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

FORM 10-K

|(mark one)
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|x         
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Commission
File Number 001-11141

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

|Delaware                                                         |  | 61-0963645                          
|---------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of
  incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                                 |  |                                     
|5811 Pelican Bay Boulevard, Suite
  500
  Naples, Florida        |  | 34108-2710                          
|(Address of principal executive offices)                         |  | (Zip Code)                          

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

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

|Title of each class                    |  | Name of each exchange on 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 class                                         
|------------------------------------------------------------
|Zero-Coupon Convertible
  Senior Subordinated Notes due 2022
|1.50% Convertible
  Senior Subordinated Notes due 2023      

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.o

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

As
of December 6, 2004, there were 243,888,465 shares of the Registrants Class A
Common Stock, par value $.01 per share outstanding. As of March 31, 2004 (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 $5,473,542,790, 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.  For purposes of the foregoing
calculation only, all directors and officers of the Registrant have been deemed
affiliates.

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 15,
2005, have been incorporated by reference into Part III, Items 10, 11, 12, 13
and 14 of this Report.

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TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT
HEALTH MANAGEMENT ASSOCIATES, INC.
Fiscal year ended September 30, 2004

|         |                                                                                                                    | 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 the Registrants Common
  Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |     
|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                                                                                            |     
|Item 9B. | Other Information                                                                                                  |     
|         |                                                                                                                    |     
|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 and Related Stockholder Matters                   |     
|Item 13. | Certain Relationships and Related
  Transactions                                                                   |     
|Item 14. | Principal Accountant Fees and
  Services                                                                           |     
|         |                                                                                                                    |     
|PART IV  |                                                                                                                    |     
|         |                                                                                                                    |     
|Item 15. | Exhibits and Financial Statement
  Schedules                                                                       |     

|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 15, 2005, have been incorporated by
  reference into Part III, Items 10, 11, 12, 13 and 14 of this Report.
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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, 2004, we
operated 52 hospitals, consisting of 50 acute care hospitals with a total of
7,286 licensed beds and two psychiatric hospitals with a total of 178 licensed
beds.  Our fiscal year runs from October
1 through September 30.  During the
twelve months ended September 30, 2004, which we refer to as fiscal 2004, we
operated facilities located in Alabama, Arkansas, Florida, Georgia, Kentucky,
Mississippi, Missouri, North Carolina, Oklahoma, Pennsylvania, South Carolina,
Tennessee, Texas, Virginia, Washington and West Virginia. Our general acute
care hospitals contributed substantially all of our consolidated net patient
service revenues during fiscal 2004.

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, 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. Our facilities benefit from corporate
resources, such as purchasing, information services, finance and control
systems, legal services, 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 15,
2004, for the third 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
and Pending 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 each fiscal year. Generally, at any given
time, we are actively involved in negotiations concerning possible acquisitions.
Our pending and recently completed transactions include:

| |  | On November 9, 2004, we announced the execution of
  an agreement with Bon Secours Health Systems, Inc., pursuant to which we will
  acquire from Bon Secours substantially all of the assets of the 312-bed Bon
  Secours Venice Hospital, located in Venice, Florida, the 212-bed Bon Secours
  St. Josephs Hospital, located in Port Charlotte, Florida, and the 133-bed
  Bon Secours St. Marys Hospital, located in Norton, Virginia. We expect that
  this transaction will be completed on or before the end of our second fiscal quarter
  ending March 31, 2005.                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | On October 7, 2004, we announced the execution of an
  agreement with LifePoint Hospitals, Inc., pursuant to which we will acquire
  from LifePoint Hospitals, Inc. substantially all of the assets of the 56-bed Bartow Memorial
  Hospital, located in Bartow, Florida, and LifePoint Hospitals, Inc. will simultaneously
  acquire from us substantially all of the assets of the 76-bed Williamson
  Memorial Hospital, located in Williamson, West Virginia. Subject to certain conditions stated in the agreement, we expect that this
  transaction will be completed by the end of our first fiscal quarter ending
  December 31, 2004.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | On October 1, 2004, we acquired Chester County
  Hospital, an 82-bed hospital located in Chester, South Carolina. The total
  cash paid for this acquisition was approximately $20.5 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                  

1

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| |  | On September 29, 2004, we announced that we received
  a favorable ruling from the State of Floridas First District Court of
  Appeals affirming the final certificate of need approval from the State of
  Floridas Agency for Health Care Administration to build the 100-bed Collier
  Regional Medical Center. This hospital will be located in southeast Collier
  County, Florida. This decision ended the appeal process. We
  expect to begin construction of this facility in early 2005.  The cost of this project is expected to be
  approximately $75.0 million.                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | On November 1, 2003, we acquired five non-urban
  hospitals from subsidiaries of Tenet Healthcare Corporation.  The five hospitals acquired were 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 total cash paid for this acquisition was approximately $513.9
  million.  This acquisition also
  represented our initial operations in the State of Missouri.

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 we believe 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.                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | Favorable demographics, including 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.  We believe,
  that in many instances,  we can
  recruit primary care and specialty 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 appropriate barriers to the entry
  and, in many instances, permit us to be the sole or preferred service
  provider in a geographic area.

2

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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 designed to attract and retain
qualified specialists and primary care physicians, in conjunction with our
existing physicians and community needs, in order to 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; ProMed, an emergency room
clinical pathway support service; MedKey, 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.

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. We believe that the acute
care hospitals we acquire are, or can become, the provider of choice for health
care services in their market areas. When we evaluate potential acquisitions,
we require that a hospitals market service area have a demonstrated need for
the hospital, along with an established physician base that can benefit from
our ability to attract additional, qualified physicians to the area, based on
community needs.

Many
of the hospitals we acquire are under-performing at the time of acquisition.
Upon acquiring a hospital, we conduct a thorough review and, where appropriate,
retain current administrative leadership. We also take several other steps,
including, among other things, employing a well-qualified chief executive
officer, chief financial officer and chief nursing officer, implementing our
proprietary management information system (the Pulse System) and
other technological enhancements, recruiting physicians, establishing
additional quality assessment and efficiency measures, introducing volume
purchasing under company-wide agreements, and spending the necessary capital to
renovate facilities and upgrade equipment. Our Pulse System 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
expand and 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 to 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 generally 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.

3

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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 patients 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s
management team utilizes information provided by our QSM program to improve and
enhance services.   The overall results
in our QSM program for fiscal 2004 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
2004, such achievements and accomplishments included the following:

| |  | All of our hospitals were accredited by the Joint
  Commission on Accreditation of Healthcare Organizations (JCAHO), including
  our laboratories and home health programs.                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                      
| |  | Charlotte Regional Medical Center in Punta Gorda,
  Florida, for the fifth time, was named 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.  
| |   |                                                                                                                                                                                                                                                                                                                      
| |  | Yakima Regional Medical Center in Yakima,
  Washington, for the first time, was named one of the Top 100 Cardiac
  Hospitals in America by Solucient, Inc.                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                      
| |  | Pasco Regional Medical Center in Dade City, Florida,
  was selected as one of the United States top performing hospitals according
  to Solucient, Inc.s 100 Top Hospitals report.                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                      
| |  | Four of our hospitals received the JCAHO Gold Seal
  of Approval:  Rankin Medical Center in
  Brandon, Mississippi; River Oaks Hospital and the Womans Hospital in
  Flowood, Mississippi; Walton Regional Medical Center in Monroe, Georgia; and
  the Medical Center of Southeastern Oklahoma in Durant, Oklahoma.

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, legal services, 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 subsidiary hospitals.  Financial information is consolidated at the corporate level
through our proprietary Pulse System 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.

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Selected Operating Statistics

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

|                                                                                   |  | Year Ended September 30, |          
|---------------------------------------------------------------------------------- |  | ------------------------ | ---------
|                                                                                   |  |                          |          
|                                                                                   |  | 2004                     |          
|                                                                                   |  |                          |          
|                                                                                   |  |                          |          
|Total
  hospitals owned or leased as of the end of each period                     |  |                          | 52       
|Licensed
  beds as of the end of each period (1)                                   |  |                          | 7,464    
|Admissions
  (2)                                                                   |  |                          | 284,634  
|Adjusted
  admissions (3)                                                          |  |                          | 462,388  
|Surgeries
  (4)                                                                    |  |                          | 236,741  
|Patient days
  (5)                                                                 |  |                          | 1,288,461
|Acute care
  average length of stay in days (6)                                    |  |                          | 4.5      
|Occupancy rate
  (7)                                                               |  |                          | 47.9     
|Earnings
  margin, before interest, taxes, depreciation,
     and amortization (8) |  |                          | 21.1     

|(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
  particular market service areas, the degrees of variation in medical and
  surgical products, outpatient use of hospital services, quality and treatment
  availability at competing hospitals, and seasonality.                                                                                                                                                                                                                                                                                              

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|(8) | 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
  either 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 and other readers of our financial statements, as it provides a
  measure of  liquidity.  In addition, EBITDA is commonly used as an
  analytical indicator within the health care industry and our debt facilities
  contain covenants that use EBITDA in their calculations.  Because EBITDA is not a measurement
  determined in accordance with GAAP and is thus susceptible to varying
  calculations, EBITDA, as presented, may not be directly comparable to other
  similarly titled measures of other companies.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
table below reconciles the GAAP information to EBITDA.

| |                                                      |  | Year Ended September 30, |          
| | ---------------------------------------------------- |  | ------------------------ | ---------
| |                                                      |  |                          |          
| |                                                      |  | 2004                     |          
| |                                                      |  |                          |          
| |                                                      |  | (in thousands)           |          
| | Net patient
  service revenue                        |  | $                        | 3,205,885
| |                                                      |  |                          |          
| | Income
  before income taxes                         |  |                          | 526,480  
| | Add:                                                 |  |                          |          
| | Interest,
  net                                      |  |                          | 16,184   
| | Depreciation
  and amortization (a)                  |  |                          | 134,915  
| |                                                      |  |                          |          
| | EBITDA                                               |  | $                        | 677,579  
| |                                                      |  |                          |          
| |                                                      |  |                          |          
| | EBITDA
  margin = EBITDA/net patient service revenue |  |                          | 21.1     

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

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 strive to
distinguish ourselves based on the quality and scope of medical services
provided.

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 appropriate
barriers to entry and, in many instances, permit us to be the sole or preferred
service provider in a geographic area.

6

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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 adversely 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, the hospital services we provide. 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 increasing wages, improving hospital working conditions and fostering
relationships with local nursing schools.

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 hospital
revenues.  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.  During our fiscal year ended September 30,
2004, we recruited 364 physicians. 
Often, in consideration for a physician relocating to one of our
communities and agreeing to engage in private practice, our subsidiaries 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, referred to as the commitment period, which generally does not
exceed twelve months.  The net amounts
advanced under these recruiting agreements at the end of the physicians
commitment period are considered loans and are generally forgiven pro rata over
a 36 month period, contingent upon the physician continuing to practice in the
respective community.

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;

7

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| |  | commercial insurance; and     
| | - | ------------------------------
| |   |                               
| |  | private insurers and patients.

Co-payments
and deductibles are a portion of the patients bill for medical services that
many private and governmental payors require the patient to pay. 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 that we collect at the time of
service. However, we do track the subsequent collection of co-payments and deductibles and
during fiscal 2004, we collected approximately 50% of such patient co-payments and deductibles.
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 (e.g., emergency room services, active labor and other like
situations) are present, as 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.

Approximately
90% of our billing system is computerized via our proprietary Pulse System.  Charges for services rendered are
automatically interfaced into the billing system.  Front end edits are performed automatically by our billing
system, which edits the bills for inconsistencies and improperly billed
charges.  Any inconsistencies are
reviewed by billing personnel who clear such inconsistencies before the bill is
sent.  Once the bill has cleared the
edit process, the billing system automatically generates a bill and
approximately 90% of these bills are sent electronically to third party
payors.  For the approximately 10% of
the bills that are not generated through the above described process, paper
copies of the bills are printed and mailed to the respective third-party payors
or individuals, as the case may be.

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, |    
|------------------------- |  | ------------------------ | ---
|                          |  |                          |    
|                          |  | 2004                     |    
|                          |  |                          |    
|                          |  |                          |    
|Medicare                  |  |                          | 35 
|Medicaid                  |  |                          | 9  
|Commercial insurance      |  |                          | 46 
|Private and other sources |  |                          | 10 
|                          |  |                          |    
|Total                     |  |                          | 100
|                          |  |                          |    

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 care) 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.

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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 2004 and 2003, the
update factors were 3.4% and 2.95%, respectively.  For federal fiscal year 2005, the update factor is 3.3%.

