on February 17, 2004 under the heading
Security Ownership of Certain Beneficial Owners and Management,
which proxy statement will be filed within 120 days after the end of our fiscal
year ended September 30, 2003.

Item 13.  Certain Relationships and Related Transactions

The
information required by this Item 13 is incorporated into this Form 10-K by
reference to our proxy statement to be issued in connection with our Annual
Meeting of Stockholders to be held on February 17, 2004 under the heading
Certain Transactions, which proxy statement will be filed within 120
days after the end of our fiscal year ended September 30, 2003.

Item 14.  Principal Accounting Fees and Services

The
information required by this Item 14 is incorporated into this Form 10-K by
reference to our proxy statement to be issued in connection with our Annual
Meeting of the Stockholders to be held on February 17, 2004 under the heading
Relationship with Independent Accountants, which proxy statement
will be filed within 120 days after the end of our fiscal year ended September
30, 2003.

58

---

PART IV

Item 15.  Exhibits, Financial Statement Schedule, and Reports on Form 8-K

Item 15(a)(1)
and 15(a)(2):

We
have filed our consolidated financial statements in Part II, Item 8 of this Form
10-K. In addition, the financial statement schedule entitled Schedule II
 Valuation and Qualifying Accounts is filed as part of this Form
10-K under Item 15(d).

All
other schedules have been omitted since the required information is not present
or is not present in amounts sufficient to require submission of the schedule,
or because the information required is included in the consolidated financial
statements and notes thereto.

Item 15(a)(3)
and 15(c):

The
exhibits filed as part of this Form 10-K are listed in the Index to Exhibits
immediately following the signature page of this Form 10-K.

Item 15(b):

Reports
on Form 8-K:

|(a) |  | Form
8-K - Reporting Date July 22, 2003  Item Reported - Item 9.  Regulation FD Disclosure
|--- |  | ------------------------------------------------------------------------------------------

|(b) |  | Form
8-K - Reporting Date July 24, 2003  Item Reported - Item 5.  Other Events and Regulation
FD Disclosure
|--- |  | -----------------------------------------------------------------------------------------------------------

|(c) |  | Form
8-K - Reporting Date August 25, 2003  Item Reported - Item 5.  Other Events and
Regulation FD Disclosure
|--- |  | -------------------------------------------------------------------------------------------------------------

Item 15(d):

HEALTH
MANAGEMENT ASSOCIATES, INC.SCHEDULE
II  VALUATION AND QUALIFYING ACCOUNTS(in
thousands)

|                                | Balance atBeginning ofPeriod |          | AcquisitionsandDispositions |          | Charges toOperations(a) |          | Chargedto otherAccounts |     | Deductions(b) |           | Balance atEnd ofPeriod
|------------------------------- | ---------------------------- | -------- | --------------------------- | -------- | ----------------------- | -------- | ----------------------- | --- | ------------- | --------- | ----------------------
|Year ended September 30, 2001   |                              |          |                             |          |                         |          |                         |     |               |           |                       
|allowance for doubtful accounts |                              | $118,602 |                             | $  5,482 |                         | $154,114 |                         | $  |               | ($161,413 | )                     
|                                |                              |          |                             |          |                         |          |                         |     |               |           |                       
|Year ended September 30, 2002   |                             
|allowance for doubtful accounts |                              | $116,785 |                             | $33,143  |                         | $179,347 |                         | $  |               | ($190,659 | )                     
|                                |                              |          |                             |          |                         |          |                         |     |               |           |                       
|Year ended September 30, 2003   |                              |          |                             |          |                         |          |                        
|allowance for doubtful accounts |                              | $138,616 |                             | $  1,061 |                         | $212,320 |                         | $  |               | ($200,982 | )                     
|                                |                              |          |                             |          |                         |          |                         |     |               |           |                       
|                                |                              |          |                             |          |                         |         

|(a) |  | Charges
to operations include amounts related to provisions for doubtful accounts, before
recoveries.
|--- |  | -----------------------------------------------------------------------------------------------------

|(b) |  | Includes
amounts written-off as uncollectible, net of revenues.
|--- |  | ---------------------------------------------------------------