Medicares
outpatient PPS groups services that are clinically related and use similar
resources are classified 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 actual 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 calendar years
2004 and 2003, the payment rate update factors were 3.4% and 2.3%,
respectively. For calendar year 2005, the update factor is 3.3%.

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
were reimbursed through December 31, 2003. 
Some of our acute care hospitals qualify for relief under this
provision. The Medicare Prescription Drug Improvement and Modernization Act of 2003 provided an extension
until January 1, 2006 of certain provisions of the Balanced Budget Refinement Act of 1999 for small rural and
sole community hospitals.

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 items such as current cancer therapy drugs, biologicals,
  and certain medical devices).

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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 is
intended to 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 of 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, was 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 Outpatient Department reform provisions of the 2003 Act; 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
and believe that the 2003 Act will continue to 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 2004 and 2003 was $31,000 and $33,560,
respectively. The amount for federal fiscal year 2005 is $25,800. Approximately
2.5% of our Medicare inpatient payments were from outliers in fiscal 2004
compared to 3.8% 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.

Each state
is responsible for administering its own Medicaid program and payment rates and
methodologies as well as covered services, all of which 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, and 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.

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In addition
to statutory changes, the Medicare and each of the Medicaid programs are
subject to regulatory changes, administrative rulings, interpretations and
determinations, post-payment audits, 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 a hospital directly after the claim is filed, nevertheless,
reimbursement can be sent directly to the patient based on particular insurance
policy stipulations.  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 contracts negotiated 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.

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 indigent and charity care policy. 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. See Legal Proceedings for additional information
relating to uninsured patients.

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 provide services 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 of the applicable
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, collection efforts, 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.

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Although we
believe that we are in material compliance with all applicable laws, rules and
regulations, if we fail to comply with such 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. 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 the Medicare and the Medicaid programs.  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.

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 for 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.

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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 below for further discussion.

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 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, and that we will be in compliance with the security and integrity
portions of HIPAA by the implementation date. 
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. We have and will continue to use substantial resources in the implementation of both the privacy and security aspects of HIPAA and we believe that 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.

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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

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, to the extent set forth therein, our
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
upon initial hire to each of our employees, officers, as well as to our  directors. 
Our employees, officers, and directors also receive additional ethics
and compliance training annually thereafter. 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, including rules and
regulations promulgated under the Sarbanes-Oxley Act of 2002 and by the New
York Stock Exchange.

Employees and Medical Staff

As of
September 30, 2004, we had approximately 28,000 employees, approximately 1,100 of whom were covered by eight collective
bargaining agreements.  Our corporate staff consisted of approximately 125 people at such date.  We believe that our relations with employees
are satisfactory.

In general,
although our medical staffs consist of physicians with certain services and
specialties, the staff physicians at our hospitals are, in most cases, not our employees.  Such physicians may also be staff members of
other hospitals.  Nevertheless, we do
employ approximately 200 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 increased
litigation, unfavorable pricing and a decreasing number of insurers in the
professional liability markets.

In
response to such unfavorable pricing and a decreasing number of insurers, in
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 ($6.0 million effective October 1, 2004) 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 for periods prior to
the inception of our captive insurance program. 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.

14

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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 Board
of Directors committee charters (Audit Committee, Compensation Committee, Corporate
Governance and Nominating Committee and Executive Committee), Code of Business
Conduct and Ethics, and Corporate Governance Guidelines are posted on our
website under the heading Investor Relations. This information is available in
print to any stockholder who requests it.

15

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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, 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, 2004.  For more
information regarding the utilization of our facilities, see Item 1  Business - Selected Operating Statistics.

|State       |  | Facility                                           |  | City                |  | Licensed
  Beds |  | Operational
  Status |  | Date
  Acquired
|----------- |  | -------------------------------------------------- |  | ------------------- |  | --------------- |  | -------------------- |  | ---------------
|            |  |                                                    |  |                     |  |                 |  |                      |  |                
|Alabama     |  | Riverview Regional Medical Center                  |  | Gadsden             |  | 281             |  | Owned                |  | July           
|            |  | Stringfellow Memorial Hospital                     |  | Anniston            |  | 125             |  | Managed              |  | January        
|            |  |                                                    |  |                     |  |                 |  |                      |  |                
|Arkansas    |  | Crawford Memorial Hospital                         |  | Van Buren           |  | 103             |  | Leased               |  | May            
|            |  | Southwest Regional Medical Center                  |  | Little Rock         |  | 125             |  | Owned                |  | November       
|            |  |                                                    |  |                     |  |                 |  |                      |  |                
|Florida     |  | Highlands Regional Medical Center                  |  | Sebring             |  | 126             |  | Leased               |  | August         
|            |  | Fishermens Hospital                               |  | Marathon            |  | 58              |  | Leased               |  | August         
|            |  | University Behavioral Center                       |  | Orlando             |  | 104             |  | Owned                |  | January        
|            |  | SandyPines                                         |  | Tequesta            |  | 74              |  | Owned                |  | January        
|            |  | Heart of Florida Regional Medical Center           |  | Greater Haines City |  | 142             |  | Owned                |  | August         
|            |  | Sebastian River Medical Center                     |  | Sebastian           |  | 129             |  | Owned                |  | September      
|            |  | Charlotte Regional Medical Center                  |  | Punta Gorda         |  | 208             |  | Owned                |  | December       
|            |  | Brooksville Regional Hospital                      |  | Brooksville         |  | 91              |  | Leased               |  | June           
|            |  | Spring Hill Regional Hospital                      |  | Spring Hill         |  | 95              |  | Leased               |  | June           
|            |  | Lower Keys Medical Center                          |  | Key West            |  | 167             |  | Leased               |  | May            
|            |  | Pasco Regional Medical Center                      |  | Dade City           |  | 120             |  | Owned                |  | September      
|            |  | Lehigh Regional Medical Center                     |  | Lehigh Acres        |  | 88              |  | Owned                |  | December       
|            |  | Santa Rosa Medical Center                          |  | Milton              |  | 129             |  | Owned                |  | January        
|            |  | Seven Rivers Regional
  Medical Center             |  | Crystal River       |  | 128             |  | Owned                |  | November       
|            |  |                                                    |  |                     |  |                 |  |                      |  |                
|Georgia     |  | East Georgia Regional Medical Center               |  | Statesboro          |  | 150             |  | Owned                |  | October        
|            |  | Walton Regional Medical Center                     |  | Monroe              |  | 135             |  | Owned                |  | September      
|            |  |                                                    |  |                     |  |                 |  |                      |  |                
|Kentucky    |  | Paul B. Hall Regional Medical Center               |  | Paintsville         |  | 72              |  | Owned                |  | January        
|            |  |                                                    |  |                     |  |                 |  |                      |  |                
|Mississippi |  | Biloxi Regional Medical Center                     |  | Biloxi              |  | 153             |  | Leased               |  | September      
|            |  | Natchez Community Hospital                         |  | Natchez             |  | 101             |  | Owned                |  | September      
|            |  | Northwest Mississippi Regional
     Medical Center |  | Clarksdale          |  | 195             |  | Leased               |  | January        
|            |  | Rankin Medical Center                              |  | Brandon             |  | 134             |  | Leased               |  | January        
|            |  | Riley Hospital                                     |  | Meridian            |  | 140             |  | Owned                |  | January        
|            |  | River Oaks Hospital                                |  | Flowood             |  | 110             |  | Owned                |  | January        
|            |  | Womans Hospital at River Oaks                     |  | Flowood             |  | 111             |  | Owned                |  | January        

16

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|State          |  | Facility                                                           |       | City           |  | Licensed
  Beds |  | Operational
  Status |  | Date Acquired
|-------------- |  | ------------------------------------------------------------------ | ----- | -------------- |  | --------------- |  | -------------------- |  | -------------
|               |  |                                                                    |       |                |  |                 |  |                      |  |              
|               |  |                                                                    |       |                |  |                 |  |                      |  |              
|Mississippi    |  | Central Mississippi Medical
  Center                               |       | Jackson        |  | 429             |  | Leased               |  | April        
|(continued)    |  | Madison Regional Medical
  Center                                  |       | Canton         |  | 67              |  | Leased               |  | January      
|               |  |                                                                    |       |                |  |                 |  |                      |  |              
|Missouri       |  | Twin Rivers Regional Medical
  Center                              |       | Kennett        |  | 116             |  | Owned                |  | November     
|               |  | Poplar Bluff Regional
  Medical Center                             |       | Poplar Bluff   |  | 423             |  | Owned                |  | November     
|               |  |                                                                    |       |                |  |                 |  |                      |  |              
|North Carolina |  | Franklin Regional Medical
  Center                                 |       | Louisburg      |  | 85              |  | Owned                |  | August       
|               |  | Lake Norman Regional Medical
  Center                              |       | Mooresville    |  | 105             |  | Owned                |  | January      
|               |  | Sandhills Regional Medical
  Center                                |       | Hamlet         |  | 64              |  | Owned                |  | August       
|               |  | Davis Regional Medical
  Center                                    |       | Statesville    |  | 149             |  | Owned                |  | October      
|               |  |                                                                    |       |                |  |                 |  |                      |  |              
|Oklahoma       |  | Medical Center of
  Southeastern Oklahoma                          |       | Durant         |  | 120             |  | Owned                |  | May          
|               |  | Midwest Regional Medical
  Center                                  |       | Midwest City   |  | 255             |  | Leased               |  | June         
|               |  |                                                                    |       |                |  |                 |  |                      |  |              
|Pennsylvania   |  | Heart of Lancaster Regional
  Medical Center                       |       | Lancaster      |  | 144             |  | Owned                |  | July         
|               |  | Lancaster Regional Medical
  Center                                |       | Lancaster      |  | 261             |  | Owned                |  | July         
|               |  | Carlisle Regional Medical
  Center                                 |       | Carlisle       |  | 151             |  | Leased               |  | June         
|               |  |                                                                    |       |                |  |                 |  |                      |  |              
|South Carolina |  | Upstate Carolina Medical
  Center                                  |       | Gaffney        |  | 125             |  | Owned                |  | March        
|               |  | Carolina Pines Regional
  Medical Center                           |       | Hartsville     |  | 116             |  | Owned                |  | September    
|               |  |                                                                    |       |                |  |                 |  |                      |  |              
|Tennessee      |  | Jamestown Regional Medical Center                                  |       | Jamestown      |  | 85              |  | Owned                |  | January      
|               |  | University Medical Center                                          |       | Lebanon        |  | 257             |  | Owned                |  | November     
|               |  | Harton Regional Medical
  Center                                   |       | Tullahoma      |  | 137             |  | Owned                |  | November     
|               |  |                                                                    |       |                |  |                 |  |                      |  |              
|Texas          |  | Medical Center of Mesquite                                         |       | Mesquite       |  | 176             |  | Owned                |  | January      
|               |  | Mesquite Community Hospital                                        |       | Mesquite       |  | 172             |  | Owned                |  | May          
|               |  |                                                                    |       |                |  |                 |  |                      |  |              
|Virginia       |  | Lee Regional Medical Center                                        |       | Pennington Gap |  | 80              |  | Owned                |  | September    
|               |  |                                                                    |       |                |  |                 |  |                      |  |              
|Washington     |  | Yakima Regional Medical
  & Heart Center                           |       | Yakima         |  | 214             |  | Owned                |  | August       
|               |  | Toppenish Community Hospital                                       |       | Toppenish      |  | 63              |  | Owned                |  | August       
|               |  |                                                                    |       |                |  |                 |  |                      |  |              
|West Virginia  |  | Williamson Memorial Hospital                                       |       | Williamson     |  | 76              |  | Owned                |  | June         
|               |  |                                                                    |       |                |  |                 |  |                      |  |              
|               |  |                                                                    |       |                |  |                 |  |                      |  |              
|               |  | Total licensed beds owned,leased, or managed at September 30, 2004 | 7,464 |                |  |                 |  |                      | 
|               |  |                                                                    |       |                |  |                 |  |                      | 

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, that 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, provided,
however, that this lease can be extended at our option until our replacement
hospital facility is completed), and Madison Regional Medical Center (2042).

17

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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 22% of the
complex and lease the remaining space. 
We have an outside property management company that manages this complex
on our behalf.

We also
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 Monroe,
Georgia) and complete our proposed Collier Regional Medical Center in southeast
Collier County, Florida. State regulatory approval to begin construction of Collier
Regional Medical Center has been granted, and we are awaiting issuance of final land use permits.

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.

Item
3.  Legal Proceedings

On
September 3, 2004 a lawsuit, Olga S. Estrada v. Health Management Associates, Inc., was filed against us in the Court of Commom Pleas in Cherokee County,
South Carolina, which lawsuit challenges the prices we
charge insured and uninsured patients. The case was subsequently transferred to the United States District Court for the District of South Carolina, Spartanburg Division. The plaintiff in the lawsuit seeks
damages and injunctive relief on behalf of a purported class of patients
treated in our South Carolina facilities.