59

---

SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

HEALTH
MANAGEMENT ASSOCIATES, INC.

|By            /s/ Joseph V. Vumbacco                    Joseph V. Vumbacco |  | President and ChiefExecutive Officer |  | December 3, 2003 | 
|-------------------------------------------------------------------------- |  | ------------------------------------ |  | ---------------- | 

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant in the
capacities and on the dates indicated:

|/s/ William J. SchoenWilliam J. Schoen                   |  | Chairman of the Boardof Directors                                                                            |  | December 3, 2003 | 
|-------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | ---------------- | 
|                                                         |  |                                                                                                             
|/s/ Joseph V. VumbaccoJoseph V. Vumbacco                 |  | President, Chief Executive Officer,and Director (PrincipalExecutive Officer)                                 |  | December 3, 2003 | 
|                                                         |  |                                                                                                             
|/s/ Robert E. FarnhamRobert E. Farnham                   |  | Senior Vice Presidentand Chief Financial Officer(Principal Financial Officerand Principal Accounting Officer |  | December 3, 2003 | 
|                                                         |  |                                                                                                             
|/s/ Kent P. DautenKent P. Dauten                         |  | Director                                                                                                     |  | December 3, 2003 | 
|                                                         |  |                                                                                                              | 
|/s/ Donald E. KiernanDonald E. Kiernan                   |  | Director                                                                                                     |  | December 3, 2003 | 
|                                                         |  |                                                                                                              | 
|/s/ Robert A. KnoxRobert A. Knox                         |  | Director                                                                                                     |  | December 3, 2003 | 
|                                                         |  |                                                                                                             
|/s/ Kenneth D. LewisKenneth D. Lewis                     |  | Director                                                                                                     |  | December 3, 2003 | 
|                                                         |  |                                                                                                              | 
|/s/ William E. MayberryWilliam E. Mayberry, M.D          |  | Director                                                                                                     |  | December 3, 2003 | 
|                                                         |  |                                                                                                              | 
|/s/ William C. Steere, JrWilliam C. Steere, Jr           |  | Director                                                                                                     |  | December 3, 2003 | 
|                                                         |  |                                                                                                              | 
|/s/ Randolph W. WesterfieldRandolph W. Westerfield, Ph.D |  | Director                                                                                                     |  | December 3, 2003 | 

60

---

INDEX
TO EXHIBITS

|(2) |  | Plan of acquisition, reorganization, arrangement, liquidation or succession
|--- |  | ---------------------------------------------------------------------------

| |  | Not applicable.
| |  | ---------------

|(3) |  | (i)
Articles of Incorporation
|--- |  | -----------------------------

|3.1 |  | Fifth Restated Certificate of Incorporation, previously filed and included as
Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995 (SEC File No. 000-18799), is incorporated herein by
reference.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.2 |  | Certificate of Amendment to Fifth Restated Certificate of Incorporation,
previously filed and included as Exhibit 3.2 to the Companys Annual Report
on Form 10-K for the fiscal year ended September 30, 1999, is incorporated
herein by reference.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (ii)
By-laws
| |  | ------------

|3.3 |  | By-laws, as amended, previously filed and included as Exhibit 3.3 to the
Companys Quarterly Report on Form 10-Q for the quarter ended March 31,
2001, is incorporated herein by reference.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Instruments defining rights of security holders, including indentures
|--- |  | ---------------------------------------------------------------------

| |  | The
Exhibits referenced under (3) of this Index to Exhibits are incorporated herein
by reference.
| |  | -------------------------------------------------------------------------------------------------