On August
5, 2004 a lawsuit, Jose Manuel Quintana v. Health Management Associates, Inc., was filed against us in the Circuit Court for the 11th
Judicial Circuit in Miami-Dade County, Florida, which lawsuit alleges that we
violated the State of Floridas unfair trade practices laws by charging
uninsured patients more than insured patients. The plaintiff in the lawsuit
seeks damages and injunctive relief on behalf of a purported class of patients
treated in our facilities.

Both of
these lawsuits are similar to lawsuits filed against many other hospital
systems throughout the country in respect to hospital charges billed to
uninsured patients. We believe that our billing and collection practices are
appropriate, reasonable and in compliance with all applicable laws, rules and
regulations and we intend to vigorously defend against the allegations
contained in these lawsuits. At this time, it is not possible to estimate the ultimate loss, if any, related to these lawsuits and therefore no
accrual for loss has been recorded at September 30, 2004.

We are also
subject to other 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 our insurance program 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 2004.

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Executive Officers of
the Registrant

Below is
information regarding our executive officers:

William J.
Schoen, age 69, 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 59, 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 49, became our Senior Vice President and Chief Financial Officer
in March 2001.  He joined us in 1985 and
previously 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 50, 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 42, 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.

Jon P.
Vollmer, age 46, 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.

19

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PART II

Item 5.  Market for the Registrants Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is listed on the New York
Stock Exchange under the symbol HMA. 
At December 6, 2004 there were approximately 243,888,465 shares of our
common stock outstanding held by approximately 1,400 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, 2003 |  |      |       |     |  
|First
  Quarter                        |  | $    | 22.70 |     | $
|Second
  Quarter                       |  | $    | 19.41 |     | $
|Third
  Quarter                        |  | $    | 20.10 |     | $
|Fourth
  Quarter                       |  | $    | 22.89 |     | $
|                                       |  |      |       |     |  
|Fiscal Year
  Ended September 30, 2004 |  |      |       |     |  
|First
  Quarter                        |  | $    | 26.45 |     | $
|Second
  Quarter                       |  | $    | 25.55 |     | $
|Third
  Quarter                        |  | $    | 23.79 |     | $
|Fourth
  Quarter                       |  | $    | 22.50 |     | $

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, October 28, 2003, January 27, 2004, April 27, 2004,
and July 27, 2004.  We declared a cash
dividend of $0.04 per share on our common stock on September 23, 2004.  We can provide no assurance that we will pay
cash dividends for any future period or that our cash dividends will remain at
any specific level.

At
September 30, 2004 and 2003, 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% Convertible Senior Subordinated Notes due 2023. See
Note 3.b. to our Consolidated Financial Statements in Item 8 and Managements
Discussion and Analysis of Financial Condition and Results of Operations 
Capital Resources  Outstanding Debt Securities 2023 Notes in Item 7.

20

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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, |          
|------------------------------------------------------------ |  | ------------------------ | ---------
|                                                             |  |                          |          
|                                                             |  | 2004                     |          
|                                                             |  |                          |          
|                                                             |  |                          |          
|Net patient
  service revenue                                |  | $                        | 3,205,885
|Costs and
  expenses (1)                                     |  |                          | 2,679,405
|Income
  before income taxes (2)                             |  |                          | 526,480  
|Net income
  (2)                                             |  |                          | 325,099  
|Net income
  per share-diluted (2)                           |  | $                        | 1.32     
|Weighted
  average number of
     shares outstanding-diluted |  |                          | 246,826  
|Cash
  dividends per common share                            |  | $                        | 0.12     
|                                                             |  |                          |          
|                                                             |  | As of September 30,      |          
|                                                             |  |                          |          
|                                                             |  | 2004                     |          
|                                                             |  |                          |          
|                                                             |  |                          |          
|Working
  capital                                            |  | $                        | 621,463  
|Total assets                                                 |  |                          | 3,507,288
|Short-term
  debt                                            |  |                          | 9,742    
|Long-term
  debt                                             |  |                          | 925,518  
|Stockholders
  equity                                       |  |                          | 1,978,010
|Book value
  per common share                                |  | $                        | 8.12     

(1) For the
years ended September 30, 2004 and 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, 2000 and September
30, 2001 have 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 and Pending Transactions
in Item 1.

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

Overview

At September 30, 2004 we owned and operated 52
acute care and psychiatric hospitals in non-urban communities located in Alabama,
Arkansas, Florida, Georgia, Kentucky, Mississippi, Missouri, 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.

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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:

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

Our
hospitals provide services to patients with health care coverage as well as to
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 and charity 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 by contacting the patient via mail and phone.  The purpose of this process is to work with
the patient to resolve the outstanding debt. 
The primary collection agency acts, in most cases, as an extension of
our local hospitals business office. 
The accounts that are sent to these agencies are often difficult to
collect accounts that require more focused, dedicated attention than might be
available in the local hospital business office.  The primary collection agencies have proven very successful in
collecting on the accounts that we send to them.  A secondary collection agency is utilized when accounts are
returned from the primary collection agency as uncollectible.  These accounts are written off at that point
as uncollectible.  An account is
typically sent to the primary collection agency automatically via electronic
transfer of data at the end of the statement cycle although, if determined
necessary by specific account identification, the account can be sent to the
primary collection agency at any time. In many cases, patients who do not qualify for Medicaid or indigent writeoffs
are offered substantial discounts in efforts to settle their account balance.

All
non-governmental accounts over 150 days old from date of discharge are 100%
reserved for in our allowance for bad debts. For governmental accounts, an
allowance for doubtful accounts is established for accounts over 360 days old
from date of discharge.  These accounts
for which a reserve is placed include those accounts that are placed with a
collection agency and for which legal action has been taken.  Those accounts for which legal action has
been taken are written off once a judgment has been obtained.  Accounts under 150 days old from the date of
discharge that are placed with a primary collection agency are not reserved for
in our allowance for doubtful accounts due to the fact that, in most cases, we
consider the primary collection agencies extensions of our local hospital
business offices and we do not feel as though a reserve is necessary until the
primary collector has appropriately worked the account and has deemed it
uncollectible.  Accounts are reviewed
individually for write off, but are not automatically written off when they
reach 150 days old.  Accounts that are
identified as private pay accounts with balances less than $9.99 are
automatically written off on the 20th of each month.  All accounts that have been placed with a primary collection
agency that are less than $25.00 are also written off.

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.

23

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---

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 2004, 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.

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, 2001, 2002 and 2003 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 ($6.0 million effective October 1, 2004) 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 professional liability program was
approximately 1.5% of net revenue in fiscal 2004, 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.

24

---

---

Results of Operations

Overview

During our
fiscal year ended September 30, 2004, which we refer to as the 2004 Period, we
reported net revenue growth over our year ended September 30, 2003, which we
refer to as the 2003 Period, of 25%, net income growth of 15% and net earnings
per diluted share growth of 17%.  Our
revenue and net income growth resulted from increases in same hospital
admissions, which are admissions to hospitals in operation for the entire 2004
Period and 2003 Period, rate increases and from hospitals acquired by us in the
12 month period ended September 30, 2004. 
In addition, our earnings per diluted share increased both as a result
of our increased net income and a reduction in our diluted shares outstanding
following our redemption on August 16, 2003 of our Convertible Senior
Subordinated Debentures due 2020.

Same
hospital admissions increased 2.0% in the 2004 Period compared to the 2003
Period.  We believe this increase is due
in part to our adherence to the acquisition criteria we have strictly followed
for many years, whereby we acquire hospitals in growing areas and in areas where
we believe the opportunity to reverse outmigration to other hospitals
exists.  Furthermore, our hospitals
continue to add additional physicians to their respective medical staffs and
medical equipment to their hospitals in order to meet the needs of the
communities they serve.  We believe
these investments ultimately result in higher same hospital admissions.

Outpatient
services continued to play an important role in our delivery of health care,
with roughly half of our net revenue during the 2004 Period generated on an
outpatient basis.  We continue to focus
on emergency room operations and diagnostic imaging services to meet the needs
of the communities we serve and have invested capital in nearly every one of
our hospitals over the last five years in one of these two areas.  As a result, our same hospital adjusted
admissions, which adjusts admissions for outpatient volume, increased 2.7% in
the 2004 Period compared to the 2003 Period.

Our surgery
volumes have been affected by changes in physician practices related to their
increased expenses due to malpractice costs and declining or flat reimbursement
rates. Outpatient surgeries for gastrointestinal, ENT and ophthalmology have
been impacted most severely, as physicians continue to move these procedures
from our hospitals into their offices. 
We believe that although this trend effects the number of surgeries
performed at our hospitals, it does not have a material financial impact on our
hospitals.  We had a decrease in same
hospital surgeries of 1.4% for the 2004 Period compared to the 2003 Period.

Our bad
debt expense in the 2004 Period increased 20 basis points to 7.5% of net
revenue. We believe that this percent to net revenue is lower than our industry
peer group average, primarily as a result of our long-standing and consistently
applied bad debt and charity care policies. Economic conditions and changes in
commercial health insurance benefit plan structure over the past several years
have contributed to an increase in the number of uninsured and under-insured
patients seeking health care in the United States.  Although we are not immune to these trends, we believe that the
general demographic profiles of our non-urban markets, combined with our
consistent application of charity care, indigent and bad debt policies over
many years, have contributed to a relatively stable level of bad debt expense
as compared to the rest of our industry.

During the
fourth quarter ended September 30, 2004, four hurricanes and one tropical storm
made landfall in Florida, where we operate 14 hospitals.  Hurricane damage and disruption to our
hospitals located in the affected areas, as well as to employees homes, local
businesses and physicians offices, was extensive. One of our hospitals in
South Carolina also suffered hurricane-related damage. We are insured for
property damage and business interruption. We have initiated the insurance
claims process, and are working closely with our insurers in order to resolve
and settle all hurricane-related claims. We expect that we will recover the
amounts claimed, including claims for property damage and business interruption
losses, subject to policy deductibles. However, the insurance settlement process is complex and the actual results of that process
could differ from our estimates. The uninsured impact from these storms
in the 2004 Period amounted to approximately $9.5 million in lower net income
for the fourth quarter and year ended September 30, 2004.

25

---

---

2004 Period Compared to 2003 Period

The
following tables summarize our results of operations for the twelve months
ended September 30, 2004 and 2003:

|                                                             |  | Twelve months ended September 30, |          
|------------------------------------------------------------ |  | --------------------------------- | ---------
|                                                             |  |                                   |          
|                                                             |  | 2004                              |          
|                                                             |  |                                   |          
|                                                             |  | Amount                            |          
|                                                             |  |                                   |          
|                                                             |  | (in thousands)                    |          
|                                                             |  |                                   |          
|Net patient service
  revenue                                |  | $                                 | 3,205,885
|Costs and expenses:                                          |  |                                   |          
|Salaries
  and benefits                                      |  |                                   | 1,259,859
|Supplies
  and other                                         |  |                                   | 956,891  
|Provision
  for doubtful accounts                            |  |                                   | 240,074  
|Depreciation
  and amortization                              |  |                                   | 134,915  
|Rent
  expense                                               |  |                                   | 65,766   
|Interest,
  net                                              |  |                                   | 16,184   
|Writeoff
  of deferred financing costs                       |  |                                   | -        
|                                                             |  |                                   |          
|Total costs and expenses                                     |  |                                   | 2,673,689
|                                                             |  |                                   |          
|Income before minority
  interests
     and income taxes     |  |                                   | 532,196  
|Minority interests in earnings
     of consolidated entities |  |                                   | 5,716    
|                                                             |  |                                   |          
|                                                             |  |                                   |          
|Income before income taxes                                   |  |                                   | 526,480  
|Provision for income taxes                                   |  |                                   | 201,381  
|                                                             |  |                                   |          
|                                                             |  |                                   |          
|Net income                                                   |  | $                                 | 325,099  
|                                                             |  |                                   |          

|                                 |  | Twelve months ended
  September 30, |           | Change |  | Percent
  change |  
|-------------------------------- |  | ----------------------------------- | --------- | ------ |  | ---------------- | -
|                                 |  |                                     |           |        | 
|                                 |  | 2004                                |           | 2003   |  |                  |  
|                                 |  |                                     |           |        |  |                  |  
|Same
  Hospitals                 |  |                                     |           |        |  |                  |  
|Occupancy                        |  |                                     | 48.9      | %      |  | 47.5             | %
|Patient days                     |  |                                     | 1,025,992 |        |  | 1,014,645        |  
|Admissions                       |  |                                     | 237,494   |        |  | 232,816          |  
|Adjusted admissions              |  |                                     | 380,411   |        |  | 370,531          |  
|Total surgeries                  |  |                                     | 206,911   |        |  | 209,786          |  
|Outpatient revenue
  percentage  |  |                                     | 46.9      | %      |  | 46.0             | %
|Inpatient revenue
  percentage   |  |                                     | 53.1      | %      |  | 54.0             | %
|                                 |  |                                     |           |        |  |                  |  
|Total
  Hospitals                |  |                                     |           |        |  |                  |  
|Occupancy                        |  |                                     | 47.9      | %      |  | 48.5             | %
|Patient days                     |  |                                     | 1,288,461 |        |  | 1,079,865        |  
|Admissions                       |  |                                     | 284,634   |        |  | 235,434          |  
|Adjusted admissions              |  |                                     | 462,388   |        |  | 374,392          |  
|Total surgeries                  |  |                                     | 236,741   |        |  | 210,422          |  
|Outpatient revenue
  percentage  |  |                                     | 47.9      | %      |  | 45.7             | %
|Inpatient revenue
  percentage   |  |                                     | 52.1      | %      |  | 54.3             | %
|Total hospitals at end of period |  |                                     | 52        |        |  | 47               |  

* basis points

26

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---

Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operations (Continued)

Our net
patient service revenue for the 2004 Period, was $3,205.9 million as compared
to $2,560.6 million for the 2003 Period. 
This represented an increase in net patient service revenue of $645.3
million or approximately 25%. Hospitals in operation for the entire 2004 Period
and 2003 Period, which we refer to as same hospitals, provided $141.6 million,
or 22%, of the increase in net patient service revenue as a result of increases
in inpatient and outpatient volumes and from rate increases.  The remaining 78%, or $503.7 million, of the
increase came from two hospitals we acquired in August 2003, one hospital we
acquired in September 2003, five hospitals we acquired in November 2003, as
well as from other miscellaneous revenue.