|4.1 |  | Specimen Stock Certificate, previously filed and included as Exhibit 4.11 to the
Companys Annual Report on Form 10-K for the fiscal year ended September
30, 1992 (SEC File No. 000-18799), is incorporated herein by reference.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.2 |  | Credit Agreement by and among the Company, as Borrower, Bank of America, N.A.,
as Administrative Agent and as Lender, First Union National Bank, as Syndication
Agent and as Lender, and the Chase Manhattan Bank, as Syndication Agent and as
Lender, and the Lenders party thereto from time to time, dated November 30,
1999, previously filed and included as Exhibit 4.5 to the Companys Annual
Report on Form 10-K for the fiscal year ended September 30, 1999, is
incorporated herein by reference.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.3 |  | Credit Agreement dated March 23, 2000 between First Union National Bank and
Health Management Associates, Inc. pertaining to a $15 million working capital
and cash management line of credit, previously filed and included as Exhibit 4.1
to the Companys Quarterly Report on Form 10-Q for the quarter year ended
March 31, 2000, is incorporated herein by reference.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.4 |  | Indenture dated as of January 28, 2002, by and between the Company and Wachovia
Bank, National Association (formerly First Union National Bank), as Trustee,
pertaining to the $330.0 million face value of Zero-Coupon Convertible Senior
Subordinated Notes due 2022 (includes form of Zero-Coupon Convertible Senior
Subordinated Note due 2022), previously filed and included as Exhibit 4(a) to
the Companys Current Report on Form 8-K dated January 28, 2002, is
incorporated herein by reference.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.5 |  | Indenture dated as of July 29, 2003 between the Company and Wachovia Bank,
National Association, as Trustee, pertaining to the $575.0 million face value of
1.50% Convertible Senior Subordinated Notes due 2023 (includes form of 1.50%
Convertible Senior Subordinated Note due 2023), previously filed and included as
Exhibit 4.5 to the Companys Registration Statement on Form S-3
(Registration No. 333-109756), is incorporated herein by reference.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

61

---

|(9) |  | Voting Trust Agreement
|--- |  | ----------------------

| |  | Not applicable.
| |  | ---------------

|(10) |  | Material Contracts
|---- |  | ------------------

| |  | Exhibits 4.2 through 4.5 referenced under (4) of this Index to Exhibits are incorporated
herein by reference.
| |  | -------------------------------------------------------------------------------------------------------------

|10.1 |  | Health Management Associates, Inc. Stock Incentive Plan for Corporate Officers
and Management Staff, previously filed and included as Exhibit 10.56 to the
Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 1991
(SEC File No. 000-18799), is incorporated herein by reference.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 |  | Amendment No. 1 to the Health Management Associates, Inc. Stock Incentive Plan
for Corporate Officers and Management Staff, previously filed and included as
Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995 (SEC File No. 000-18799), is incorporated herein by
reference.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 |  | Health Management Associates, Inc. Supplemental Executive Retirement Plan, dated
July 12, 1990, previously filed and included as Exhibit 10.22 to the
Companys Annual Report on Form 10-K for the fiscal year ended September
30, 1993 (SEC File No. 000-18799), is incorporated herein by reference.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 |  | First Amendment to the Health Management Associates, Inc. Supplemental Executive
Retirement Plan, dated January 1, 1994, previously filed and included as Exhibit
10.51 to the Companys Annual Report on Form 10-K for the fiscal year ended
September 30, 1994 (SEC File No. 000-18799), is incorporated herein by
reference.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 |  | Registration Agreement dated September 2, 1988 between HMA Holding Corp., First
Chicago Investment Corporation, Madison Dearborn Partners IV, Prudential Venture
Partners, Prudential Venture Partners II, William J. Schoen, Kelly E. Curry,
Stephen M. Ray, Robb L. Smith, George A. Taylor and Earl P. Holland, previously
filed and included as Exhibit 10.23 to the Companys Registration Statement
on Form S-1(Registration No. 33-36406), is incorporated herein by reference.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 |  | Health Management Associates, Inc. 1991 Non-Statutory Stock Option Plan,
previously filed and included as Exhibit 10.67 to the Companys
Registration Statement on Form S-1 (Registration No. 33-43193), is incorporated
herein by reference.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.7 |  | Amendment No. 1 and Amendment No. 2 to the Health Management Associates, Inc.
1991 Non-Statutory Stock Option Plan, previously filed and included as Exhibit
10.44 to the Companys Annual Report on Form 10-K for the fiscal year ended
September 30, 1992 (SEC File No. 000-18799), is incorporated herein by
reference.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.8 |  | Health Management Associates, Inc. 1993 Non-Statutory Stock Option Plan,
previously filed and included as Exhibit 10.45 to the Companys Annual
Report on Form 10-K for the fiscal year ended September 30, 1992 (SEC File No.
000-18799), is incorporated herein by reference.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.9 |  | Health Management Associates, Inc. Stock Option Plan for Outside Directors,
previously filed and included as Exhibit 10.5 to the Companys Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995 (SEC File No.
000-18799), is incorporated herein by reference.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.10 |  | Amendment No. 5 to the Health Management Associates, Inc. 1991 Non-Statutory
Stock Option Plan, previously filed and included as Exhibit 10.57 to the
Companys Annual Report on Form 10-K for the fiscal year ended September
30, 1995 (SEC File No. 000-18799), is incorporated herein by reference.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