Net revenue
per adjusted admission at our same hospitals increased 2.8% for the 2004
Period.  Contributing factors to the net
revenue per adjusted admission increase included rate increases, our
renegotiation of managed care contracts from October 1, 2003 through the end of
the 2004 Period and increased volumes in our higher margin outpatient
business.

Accounts
written off as charity and indigent care are not recognized in net patient
service revenue.  Our charity care and
indigent write-offs were $421.2 million, or 4.0% of gross revenue, for the 2004
Period and $279.3 million, or 3.5% of gross revenue, for the 2003 Period.  The policy and practice at each of our
hospitals is to write off a patients entire account upon the determination
that the patient qualifies under a hospitals charity care and/or indigent
policy. We believe that our practice of timely recognition of charity and
indigent accounts, and their subsequent write-off, results in more accurate and
collectible levels of accounts receivable, and correspondingly appropriate bad
debt expense levels.  Our bad debt
policy is to reserve 100% of all non-governmental accounts receivable over 150
days old.  We believe that our
decentralized management strategy, including maintaining local business office
operations in each of our hospitals, contributes greatly to our effective
accounts receivable management.  Our
hospitals also work diligently to assist uninsured patients in the process of
qualifying for Medicaid, charity care, and other state and local assistance
programs.

Consolidated
salaries and benefits increased as a percent of net patient service revenue to
39.3% for the 2004 Period from 38.6% for the 2003 Period, primarily as a result
of higher costs at the eight 2004 Period and 2003 Period acquisitions
previously mentioned.

Supplies
and other costs increased as a percent of net patient service revenue to 29.8%
for the 2004 Period from 29.0% for the 2003 Period.  The majority of this increase was due to higher costs at acquired
hospitals and increased supply costs related to drug eluding stents and
orthopedic implants.

Our
provision for income taxes reflected an effective income tax rate of
approximately 37.9% for both the 2004 Period and the 2003 Period.

27

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2003 Period Compared to 2002 Period

The
following tables summarize our results of operations for the twelve months
ended September 30, 2003 and 2002:

|                                                             |  | Twelve months ended September 30, |          
|------------------------------------------------------------ |  | --------------------------------- | ---------
|                                                             |  |                                   |          
|                                                             |  | 2003                              |          
|                                                             |  |                                   |          
|                                                             |  | Amount                            |          
|                                                             |  |                                   |          
|                                                             |  | (in thousands)                    |          
|                                                             |  |                                   |          
|Net patient service
  revenue                                |  | $                                 | 2,560,576
|Costs and expenses:                                          |  |                                   |          
|Salaries
  and benefits                                      |  |                                   | 989,075  
|Supplies
  and other                                         |  |                                   | 741,487  
|Provision
  for doubtful accounts                            |  |                                   | 186,826  
|Depreciation
  and amortization                              |  |                                   | 109,864  
|Rent
  expense                                               |  |                                   | 50,401   
|Interest,
  net                                              |  |                                   | 14,915   
|Writeoff
  of deferred financing costs                       |  |                                   | 4,931    
|                                                             |  |                                   |          
|Total costs and expenses                                     |  |                                   | 2,097,499
|                                                             |  |                                   |          
|Income before minority
  interests
     and income taxes     |  |                                   | 463,077  
|Minority interests in earnings
     of consolidated entities |  |                                   | 4,341    
|                                                             |  |                                   |          
|                                                             |  |                                   |          
|Income before income taxes                                   |  |                                   | 458,736  
|Provision for income taxes                                   |  |                                   | 175,312  
|                                                             |  |                                   |          
|                                                             |  |                                   |          
|Net income                                                   |  | $                                 | 283,424  
|                                                             |  |                                   |          

|                                 |  | Twelve months ended
  September 30, |           | Change |  | Percent
  change |  
|-------------------------------- |  | ----------------------------------- | --------- | ------ |  | ---------------- | -
|                                 |  |                                     |           |        | 
|                                 |  | 2003                                |           | 2002   |  |                  |  
|                                 |  |                                     |           |        |  |                  |  
|Same
  Hospitals                 |  |                                     |           |        |  |                  |  
|Occupancy                        |  |                                     | 47.7      | %      |  | 47.1             | %
|Patient days                     |  |                                     | 904,567   |        |  | 885,605          |  
|Admissions                       |  |                                     | 203,875   |        |  | 198,214          |  
|Adjusted admissions              |  |                                     | 325,137   |        |  | 316,239          |  
|Total surgeries                  |  |                                     | 188,453   |        |  | 187,227          |  
|Outpatient revenue percentage    |  |                                     | 46.7      | %      |  | 44.4             | %
|Inpatient revenue
  percentage   |  |                                     | 53.3      | %      |  | 55.6             | %
|                                 |  |                                     |           |        |  |                  |  
|Total
  Hospitals                |  |                                     |           |        |  |                  |  
|Occupancy                        |  |                                     | 48.5      | %      |  | 47.9             | %
|Patient days                     |  |                                     | 1,079,865 |        |  | 1,000,480        |  
|Admissions                       |  |                                     | 235,434   |        |  | 216,256          |  
|Adjusted admissions              |  |                                     | 347,392   |        |  | 344,155          |  
|Total surgeries                  |  |                                     | 210,422   |        |  | 203,502          |  
|Outpatient revenue
  percentage  |  |                                     | 45.7      | %      |  | 44.5             | %
|Inpatient revenue
  percentage   |  |                                     | 54.3      | %      |  | 55.5             | %
|Total hospitals at end of period |  |                                     | 47        |        |  | 43               |  

*
basis points

28

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Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations (Continued)

Our
net patient service revenue for the 2003 Period, was $2,560.6 million as
compared to $2,262.6 million for the twelve months ended September 30, 2002,
which we refer to as the 2002 Period. 
This represented an increase in net patient service revenue of $298.0
million or approximately 13%. Hospitals in operation for the entire 2003 Period
and 2002 Period, which we refer to as same hospitals, provided $164.0 million,
or 55%, of the increase in net patient service revenue as a result of increases
in inpatient and outpatient volumes and from rate increases.  The remaining 45%, or $134.0 million, of the
increase came from one hospital we acquired in December 2001, three hospitals
we acquired in January 2002, one hospital we acquired in May 2002, one hospital
we acquired in January 2003, two hospitals we acquired in August 2003 and one
hospital we acquired in September 2003, as well as from other miscellaneous
revenue.

Net
revenue per adjusted admission at our same hospitals increased 4.9% for the
2003 Period.  Contributing factors to
the net revenue per adjusted admission increase included rate increases, our
renegotiation of managed care contracts from October 1, 2002 through the end of
the 2003 Period and increased volumes in our higher margin outpatient
business.

Accounts
written off as charity and indigent care are not recognized in net patient
service revenue.  Our charity care and
indigent write-offs were $279.3 million, or 3.5% of gross revenue, for the 2003
Period and $172.9 million, or 2.7% of gross revenue, for the 2002 Period.  The policy and practice at each of our
hospitals is to write off a patients entire account upon the determination
that the patient qualifies under a hospitals charity care and/or indigent
policy. We believe that our practice of timely recognition of charity and
indigent accounts, and their subsequent write-off, results in more accurate and
collectible levels of accounts receivable, and correspondingly appropriate bad
debt expense levels.  Our bad debt
policy is to reserve 100% of all non-governmental accounts receivable over 150
days old.  We believe that our
decentralized management strategy, including maintaining local business office
operations in each of our hospitals, contributes greatly to our effective
accounts receivable management.  Our
hospitals also work diligently to assist uninsured patients in the process of
qualifying for Medicaid, charity care, and other state and local assistance
programs.

Consolidated
salaries and benefits decreased as a percent of net patient service revenue to
38.6% for the 2003 Period from 38.7% for the 2003 Period, primarily as a
result of a decrease in salaries at newly acquired hospitals.

Supplies
and other costs increased as a percent of net patient service revenue to 29.0%
for the 2003 Period from 28.8% for the 2002 Period.  The majority of this increase related to higher costs at
acquisition hospitals.

Our
provision for income taxes reflected an effective income tax rate of
approximately 37.9% for the 2003 Period and 39.2% for the 2002 Period.  The rate decrease was due to a lower
effective state income tax rate during the 2003 period.

29

---

---

Liquidity, Capital Resources, and Capital Expenditures

Liquidity

Our
cash flows from operations provide the primary source of funding for our
ongoing cash needs.  We have
historically utilized cash on hand, credit facility borrowings and proceeds
from debt issuances, or a combination of the preceding, to fund
acquisitions.

The
following is a summary of cash flows for the twelve month periods ended
September 30, 2004 and 2003, respectively:

|Source (use) of cash flows                        |  | September
  30, 2004
  (in millions) |   | September
  30, 2003
  (in millions) |  
|------------------------------------------------- |  | ------------------------------------ | - | ------------------------------------ | -
|                                                  |  |                                      |   |                                      |  
|                                                  |  |                                      |   |                                      |  
|Operating activities                              |  |                                      | $ | 458.0                                |  
|Investing activities                              |  |                                      |   | (709.3                               | )
|Financing activities                              |  |                                      |   | (31.1                                | )
|                                                  |  |                                      |   |                                      |  
|                                                  |  |                                      |   |                                      |  
|Net (decrease) increase in
  cash and equivalents |  |                                      | $ | (282.4                               | )
|                                                  |  |                                      |   |                                      |  

2004
Period Cash Flows Compared to 2003 Period Cash Flows

Operating
Activities

Our
cash flows from operations increased 37.2% during the 2004 Period when compared
to the 2003 Period due primarily to our increased profitability.  The primary cause for the increase in our
working capital was the increase in accounts receivable.  The increase in accounts receivable in the
2004 Period as compared to the 2003 Period resulted primarily from our 2004
Period acquisitions, as receivables were not purchased by us as part of such
transactions and we therefore experienced a build up in accounts receivable
during the 2004 Period.  Days sales outstanding were down two days to 72 days at the end of the 2004 Period versus
74 days at the end of the 2003 Period.

Investing
activities

Cash
used in investing activities in the 2004 Period consisted primarily of the cash
paid for the five hospitals we acquired on November 1, 2003 and cash paid for
additions to property, plant and equipment. 
These additions consisted of renovation and expansion projects at
certain of our facilities and capital expenditures associated with three ongoing
replacement hospital projects.

During
the 2003 Period, cash used in investing activities consisted primarily of the
cash paid for four hospitals we acquired and cash paid for additions to
property, plant and equipment.  These
additions consisted of renovation and expansion projects at certain of our
facilities and capital expenditures associated with one replacement hospital
project.

Financing
activities

We
also borrowed $275.0 million under our line of credit agreement in the 2004
Period to finance acquisitions and subsequently repaid the $275.0 million from
cash flows from operations during the same period.  Proceeds from the exercise of stock options provided $27.4
million which was offset by an increase in restricted funds related to our
captive insurance company of $39.4 million. 
We also used $19.8 million for payments of stock dividends.

30

---

---

2003
Period Cash Flows Compared to 2002 Period Cash Flows

Operating
Activities

Our
cash flows from operations decreased 5.7% during the 2003 Period when compared
to the 2002 Period due to a decrease in our working capital partially offset by improved
profitability.  Days sales outstanding
were up four days to 74 days at the end of the 2003  Period versus 70 days at the end of the 2002 Period due to
acquisitions in the fourth quarter of the 2003 Period.

Investing
activities

Cash
used in investing activities in the 2003 Period consisted primarily of the cash
paid for the four hospitals we acquired and cash paid for additions to
property, plant and equipment.  These
additions consisted of renovation and expansion projects at certain of our
facilities and capital expenditures associated with one replacement hospital
project.

During
the 2002 Period, cash used in investing activities consisted primarily of the
cash paid for five hospitals acquisitions and cash paid for additions to
property, plant and equipment.  These
additions consisted of renovation and expansion projects at certain of our
facilities.

Financing
activities

The
increase in cash provided by financing activities in the 2003 Period primarily
resulted from the borrowings of $575.0 million in connection with the issuance
of the 2023 Notes, offset by $310.8 million in proceeds
 used for the repayment of our
Convertible Senior Subordinated Debentures due 2020.

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.

31

---

---

Capital Resources

Credit
Facilities

On
May 14, 2004, we entered into a new credit agreement with a syndicate of
banks.  The new credit agreement expires
on May 14, 2009 and replaced our previous $450.0 million credit agreement,
described below, which was due to expire in accordance with its terms on
November 30, 2004.  The new credit
agreement allows us to borrow, on a revolving, unsecured basis, up to $600.0
million (including standby letters of credit). 
The new credit agreement also requires our subsidiaries (other than
certain exempted subsidiaries) to guarantee our borrowings in the event our
credit rating falls below certain thresholds. 
Under the new credit agreement, we can choose whether the interest charged
on our loans is based upon the prime rate or the LIBOR rate.  The interest rate we pay includes a spread
above the base rate we select, which is subject to change in the event our debt
rating changes.  The applicable interest
rate under the new credit agreement at September 30, 2004 was 2.99%. At
September 30, 2004, there were no amounts outstanding under our new credit
agreement.

Under
the terms of the new credit agreement, we are obligated to pay certain
commitment fees based upon amounts available to us for borrowing.  In addition, this credit agreement contains
covenants which, without prior consent of the lenders under such facility,
limit certain of our activities, including those relating to mergers,
consolidations, our ability to borrow additional money, make guarantees and grant
security interests.  We are also
required to comply with certain financial covenants.  The following are the required covenants calculated as of
September 30, 2004:

|At September 30, 2004                                   |  | Requirement |                | Level | 
|------------------------------------------------------- |  | ----------- | -------------- | ----- | 
|                                                        |  |             |                |       | 
|                                                        |  |             |                |       | 
|Maximum permitted consolidated leverage ratio           |  |             | < 3.00 to 1.00 |       | 
|Minimum required consolidated interest coverage
  ratio |  |             | > 3.00 to 1.00 |       | 

At
September 30, 2004, we were in compliance with the above covenants.

As
of September 30, 2003, we had a $450.0 million credit agreement which permitted
us to borrow under an unsecured revolving credit line at any time during the
term of the agreement.  The terms of
this credit agreement permitted us to choose a loan based on an interest rate
equal to the prime interest rate or an interest rate based on the LIBOR
interest rate.  As of September 30,
2003, the interest rate for a loan based on the LIBOR interest rate was the
LIBOR rate plus 1.00 percent.  Although
no amounts were outstanding under the credit agreement at September 30, 2003,
the applicable LIBOR interest rate at such time was 2.1%.  As of September 30, 2003, we did not have
any outstanding borrowings under this credit agreement.  We transferred all outstanding borrowings
under the $450.0 million credit agreement to our new $600.0 million credit
agreement described above on May 14, 2004.

During
the term of our credit agreement in effect at September 30, 2003, we were
obligated to pay certain commitment fees based upon amounts available to us for
borrowing.  In addition, such credit
facility contained covenants which, without prior consent of the lenders,
limited certain of our activities, including those relating to mergers,
consolidations, our ability to borrow additional money, make guarantees, grant
security interests and declare dividends. 
Furthermore, such credit facility required that we comply with certain
financial covenants, including the following:

|At September 30, 2003                                   |  | Requirement |                    | Level |  
|------------------------------------------------------- |  | ----------- | ------------------ | ----- | -
|                                                        |  |             |                    |       |  
|                                                        |  |             |                    |       |  
|Minimum required consolidated net worth                 |  |             | > $1,077.0 million |       | $
|Maximum permitted consolidated leverage ratio           |  |             | < 2.50 to 1.00     |       |  
|Minimum required consolidated interest coverage
  ratio |  |             | > 4.50 to 1.00     |       |  

At
September 30, 2003, we were in compliance with the above covenants.

32

---

---

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, 2004 and 2003 was 4.50% and 3.75%, respectively. As of
September 30, 2004 and 2003, we did not have any amounts outstanding under the
credit commitment.

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 and New 2022 Notes, which are each 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 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 2022 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.

We
are currently offering the holders of our outstanding 2022
Notes the ability to exchange all or a portion of their 2022 Notes for an equal
amount of a new issuance of Exchange Zero-Coupon Convertible Senior
Subordinated Notes due 2022, or New 2022 Notes. The terms of the New 2022 Notes
will be substantially similar to the terms of the existing 2022 Notes, except
that: (i) upon conversion, we will pay holders cash equal to the accreted value
of the New 2022 Notes being converted and the remainder in cash or shares of
common stock, at our option; (ii) holders may require us to repurchase their
New 2022 Notes on January 28, 2006 in addition to the dates in the original 2022 Notes, (iii) the New 2022 Notes will contain
additional anti-dilution protection for cash dividends until January 28, 2007,
(iv) the New 2022 Notes will require us to pay only cash (in lieu of cash,
shares of common stock or a combination of cash and shares of common stock)
when we repurchase New 2022 Notes at the option of the holders, whether on a
specified purchase date or upon the occurrence of a fundamental change, as defined in the New 2022 Notes, and (v)
contingent interest payable will equal to 0.125% of the average price of the
New 2022 Notes during the relevant specified period. The exchange offer expires
on December 28, 2004, unless extended at our option. Those 2022 Notes which are not exchanged will be considered dilutive,
and based on current and proposed accounting pronouncements, we believe that the New 2022 Notes generally will
not be considered dilutive.

33

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---

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.
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 and New 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 terms of the
indenture, as amended, provide that in lieu of providing shares of our common stock upon a
conversion event we will satisfy any conversion of the 2023 Notes up to its par value by making a cash
payment.

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 cash purchase
price per note equal to 100% of its principal face amount, plus accrued but
unpaid interest.  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 for cash all or a portion
of their 2023 Notes. Furthermore, we may redeem all or a portion of the 2023
Notes at any time on or after August 5, 2008 for a cash redemption price per
note equal to its principal face amount, plus accrued but unpaid interest. On
November 24, 2004, we completed a consent solicitation that amended the
indenture governing the 2023 Notes in order to eliminate a provision which had
prohibited us from paying cash upon conversion of the Notes if an event of
default, as defined in the indenture, was occurring at the time of conversion. On November 30, 2004, we further amended the indenture governing the 2023 Notes to provide that in lieu of providing
shares of common stock upon a conversion event, we will satisfy any conversion of the 2023 Notes by making a cash payment.

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 2004 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 the 2004 Period, excess
proceeds from the 2023 Notes sold in July and August 2003 also provided an
additional source of funding for our five hospital acquisition completed on
November 1, 2003.

Transactions
Completed or Pending for Fiscal 2005

| |  | On November 9, 2004, we
  announced the execution of an agreement with Bon Secours Health Systems,
  Inc., pursuant to which we will acquire from Bon Secours substantially all of
  the assets of the 312-bed Bon Secours Venice Hospital, located in Venice,
  Florida, the 212-bed Bon Secours St. Josephs Hospital, located in Port
  Charlotte, Florida, and the 133-bed Bon Secours St. Marys Hospital, located
  in Norton, Virginia. We expect that this transaction will be completed on or before the
  end of our second fiscal quarter ending March 31, 2005.                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | On October 7, 2004, we
  announced the execution of an agreement with LifePoint Hospitals, Inc.,
  pursuant to which we will acquire from LifePoint Hospitals, Inc. substantially all of the
  assets of the 56-bed Bartow Memorial Hospital, located in Bartow, Florida,
  and LifePoint Hospitals, Inc. will simultaneously acquire from us substantially all of the
  assets of the 76-bed Williamson Memorial Hospital, located in Williamson,
  West Virginia. Subject to certain conditions stated in the agreement, we expect that this transaction will be completed by the end
  of our first fiscal quarter ending December 31, 2004.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | On October 1, 2004, we
  acquired Chester County Hospital, an 82-bed hospital located in Chester,
  South Carolina. The aggregate cost of this acquisition was approximately
  $20.5 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                  

34

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---

Transactions
Completed for Fiscal 2004

| |  | On September 29, 2004 we
  announced that we received a favorable ruling from the State of Floridas
  First District Court of Appeals affirming the final certificate of need
  approval from the State of Floridas Agency for Health Care Administration to
  build the 100-bed Collier Regional Medical Center. This hospital will be
  located in southeast Collier County, Florida. This decision
  ended the appeal process. We expect to begin construction of this facility in
  early 2005. The cost of this project is expected to be approximately $75.0
  million.                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | 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 purchase price was
  approximately $513.9 million in cash.

We
also 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 two years we plan to replace two of our existing
hospitals (Brooksville, Florida and Carlisle, 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,
2004, we had invested approximately $24.4 million in these projects. We
anticipate spending between approximately $145.0 and $165.0 million for capital
equipment and renovations and $75.0 million for replacement hospitals during
fiscal 2005.

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.                                                                                                                                                                                                         

35

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Contractual Obligations and Off-Balance Sheet Arrangements

As
of September 30, 2004, maturities of contractual obligations (including principal and interest) and other
commercial commitments are presented in the table below (dollars in thousands):

|                                                         |  | Payments Due by Fiscal Period |       
|-------------------------------------------------------- |  | ----------------------------- | ------
|                                                         |  |                               |       
|Contractual Obligations                                  |  | 2005                          |       
|                                                         |  |                               |       
|Long-term debt, excluding
  our
     credit facility (a) |  | $                             | 17,628
|Loans outstanding under
  our
     credit facility       |  |                               | ---   
|Operating leases (b)                                     |  |                               | 46,964
|                                                         |  |                               |       
|                                                         |  |                               |       
|Total contractual obligations                            |  | $                             | 64,592
|                                                         |  |                               |       

|                                                                                  |  | Commitment Expiration by Fiscal Period |       
|--------------------------------------------------------------------------------- |  | -------------------------------------- | ------
|                                                                                  |  |                                        |       
|Other Commercial
  Commitments
  Not Recorded on the
  Consolidated Balance Sheet |  | 2005                                   |       
|                                                                                  |  |                                        |       
|                                                                                  |  |                                        |       
|Letters of credit (c)                                                             |  | $                                      | 30,386
|Performance bonds (d)                                                             |  |                                        | 276   
|Physician commitments(e)                                                          |  |                                        | 24,144
|                                                                                  |  |                                        |       
|                                                                                  |  |                                        |       
|Total commercial
  commitments                                                    |  | $                                      | 54,806
|                                                                                  |  |                                        |       

| | (a) | Holders of the 2022 Notes and 2023 Notes are able to put the notes to us at various predetermined dates
throughout the period from 2005-2009. For purposes of this table, we have assumed that expected maturities will equal scheduled maturities. September 30, 2004 interest rates were
used to estimate interest payments on variable rate debt in this table.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (b) | Obligations under
  operating leases for real property, real property master leases and
  equipment. The real property master leases are leases for buildings on or
  near hospital property for which we guarantee a certain level of rental
  income to the owners of the property. 
  We sublease space in these buildings and any amounts received under
  these subleases are offset against the expense.  Future operating lease obligations are not recorded in our
  consolidated balance sheet.                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (c) | Amounts relate primarily
  to letters of credit outstanding with financial institutions. The letters of
  credit serve as security for self insured portions of our insurance programs
  for payment of claims, as guarantees for the construction of
  replacement hospitals, and for obligations to utility companies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (d) | Amounts relate to
  performance bonds that guarantee the performance of certain construction
  projects.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (e) | In consideration for a
  physician relocating to one of our communities and agreeing to engage in
  private practice, our subsidiaries may advance money to the physician to assist in the
  establishment of the physicians practice. 
  The actual amount of these commitments is dependent upon the financial
  results of each physicians private practice during the commitment period,
  which generally does not exceed twelve months.  The net amounts advanced under these recruiting agreements at
  the end of the individuals commitment 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 during such
  period.  Our practice is to expense
  these advances on a straight-line basis as they are paid over the commitment
  period.