62

---

|10.11 |  | Amendment No. 3 to the Health Management Associates, Inc. 1993 Non-Statutory
Stock Option Plan, previously filed and included as Exhibit 10.58 to the
Companys Annual Report on Form 10-K for the fiscal year ended September
30, 1995 (SEC File No. 000-18799), is incorporated herein by reference.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.12 |  | Amendment No. 1 to the Health Management Associates, Inc. Stock Option Plan for
Outside Directors, previously filed and included as Exhibit 10.59 to the
Companys Annual Report on Form 10-K for the fiscal year ended September
30, 1995 (SEC File No. 000-18799), is incorporated herein by reference.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.13 |  | Amendment No. 6 to the Health Management Associates, Inc. 1991 Non-Statutory
Stock Option Plan, previously filed and included as Exhibit 10.2 to the
Companys Quarterly Report on Form 10-Q for the quarter ended December 31,
1995 (SEC File No. 000-18799), is incorporated herein by reference.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.14 |  | Amendment No. 7 to the Health Management Associates, Inc. 1991 Non-Statutory
Stock Option Plan, previously filed and included as Exhibit 10.3 to the
Companys Quarterly Report on Form 10-Q for the quarter ended December 31,
1995 (SEC File No. 000-18799), is incorporated herein by reference.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.15 |  | Amendment No. 4 to the Health Management Associates, Inc. 1993 Non-Statutory
Stock Option Plan, previously filed and included as Exhibit 10.4 to the
Companys Quarterly Report on Form 10-Q for the quarter ended December 31,
1995 (SEC File No. 000-18799), is incorporated herein by reference.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.16 |  | Amendment No. 5 to the Health Management Associates, Inc. 1993 Non-Statutory
Stock Option Plan, previously filed and included as Exhibit 10.5 to the
Companys Quarterly Report on Form 10-Q for the quarter ended December 31,
1995 (SEC File No. 000-18799), is incorporated herein by reference.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.17 |  | Health Management Associates, Inc. 1996 Executive Incentive Compensation Plan,
previously filed and included as Exhibit 99.15 to the Companys
Registration Statement on Form S-8 (Registration No. 33-80433), is incorporated
herein by reference.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.18 |  | Amendment No. 1 to the Health Management Associates, Inc. 1996 Executive
Incentive Compensation Plan, previously filed and included as Exhibit 10.1 to
the Companys Quarterly Report on Form 10-Q for the quarter ended March 31,
1996, is incorporated herein by reference.
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.19 |  | Second Amendment to the Health Management Associates, Inc. Supplemental
Executive Retirement Plan, dated September 17, 1996, previously filed and
included as Exhibit 10.64 to the Companys Annual Report on Form 10-K for
the fiscal year ended September 30, 1996, is incorporated herein by reference.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.20 |  | Amendment No. 5 to the Health Management Associates, Inc. 1996 Executive
Incentive Compensation Plan, previously filed and included as Exhibit 10.1 to
the Companys Quarterly Report on Form 10-Q for the quarter year ended June
30, 2000, is incorporated herein by reference.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.21 |  | Amendment No. 6 to the Health Management Associates, Inc. 1996 Executive
Incentive Compensation Plan, previously filed and included as Exhibit 10.2 to
the Companys Quarterly Report on Form 10-Q for the quarter year ended June
30, 2000, is incorporated herein by reference.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

63

---

|10.22 |  | Amendment No. 10 to the Health Management Associates, Inc. 1991 Non-Statutory
Stock Option Plan, previously filed and included as Exhibit 10.37 to the
Companys Annual Report on Form 10-K for the fiscal year ended September
30, 2000, is incorporated herein by reference.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.23 |  | Amendment No. 8 to the Health Management Associates, Inc. 1993 Non-Statutory
Stock Option Plan, previously filed and included as Exhibit 10.38 to the
Companys Annual Report on Form 10-K for the fiscal year ended September
30, 2000, is incorporated herein by reference.
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.24 |  | Amendment to Stock Option Agreements between Health Management Associates, Inc.
and William J. Schoen made as of December 5, 2000, previously filed and included
as Exhibit 10.39 to the Companys Annual Report on Form 10-K for the fiscal
year ended September 30, 2000, is incorporated herein by reference.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.25 |  | Third Amendment to the Health Management Associates, Inc. Supplemental
Retirement Plan, previously filed and included as Exhibit 10.40 to the
Companys Annual Report on Form 10-K for the fiscal year ended September
30, 2000, is incorporated herein by reference.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.26 |  | Employment Agreement for William J. Schoen made as of January 2, 2001,
previously filed and included as Exhibit 99.2 to the Companys Registration
Statement on Form S-8 (Registration No. 333-53602), is incorporated herein by
reference
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.27 |  | Amendment No. 8 to the Health Management Associates, Inc. Stock Option Plan for
Outside Directors, previously filed and included as Exhibit 10.1 to the
Companys Quarterly Report on Form 10-Q for the quarter ended December 31,
2001, is incorporated herein by reference.
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.28 |  | Purchase Agreement dated January 22, 2002 by and among the Company, Credit
Suisse First Boston Corporation and Salomon Smith Barney Inc., as
representatives of the initial purchasers, previously filed and included as
Exhibit 99(a) to the Companys Current Report on Form 8-K dated January 28,
2002, is incorporated herein by reference.
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.29 |  | Registration Rights Agreement dated as of January 28, 2002, by and among the
Company, Credit Suisse First Boston Corporation and Salomon Smith Barney Inc.,
as representatives of the initial purchasers, previously filed and included as
Exhibit 99(b) to the Companys Current Report on Form 8-K dated January 28,
2002, is incorporated herein by reference.
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.30 |  | Amendment No. 9 to the Health Management Associates, Inc. Stock Option Plan for
Outside Directors, previously filed and included as Exhibit 10.38 to the
Companys Annual Report on Form 10-K for the fiscal year ended September
30, 2002, is incorporated herein by reference.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.31 |  | Amendment No. 10 to the Health Management Associates, Inc. Stock Option Plan for
Outside Directors, previously filed and included as Exhibit 10.1 to the
Companys Quarterly Report on Form 10-Q for the quarter ended June 30,
2003, is incorporated herein by reference.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.32 |  | Purchase Agreement dated July 24, 2003 by and among the Company, Banc of America
Securities LLC, Lehman Brothers Inc. and Wachovia Capital Markets LLC,
previously filed and included as Exhibit 1.1 to the Companys Registration
Statement on Form S-3 (Registration No. 333-109756), is incorporated herein by
reference.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.33 |  | Registration Rights Agreement dated as of July 29, 2003 by and among the
Company, Banc of America Securities LLC, Lehman Brothers Inc. and Wachovia
Capital Markets LLC, previously filed and included as Exhibit 4.7 to the
Companys Registration Statement on Form S-3 (Registration No. 333-109756),
is incorporated herein by reference.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