36

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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, or 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, |      
|-------------------------------------- |  | --------------- | -----
|                                       |  |                 |      
|                                       |  | 2004            |      
|                                       |  |                 |      
|                                       |  |                 |      
|Actual days sales
  outstanding        |  |                 | 72   
|Objective for days sales
  outstanding |  |                 | 65-73

*
The variance from fiscal 2002 and our fiscal 2003 objective resulted from the
acquisitions we completed during the fourth quarter of fiscal 2003.  At September 30, 2003 we were in the process
of transferring Medicare and Medicaid provider numbers for these acquired
hospitals.  Until provider numbers were
transferred, these hospitals continued to treat patients under the Medicare and
Medicaid programs, but were unable to bill Medicare and Medicaid.  Once we transferred these provider numbers,
we were 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 for fiscal 2003 would have been 71
days.

Our
Pulse System provides a daily 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 each 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 presents an aging of our gross (prior to allowances for
contractual adjustments and doubtful accounts) discharged and billed accounts
receivable:

| |                                                 |  | September
  30, |          
| | ----------------------------------------------- |  | --------------- | ---------
| |                                                 |  |                 |          
| |                                                 |  | 2004            |          
| |                                                 |  |                 |          
| |                                                 |  | (in thousands)  |          
| |                                                 |  | 0-150
  days    |          
| |                                                 |  |                 |          
| |                                                 |  |                 |          
| | Medicare                                        |  | $               | 220,507  
| | Medicaid                                        |  |                 | 171,686  
| | Commercial insurance and
  others               |  |                 | 336,328  
| | Private pay                                     |  |                 | 304,207  
| |                                                 |  |                 |          
| | Total gross discharged
     accounts receivable |  | $               | 1,032,728
| |                                                 |  |                 |          

37

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---

We
have historically and consistently used the 150 day threshold for establishing
the allowance for doubtful accounts. 
Our financial statements have been consistently prepared and presented
by the application of this policy.

While
we do consistently apply the 150 day policy, we utilize other quantitative and
qualitative factors to analyze the propriety of this policy and the adequacy of
the reserves established under this policy.  
The principal quantitative factor is a comparison of net revenues to
cash collections.  We analyze this
statistic monthly and quarterly to validate our estimation of both deductions
from revenue and provision for bad debts.  
The primary qualitative factors used include analyzing days sales
outstanding, bad debt expense as a percentage of net revenue and the allowance
for doubtful accounts as a percentage of gross accounts receivable.  All of these factors and others are reviewed
monthly and are closely monitored for developing trends in the accounts
receivable portfolio.

We
believe that virtually all accounts identified as due from third-party payors
at the time of billing, that are aged 150 days and earlier, will not convert to
private pay.  As the accounts age into
the older aging buckets, there is the likelihood that a small percentage of
those accounts will convert to private pay upon denials from third party
payors.  However, accounts are closely monitored on a routine basis for denial potential and are reclassified
accordingly.

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 staff needs in our markets by increasing wages, improving
hospital working conditions, and fostering relationships with local nursing
schools.  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.

38

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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
$600.0 million credit agreement that has an interest rate subject to market
fluctuations. 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, 2004 the fair value of our fixed rate debt was $939.9 million, while the
carrying value was approximately $919.3 million.  At September 30, 2004 the fair value of our variable rate debt
was $16.0 million, while the carrying value was approximately $16.0
million.

|                                                         |  | 2005                                   |     | 2006 |   | 2007 |   | 2008 |      | 2009 |   | Thereafter |   | Total |    
|-------------------------------------------------------- |  | -------------------------------------- | --- | ---- | - | ---- | - | ---- | ---- | ---- | - | ---------- | - | ----- | ---
|                                                         |  |                                        |     |      |   |      |   |      |      |      |   |            |   |       |    
|                                                         |  | (in
  millions, except interest rates) |    
|Long term debt:                                          |  |                                        |     |      |   |      |   |      |      |      |   |            |   |       |    
|                                                         |  |                                        |     |      |   |      |   |      |      |      |   |            |   |       |    
|Fixed rate long-term debt,
     including capital leases |  | $                                      | 7.7 |      | $ | 7.4  |   | $    | 6.2  |      | $ | 5.8        |   | $     | 5.0
|Average interest rates                                   |  |                                        | 6.3 | %    |   | 5.9  | % |      | 5.9  | %    |   | 5.8        | % |       | 5.8
|                                                         |  |                                        |     |      |   |      |   |      |      |      |   |            |   |       |    
|Fixed rate convertible 
     long-term debt              |  |                                        | -   |      |   | -    |   |      | -    |      |   | -          |   |       | -  
|Average interest rate                                    |  |                                        |     |      |   |      |   |      |      |      |   |            |   |       |    
|                                                         |  |                                        |     |      |   |      |   |      |      |      |   |            |   |       |    
|Variable rate 
     long-term debt                       |  | $                                      | 2.0 |      | $ | 2.0  |   | $    | 12.0 |      |   | -          |   |       | -  
|Average interest rate                                    |  |                                        | *   |      |   | *    |   |      | *    |      |   | *          |   |       | *  

| | * The interest rate is
  LIBOR plus 0.75%.  The interest rate
  on the outstanding balance at September 30, 2004 was 3.3%.
| | --------------------------------------------------------------------------------------------------------------------------

| | (a) | Holders of the 2022 Notes
  and 2023 Notes are able to put the notes to us at various predetermined dates
  throughout the period from 2005  2009. 
  For purposes of this table, we have assumed that expected maturities
  will equal scheduled maturities.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

39

---

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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 Registered Public Accounting Firm                                                               | 41  
|                                                                                                                      |     
|Consolidated Statements of Income - for the years ended
              September 30, 2004, 2003 and 2002               | 42  
|                                                                                                                      |     
|Consolidated Balance Sheets - September 30, 2004 and 2003                                                             | 43  
|                                                                                                                      |     
|Consolidated Statements of Stockholders Equity - for the             years
  ended September 30, 2004, 2003 and 2002 | 45  
|                                                                                                                      |     
|Consolidated Statements of Cash Flows - for the years             ended
  September 30, 2004, 2003 and 2002           | 46  
|                                                                                                                      |     
|Notes to Consolidated Financial Statements                                                                            | 48  

40

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REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

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, 2004 and 2003, and the related
consolidated statements of income, stockholders equity, and cash flows for
each of the three years in the period ended September 30, 2004. 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 the standards of the Public Company
Accounting Oversight Board (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, 2004 and 2003, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended September 30, 2004, in conformity with U.S. generally accepted accounting
principles.  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.

Ernst & Young LLP
Certified Public Accountants

Tampa, Florida
October 29, 2004, except for
Note 13, as to which the 
date is November 30, 2004

41

---

---

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

|                                                          |  | Year ended September 30, |          
|--------------------------------------------------------- |  | ------------------------ | ---------
|                                                          |  |                          |          
|                                                          |  | 2004                     |          
|                                                          |  |                          |          
|                                                          |  |                          |          
|Net patient
  service revenue                             |  | $                        | 3,205,885
|                                                          |  |                          |          
|Costs and
  expenses:                                     |  |                          |          
|Salaries
  and benefits                                   |  |                          | 1,259,859
|Supplies
  and other                                      |  |                          | 956,891  
|Provision
  for doubtful accounts                         |  |                          | 240,074  
|Depreciation
  and amortization                           |  |                          | 134,915  
|Rent
  expense                                            |  |                          | 65,766   
|Interest,
  net                                           |  |                          | 16,184   
|Writeoff
  of deferred financing costs                    |  |                          | -        
|                                                          |  |                          |          
|                                                          |  |                          |          
|Total
  costs and expenses                                |  |                          | 2,673,689
|                                                          |  |                          |          
|                                                          |  |                          |          
|Income
  before minority interests and income taxes       |  |                          | 532,196  
|Minority
  interests in earnings of consolidated entities |  |                          | 5,716    
|                                                          |  |                          |          
|                                                          |  |                          |          
|Income
  before income taxes                              |  |                          | 526,480  
|                                                          |  |                          |          
|Provision
  for income taxes                              |  |                          | 201,381  
|                                                          |  |                          |          
|                                                          |  |                          |          
|Net income                                                |  | $                        | 325,099  
|                                                          |  |                          |          
|                                                          |  |                          |          
|Net income
  per share:                                   |  |                          |          
|Basic                                                     |  | $                        | 1.34     
|                                                          |  |                          |          
|Diluted                                                   |  | $                        | 1.32     
|                                                          |  |                          |          
|                                                          |  |                          |          
|Dividends
  per share                                     |  | $                        | .12      
|                                                          |  |                          |          
|                                                          |  |                          |          
|Weighted
  average number of
     shares outstanding:     |  |                          |          
|Basic                                                     |  |                          | 242,725  
|                                                          |  |                          |          
|Diluted                                                   |  |                          | 246,826  
|                                                          |  |                          |          

See accompanying
notes.

42

---

---

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

|                                                                                                                                                           |  | September 30, |          
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------
|                                                                                                                                                           |  |               |          
|                                                                                                                                                           |  | 2004          |          
|                                                                                                                                                           |  |               |          
|ASSETS                                                                                                                                                     |  |               |          
|                                                                                                                                                           |  |               |          
|Current
  assets:                                                                                                                                          |  |               |          
|Cash
  and cash equivalents                                                                                                                                |  | $             | 112,946  
|Accounts
  receivable, less allowances for doubtful
          accounts of $186,439 and
  $151,015 at September
          30, 2004 and 2003,
  respectively |  |               | 588,046  
|Accounts
  receivable - other                                                                                                                              |  |               | 38,103   
|Supplies,
  at cost (first-in, first-out method)                                                                                                           |  |               | 78,927   
|Prepaid
  expenses and other assets                                                                                                                        |  |               | 80,215   
|Restricted
  funds                                                                                                                                         |  |               | 16,852   
|Deferred
  income taxes                                                                                                                                    |  |               | 26,505   
|                                                                                                                                                           |  |               |          
|                                                                                                                                                           |  |               |          
|Total
  current assets                                                                                                                                     |  |               | 941,594  
|                                                                                                                                                           |  |               |          
|Property,
  plant and equipment:                                                                                                                           |  |               |          
|Land
  and improvements                                                                                                                                    |  |               | 116,489  
|Buildings
  and improvements                                                                                                                               |  |               | 1,276,180
|Leaseholds                                                                                                                                                 |  |               | 132,184  
|Equipment                                                                                                                                                  |  |               | 767,718  
|Construction
  in progress                                                                                                                                 |  |               | 81,630   
|                                                                                                                                                           |  |               |          
|                                                                                                                                                           |  |               | 2,374,201
|Less:
  accumulated depreciation and amortization                                                                                                          |  |               | (681,500 
|                                                                                                                                                           |  |               |          
|                                                                                                                                                           |  |               |          
|Net
  property, plant and equipment                                                                                                                        |  |               | 1,692,701
|                                                                                                                                                           |  |               |          
|Restricted
  funds                                                                                                                                         |  |               | 55,942   
|                                                                                                                                                           |  |               |          
|Excess of
  cost over acquired net assets, net                                                                                                             |  |               | 748,156  
|Deferred
  tax asset                                                                                                                                       |  |               | 22,142   
|Deferred
  charges and other assets                                                                                                                        |  |               | 46,753   
|                                                                                                                                                           |  |               |          
|                                                                                                                                                           |  |               |          
|                                                                                                                                                           |  | $             | 3,507,288
|                                                                                                                                                           |  |               |          

See accompanying
notes.