64

---

|10.34 |  | Asset Sale Agreement among Health Management Associates, Inc., Health Point
Physician Hospital Organization, Inc., National Medical Hospital of Tullahoma,
Inc., National Medical Hospital of Wilson County, Inc., S.C. Management, Inc.,
Tenet HealthSystem Hospitals, Inc., Tenet HealthSystem Medical, Inc., Tenet
Lebanon Surgery Center, L.L.C. and Wilson County Management Services, Inc. dated
as of August 22, 2003, previously filed and included as Exhibit 2.1 to the
Companys Current Report on Form 8-K dated November 1, 2003, is
incorporated herein by reference.
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.35 |  | Amendment No. 1 to Asset Sale Agreement among Health Point Physician Hospital
Organization, Inc., National Medical Hospital of Tullahoma, Inc., National
Medical Hospital of Wilson County, Inc., S.C. Management, Inc., Tenet
HealthSystem Hospitals, Inc., Tenet HealthSystem Medical, Inc., Tenet Lebanon
Surgery Center, L.L.C., Wilson County Management Services, Inc., Health
Management Associates, Inc., Citrus HMA, Inc., Kennett HMA, Inc., Lebanon HMA,
Inc. and Tullahoma HMA, Inc. dated as of October 31, 2003, previously filed and
included as Exhibit 2.2 to the Companys Current Report on Form 8-K dated
November 1, 2003, is incorporated herein by reference.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

65

---

|(11) |  | Statement re computation of per share earnings
|---- |  | ----------------------------------------------

| |  | Not applicable.
| |  | ---------------

|(12) |  | Statements
re computation of ratios
|---- |  | -----------------------------------

| |  | Not applicable.
| |  | ---------------

|(13) |  | Annual report to security holders, Form 10-Q or quarterly report to security
holders
|---- |  | ------------------------------------------------------------------------------------

| |  | Not applicable.
| |  | ---------------

|(14) |  | Code of Ethics
|---- |  | --------------

| |  | Not applicable.
| |  | ---------------

|(16) |  | Letter
re change in certifying accountant
|---- |  | -----------------------------------------

| |  | Not applicable.
| |  | ---------------

|(18) |  | Letter re change in accounting principles
|---- |  | -----------------------------------------

| |  | Not applicable.
| |  | ---------------

|(21) |  | Subsidiaries
of the registrant
|---- |  | ------------------------------

| |  | 21.1 Subsidiaries of the Registrant.
| |  | ------------------------------------

|(22) |  | Published report regarding matters submitted to vote of security holders
|---- |  | ------------------------------------------------------------------------

| |  | Not applicable.
| |  | ---------------

|(23) |  | Consents
of experts and counsel
|---- |  | -------------------------------

| |  | 23.1 Consent of Ernst & Young LLP.
| |  | ----------------------------------

|(24) |  | Power of Attorney
|---- |  | -----------------

| |  | Not applicable.
| |  | ---------------

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

| |  | 31.1 Rule 13a-14(a)/15d-14(a) Certifications.
| |  | ---------------------------------------------

|(32) |  | Section 1350 Certifications
|---- |  | ---------------------------

| |  | 32.1 Section 1350 Certifications.
| |  | ---------------------------------

|(99) |  | Additional Exhibits
|---- |  | -------------------

| |  | Not applicable.
| |  | ---------------

66