43

---

---

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

|                                                                                                                                                                                     |  | September 30, |          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ---------
|                                                                                                                                                                                     |  |               |          
|                                                                                                                                                                                     |  | 2004          |          
|                                                                                                                                                                                     |  |               |          
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                 |  |               |          
|                                                                                                                                                                                     |  |               |          
|Current
  liabilities:                                                                                                                                                               |  |               |          
|Accounts
  payable                                                                                                                                                                   |  | $             | 140,695  
|Accrued
  payroll and related taxes                                                                                                                                                  |  |               | 62,119   
|Accrued
  expenses and other liabilities                                                                                                                                             |  |               | 91,538   
|Due
  to third party payors                                                                                                                                                          |  |               | 9,573    
|Income
  taxes - currently payable                                                                                                                                                   |  |               | 3,500    
|Deferred
  income taxes                                                                                                                                                              |  |               | 2,964    
|Current
  maturities of long-term debt                                                                                                                                               |  |               | 9,742    
|                                                                                                                                                                                     |  |               |          
|                                                                                                                                                                                     |  |               |          
|Total
  current liabilities                                                                                                                                                          |  |               | 320,131  
|                                                                                                                                                                                     |  |               |          
|Deferred
  income taxes                                                                                                                                                              |  |               | 143,760  
|Other
  long-term liabilities                                                                                                                                                        |  |               | 96,803   
|Long-term
  debt                                                                                                                                                                     |  |               | 925,518  
|                                                                                                                                                                                     |  |               |          
|Minority
  interests in consolidated entities                                                                                                                                        |  |               | 43,066   
|                                                                                                                                                                                     |  |               |          
|Stockholders
  equity:                                                                                                                                                              |  |               |          
|Preferred
  stock, $.01 par value, 5,000 shares
          authorized                                                                                                                 |  |               | -        
|Common
  stock, Class A, $.01 par value, 750,000
          shares authorized, 265,981
  and 262,705
          shares issued at September
  30, 2004
          and 2003, respectively |  |               | 2,660    
|Additional
  paid-in-capital                                                                                                                                                         |  |               | 445,270  
|Retained
  earnings                                                                                                                                                                  |  |               | 1,830,736
|                                                                                                                                                                                     |  |               |          
|                                                                                                                                                                                     |  |               | 2,278,666
|Less:
  treasury stock, 22,500 shares at
               September
  30, 2004 and 2003, respectively                                                                                  |  |               | (300,656 
|                                                                                                                                                                                     |  |               |          
|                                                                                                                                                                                     |  |               |          
|Total
  stockholders equity                                                                                                                                                         |  |               | 1,978,010
|                                                                                                                                                                                     |  |               |          
|                                                                                                                                                                                     |  | $             | 3,507,288
|                                                                                                                                                                                     |  |               |          

See accompanying
notes.

44

---

---

HEALTH MANAGEMENT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
Years ended September 30, 2004, 2003 and 2002
(in thousands)

|                                                                                                                    |  | Common Stock |         | Additional
  Paid-in
  Capital |   | Retained
  Earnings |  | Treasury
  Stock |  
|------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | ------------------------------ | - | ------------------- |  | ---------------- | -
|                                                                                                                    |  |              |         |                                |   |                    
|                                                                                                                    |  | Shares       |         | Par
  Value                    |   |                     |  |                 
|                                                                                                                    |  |              |         |                                |   |                     |  |                  |  
|                                                                                                                    |  |              |         |                                |   |                     |  |                  |  
|Balance at September 30, 2001                                                                                       |  |              | 258,074 |                                | $ | 2,581               |  |                  | $
|                                                                                                                    |  |              |         |                                |   |                     |  |                  |  
|Exercise of stock options and
  issuance of stock
          incentive plan shares                                   |  |              | 2,993   |                                |   | 30                  |  |                  |  
|Income tax benefit from exercise
          of stock options and issuance
  of stock
          incentive plan shares |  |              | -       |                                |   | -                   |  |                  |  
|Purchase of treasury stock, at
  cost                                                                               |  |              | -       |                                |   | -                   |  |                  |  
|Net income                                                                                                          |  |              | -       |                                |   | -                   |  |                  |  
|                                                                                                                    |  |              |         |                                |   |                     |  |                  |  
|                                                                                                                    |  |              |         |                                |   |                     |  |                  |  
|Balance at September 30, 2002                                                                                       |  |              | 261,067 |                                |   | 2,611               |  |                  |  
|                                                                                                                    |  |              |         |                                |   |                     |  |                  |  
|Exercise of stock options and
  issuance of stock
          incentive plan shares                                   |  |              | 1,638   |                                |   | 16                  |  |                  |  
|Income tax benefit from exercise
          of stock options and issuance
  of stock
          incentive plan shares |  |              | -       |                                |   | -                   |  |                  |  
|Dividends declared                                                                                                  |  |              | -       |                                |   | -                   |  |                  |  
|Net income                                                                                                          |  |              | -       |                                |   | -                   |  |                  |  
|                                                                                                                    |  |              |         |                                |   |                     |  |                  |  
|                                                                                                                    |  |              |         |                                |   |                     |  |                  |  
|Balance at September 30, 2003                                                                                       |  |              | 262,705 |                                |   | 2,627               |  |                  |  
|                                                                                                                    |  |              |         |                                |   |                     |  |                  |  
|Exercise of stock options and
  issuance of stock
          incentive plan shares                                   |  |              | 3,276   |                                |   | 33                  |  |                  |  
|Income tax benefit from exercise
          of stock options and issuance
  of stock
          incentive plan shares |  |              | -       |                                |   | -                   |  |                  |  
|Dividends declared                                                                                                  |  |              | -       |                                |   | -                   |  |                  |  
|Net income                                                                                                          |  |              | -       |                                |   | -                   |  |                  |  
|                                                                                                                    |  |              |         |                                |   |                     |  |                  |  
|                                                                                                                    |  |              |         |                                |   |                     |  |                  |  
|Balance at September 30, 2004                                                                                       |  |              | 265,981 |                                | $ | 2,660               |  |                  | $
|                                                                                                                    |  |              |         |                                |   |                     |  |                  |  

See accompanying notes.

45

---

---

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

|                                                                                              |  | Year ended September 30, |         
|--------------------------------------------------------------------------------------------- |  | ------------------------ | --------
|                                                                                              |  |                          |         
|                                                                                              |  | 2004                     |         
|                                                                                              |  |                          |         
|                                                                                              |  |                          |         
|Cash flows
  from operating activities:                                                       |  |                          |         
|Net
  income                                                                                  |  | $                        | 325,099 
|Adjustments
  to reconcile net income to net cash provided
          by operating activities: |  |                          |         
|Depreciation
  and amortization                                                               |  |                          | 134,915 
|Provision
  for doubtful accounts                                                             |  |                          | 240,074 
|Minority
  interest in earnings of consolidated entities                                      |  |                          | 5,716   
|(Gain)
  loss on sale of fixed assets                                                         |  |                          | (2,346  
|Change
  in deferred income taxes                                                             |  |                          | 79,120  
|Writeoff
  of deferred financing costs                                                        |  |                          | -       
|                                                                                              |  |                          |         
|Changes
  in assets and liabilities, net of effects of
               acquisitions:           |  |                          |         
|Accounts
  receivable                                                                         |  |                          | (343,868
|Supplies                                                                                      |  |                          | (6,783  
|Prepaid
  expenses and other assets                                                           |  |                          | (21,740 
|Deferred
  charges and other assets                                                           |  |                          | (4,628  
|Accounts
  payable                                                                            |  |                          | 212     
|Accrued
  expenses and other liabilities                                                      |  |                          | 3,208   
|Income
  taxes  currently payable                                                            |  |                          | 16,232  
|Other
  long-term liabilities                                                                 |  |                          | 32,791  
|                                                                                              |  |                          |         
|                                                                                              |  |                          |         
|Net cash
  provided by operating activities                                                   |  |                          | 458,002 
|                                                                                              |  |                          |         
|                                                                                              |  |                          |         
|Cash flows
  from investing activities:                                                       |  |                          |         
|Acquisition
  of facilities, net of cash acquired and
          purchase price adjustments    |  |                          | (517,944
|Additions
  to property, plant and equipment                                                  |  |                          | (201,660
|Proceeds
  from sale of property, plant and equipment                                         |  |                          | 10,304  
|Proceeds
  from sale of minority interests in
          consolidated entities                 |  |                          | -       
|                                                                                              |  |                          |         
|                                                                                              |  |                          |         
|Net cash
  used in investing activities                                                       |  | $                        | (709,300
|                                                                                              |  |                          |         

See accompanying
notes.

46

---

---

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

|                                                                            |  | Year ended September 30, |         
|--------------------------------------------------------------------------- |  | ------------------------ | --------
|                                                                            |  |                          |         
|                                                                            |  | 2004                     |         
|                                                                            |  |                          |         
|                                                                            |  |                          |         
|Cash flows
  from financing activities:                                     |  |                          |         
|Proceeds
  from long-term borrowings                                        |  | $                        | 288,936 
|Principal
  payments on debt                                                |  |                          | (288,230
|Increase
  in restricted funds                                              |  |                          | (39,400 
|Purchase
  of treasury stock, at cost                                       |  |                          | -       
|Proceeds
  from issuance of common stock                                    |  |                          | 27,389  
|Payment
  of interest on debentures                                         |  |                          | -       
|Payment
  of dividends                                                      |  |                          | (19,789 
|                                                                            |  |                          |         
|                                                                            |  |                          |         
|Net cash
  (used in) provided by financing activities                       |  |                          | (31,094 
|                                                                            |  |                          |         
|                                                                            |  |                          |         
|Net
  (decrease) increase in cash and cash equivalents                      |  |                          | (282,392
|Cash and
  cash equivalents at beginning of year                            |  |                          | 395,338 
|                                                                            |  |                          |         
|                                                                            |  |                          |         
|Cash and
  cash equivalents at end of year                                  |  | $                        | 112,946 
|                                                                            |  |                          |         
|                                                                            |  |                          |         
|Supplemental
  schedule of noncash
     investing and financing activities: |  |                          |         
|Fair
  value of assets acquired (including cash)                            |  | $                        | 552,964 
|Consideration:
  cash paid                                                  |  |                          | 516,785 
|                                                                            |  |                          |         
|                                                                            |  |                          |         
|Liabilities
  assumed                                                       |  | $                        | 36,179  
|                                                                            |  |                          |         

See accompanying
notes.

47

---

---

HEALTH MANAGEMENT ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004

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 $129.6
million, $105.0 million and $91.9 million for the years ended September 30,
2004, 2003 and 2002, 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, 2004, 2003 or 2002.

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 $1.6
million and $2.5 million at September 30, 2004 and 2003, 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 U.S. generally accepted
accounting principles 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.

48

---

---

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 58%, 57% and 59% of gross patient
service charges for the years ended September 30, 2004, 2003 and 2002,
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, 2004, 2003, and 2002.
Laws, rules 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 consolidated 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 of approximately $7,456 million, $5,427 million and $4,121 million
for the years ended September 30, 2004, 2003 and 2002, 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.  Charges foregone, based
on established rates, due to the provision of care to patients who were
financially unable to pay amounted to approximately $421.2 million, $279.3
million and $172.9 million for the years ended September 30, 2004, 2003, and
2002, respectively.

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 the
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.

49

---

---

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.     Restricted
funds

Restricted funds consist
primarily of investments held on behalf of 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 debt securities and are recorded at
historical cost, which approximates fair market value in the accompanying
balance sheets. (see Note 9)

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)

50

---

---

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.     Physician
commitments

The
Company has committed to provide certain financial assistance pursuant to
recruiting agreements with various physicians practicing in the communities
that the Companys various subsidiaries serve.  In
consideration for a physician relocating to one of its communities in need of
the physicians services, the subsidiaries may advance money to the physician in
order for such physician to establish his or her practice.  Sums committed to be advanced equaled
approximately $25.7 million and $13.3 million as of September 30, 2004 and
2003.  The actual amount of such
commitments is dependent upon the financial results of each physicians private
practice during the commitment period, which generally does not exceed twelve
months.  The net amounts advanced under
these recruiting agreements at the end of the commitment 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 commitment 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, |        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | -------
|                                                                                                                                                               |  |                            |        
|                                                                                                                                                               |  | 2004                       |        
|                                                                                                                                                               |  |                            |        
|Net income, as reported                                                                                                                                        |  | $                          | 325,099
|Deduct:   Total
  stock-based employee
     compensation expense determined under
     fair value based method for all awards,
     net of related tax effects |  |                            | (11,791
|                                                                                                                                                               |  |                            |        
|Pro forma net income                                                                                                                                           |  | $                          | 313,308
|                                                                                                                                                               |  |                            |        
|                                                                                                                                                               |  |                            |        
|Pro forma earnings per share:                                                                                                                                  |  |                            |        
|                                                                                                                                                               |  |                            |        
|Basic
   as reported                                                                                                                                          |  | $                          | 1.34   
|                                                                                                                                                               |  |                            |        
|Basic
   pro forma                                                                                                                                            |  | $                          | 1.29   
|                                                                                                                                                               |  |                            |        
|Diluted
   as reported                                                                                                                                        |  | $                          | 1.32   
|                                                                                                                                                               |  |                            |        
|Diluted
   pro forma                                                                                                                                          |  | $                          | 1.28   

51

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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 2004, 2003 and 2002: (i) risk-free interest rate of 2.50%,
2.34%, and 4.60%; (ii) .4% dividend yield for 2004 and 2003, no dividends for
2002; (iii) volatility factor of the expected market price of the Companys
common stock of .500, .529, and .536; (iv) and weighted-average expected lives
of the options of 5 years.  The
weighted-average fair value of options granted in 2004, 2003, and 2002 was
$10.13, $8.59, and $10.23, 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.

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 did not  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.

52

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---

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.

On September 30, 2004, the Emerging Issues
Task Force (EITF) affirmed its
previous consensus regarding Issue 04-8, The Effect of Contingently Convertible
Debt on Diluted Earnings Per Share. The guidance in this Issue requires that
contingently convertible instruments be included in diluted earnings per share
computations (if dilutive) regardless of whether the market price trigger has
been met. The effective date of this consensus is for reporting periods ending
after December 15, 2004. Retroactive restatement of earnings per share amounts
is required for contingent convertible debt issuances that are outstanding at
the effective date. See Note 3  Long term debt, for a discussion of the
Companys outstanding convertible debt issuances and Note 13  Subsequent events,
for a description of the actions taken by the Company to offset the potentially dilutive
impact of this pronouncement.

On December 15, 2003,
the FASB issued an Exposure Draft, Earnings Per Share, an
Amendment of FASB Statement No. 128 (the Amendment). The proposed Amendment
requires, in part, that for contracts that can be settled in either cash or
shares, issuing entities should assume share settlement for purposes of
computing diluted earnings per share. The FASB subsequently decided that
retroactive restatement of earnings per share is not required for those
contracts that are appropriately modified prior to the effective date of the
Amendment. This Amendment is expected to be finalized by December 31, 2004 and
will be effective for reporting periods ending after December 15, 2004. See Note
3  Long term debt, for a discussion of the Companys outstanding convertible
debt issuances and Note 13  Subsequent events, for a description of the actions
taken by the Company to offset the potentially dilutive impact of this pronouncement.

q.     Reclassifications

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

2.       Acquisitions
and dispositions

Effective
November 1, 2003, the Company acquired the following five hospitals:

| |  | 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 Company also purchased one free-standing MRI
facility in June 2004. The
consideration for all of the hospitals and free-standing MRI facility totaled approximately $553.0 million,
which consisted of approximately $516.8 million in cash and approximately $36.2
million in assumed liabilities.  The
Company used available cash and amounts borrowed under the Companys Credit
Agreement to fund this transaction. 
Goodwill totaled approximately $338.9 million, all of which is expected
to be deductible for tax purposes.   The
Company generally seeks to recover its cash investment in acquisitions in four
years or less by increasing and expanding services provided and achieving
significant improvement in the operating performance of the acquired
facilities.

53

---

---

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

2.       Acquisitions
and dispositions (continued)

These
acquisitions were made in furtherance of the Companys general acquisition
strategy to acquire hospitals in rural and non-urban areas of 30,000 to 400,000
people in the southeastern and southwestern United States and included the
Companys initial operations in the state of Missouri.

The above
transactions were accounted for using the purchase method of accounting.  The purchase price was allocated to the
assets acquired and liabilities assumed based upon their respective estimated
fair values at acquisition and is subject to change based upon available
information and is subject to further refinement upon the receipt of final
appraisals and the settlement of working capital accounts.  After acquisition, the Company utilized the
services of an independent property appraiser to determine the respective fair
values of the properties purchased.  The
operating results of the hospitals and free-standing MRI facility acquired have been included in the
accompanying consolidated statements of income from the date of
acquisition.  The following table
summarizes the allocations of the aggregate transaction purchase price,
including assumed liabilities and direct transaction costs for these transactions
(in thousands):

|Fair value of assets acquired, excluding
  cash: |  |   |         |  
|------------------------------------------------ |  | - | ------- | -
|                                                 |  |   |         |  
|Other current assets                             |  | $ | 9,355   |  
|Property, plant and
  equipment                  |  |   | 204,683 |  
|Goodwill                                         |  |   | 338,926 |  
|                                                 |  |   |         |  
|Total
  assets acquired                          |  | $ | 552,964 |  
|                                                 |  |   |         |  
|Total
  liabilities assumed                      |  |   | (36,179 | )
|                                                 |  |   |         |  
|Net assets acquired                              |  | $ | 516,785 |  
|                                                 |  |   |         |  

During the
year ended September 30, 2003, the Company acquired certain assets of four
hospitals through purchase agreements aggregating $119.1 million in cash and
the assumption of an aggregate $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 aggregating $226.2 million in cash and
the assumption of an aggregate $1.0 million in liabilities.  These 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 was 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.

54

---

---

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

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, 2004 give effect to the operation
of the hospitals purchased in the years ended September 30, 2004, 2003 and 2002
as if the acquisitions had occurred as of October 1, 2002, 2001 and 2000,
respectively:

| |                                  | Year
  Ended September 30,           | 
| | -------------------------------- | ------------------------------------ | 
| |                                  |                                      | 
| |                                  | 2004                                 | 
| |                                  |                                      | 
| |                                  | (in millions, except per share data) | 
| |                                  |                                      | 
| | 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,  |        
|------------------------------------------- |  | ---------------- | -------
|                                            |  |                  |        
|                                            |  | 2004             |        
|                                            |  |                  |        
|                                            |  | (in
  thousands) |        
|Balance at beginning of
  the year          |  | $                | 397,825
|Goodwill
  acquired during the year         |  |                  | 338,926
|Impairment
  losses                         |  |                  | -      
|Goodwill
  written off related to disposals |  |                  | -      
|Adjustments
  to purchase price allocations |  |                  | 11,405 
|                                            |  |                  |        
|Balance at end of year                      |  | $                | 748,156
|                                            |  |                  |        

55

---

---

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,  |        
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | -------
| |                                                                                                                                                                                         |  |                  |        
| |                                                                                                                                                                                         |  | 2004             |        
| |                                                                                                                                                                                         |  |                  |        
| |                                                                                                                                                                                         |  | (in
  thousands) |        
| |                                                                                                                                                                                         |  |                  |        
| | Revolving Credit
  Agreements (a)                                                                                                                                                       |  | $                | -      
| | Zero-Coupon Convertible
  Senior Subordinated Notes due 2022
     at 0.875%, net of discount of $46.3 million and $48.8
  million at
     September 30, 2004 and 2003, respectively (b) |  |                  | 283,671
| | 1.50% Convertible Senior
  Subordinated Notes due 2023 (b)                                                                                                                              |  |                  | 575,000
| | Mortgage notes, secured by
  real and personal property (c)                                                                                                                             |  |                  | 9,402  
| | Various mortgage and
  installment notes and debentures, some
     secured by equipment, at interest rates ranging from
     prime plus 1% to 6%, payable through 2009                  |  |                  | 30,491 
| | Industrial Revenue Bond
  Issue                                                                                                                                                         |  |                  | 4,220  
| | Capitalized lease
  obligations (see Note 4)                                                                                                                                            |  |                  | 32,476 
| |                                                                                                                                                                                         |  |                  |        
| |                                                                                                                                                                                         |  |                  | 935,260
| | Less current maturities                                                                                                                                                                 |  |                  | 9,742  
| |                                                                                                                                                                                         |  |                  |        
| |                                                                                                                                                                                         |  | $                | 925,518
| |                                                                                                                                                                                         |  |                  |        

a.     Revolving
Credit Agreements

On May 14,
2004, the Company entered into a new credit agreement with a syndicate of
banks.  The new credit agreement expires
on May 14, 2009 and replaced the Companys previous $450.0 million credit
agreement, which was due to expire in accordance with its terms on November 30,
2004.  The new credit agreement allows
the Company to borrow, on a revolving, unsecured basis, up to $600.0 million
(including standby letters of credit). 
The new credit agreement also requires the Companys subsidiaries (other
than certain exempted subsidiaries) to guarantee its borrowings in the event the
Companys credit rating falls below certain thresholds.  Under the new credit agreement, the Company
can choose whether the interest charged on loans is based upon the prime rate
or the LIBOR rate.  The interest rate
the Company pays includes a spread above the base rate the Company selects,
which is subject to change in the event the Companys debt rating changes.  The applicable interest rate under the new
credit agreement at September 30, 2004 was 2.99%.  On May 14, 2004, the Company borrowed $150.0 million under the
new credit agreement to repay the amounts outstanding under the Companys
former credit agreement upon its termination of such agreement.  As of September 30, 2004, there were no
amounts outstanding under the new credit agreement.

The Company
also has a $15.0 million unsecured revolving credit commitment with a
bank.  The $15.0 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, 2004 and
2003 was 4.50% and 3.75%, respectively. 
As of September 30, 2004 and 2003, there were no amounts outstanding
under this credit commitment.

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, and grant security interests. The Company is also required to comply with certain financial covenants. Similar covenants were also contained in the Companys former credit agreement.
At September 30, 2004 and 2003, the Company was in
compliance with these covenants.

56

---

---

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. To the extent
holders of the 2022 Notes exercise their January 28, 2005 put option, the Company
intends to use amounts available under its long term $600.0 million line of
credit to purchase the 2022 Notes, therefore, the Company has not included this
amount in current liabilities at September 30, 2004.

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.

57

---

---

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.

See Note 13  Subsequent events, for a discussion of the Companys changes
to its convertible debt issues.

c.     Mortgage
Notes

The Company
had three mortgage notes outstanding at September 30, 2004 and 2003. The
mortgage notes are secured by all the real and personal property related to certain
Company facilities with an aggregate net book value of $21.6 million and $27.3
million at September 30, 2004 and 2003, respectively.  The mortgage notes are payable in various installments with
maturity dates ranging through 2007 and carry interest rates ranging from prime
(4.75% and 4.0% at September 30, 2004 and 2003, respectively) to 11.5%.

As of
September 30, 2004 and 2003, the quoted market price for the 2022 Notes was
approximately $287.1 million and $293.7 million, respectively.  As of September 30, 2004 and 2003, the
quoted market price for the 2023 Notes was approximately $592.3 million and
$603.8 million, respectively.  The fair
value of the other debt included above, based on available market information,
approximates its carrying value.

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

|2005       |  | $ | 9,742   | 
|---------- |  | - | ------- | 
|2006       |  |   | 9,423   | 
|2007       |  |   | 18,150  | 
|2008       |  |   | 5,825   | 
|2009       |  |   | 5,008   | 
|Thereafter |  | $ | 887,112 | 

The Company
paid interest of $13.4 million, $28.1 million, and $7.4 million for the years
ended September 30, 2004, 2003 and 2002, respectively.  Capitalized interest was $2.6 million and
$.6 million for the year ended September 30, 2004 and 2003, respectively. There
was no capitalized interest for the year ended September 30, 2002.

58

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---

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, were as follows at September 30, 2004 (in thousands):

|                                             |  | Operating       |         | Capital                       |  |           |       
|-------------------------------------------- |  | --------------- | ------- | ----------------------------- |  | --------- | ------
|                                             |  |                 |         |                               |  |           |       
|September
  30,                              |  | Real
  Property |         | Real Property
  Master Leases |  | Equipment |       
|                                             |  |                 |         |                               |  |           |       
|2005                                         |  | $               | 15,216  |                               |  | $         | 6,452 
|2006                                         |  |                 | 13,635  |                               |  |           | 5,927 
|2007                                         |  |                 | 12,837  |                               |  |           | 5,683 
|2008                                         |  |                 | 12,122  |                               |  |           | 5,700 
|2009                                         |  |                 | 10,609  |                               |  |           | 5,741 
|Thereafter                                   |  |                 | 38,408  |                               |  |           | 41,352
|                                             |  |                 |         |                               |  |           |       
|                                             |  |                 |         |                               |  |           |       
|Total minimum payments                       |  | $               | 102,827 |                               |  | $         | 70,855
|                                             |  |                 |         |                               |  |           |       
|                                             |  |                 |         |                               |  |           |       
|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 years ended September
30, 2004 and 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, |        
| | ------------------------------- |  | --------------- | -------
| |                                 |  |                 |        
| |                                 |  | 2004            |        
| |                                 |  |                 |        
| | Cost                            |  | $               | 89,466 
| | Less accumulated
  amortization |  |                 | (24,977
| |                                 |  |                 |        
| | Net book value                  |  | $               | 64,489 
| |                                 |  |                 |        

| | The Company
  entered into capitalized leases for equipment of $5.0 million, $­2.9 million
  and $5.9 million during the years ended September 30, 2004, 2003 and 2002,
  respectively.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

59

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---

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, |        
|--------------- |  | -------------------------- | -------
|                |  |                            |        
|                |  | 2004                       |        
|                |  |                            |        
|Federal:        |  |                            |        
|Current         |  | $                          | 106,279
|Deferred        |  |                            | 68,778 
|                |  |                            |        
|Total
  Federal |  |                            | 175,057
|State:          |  |                            |        
|Current         |  |                            | 15,982 
|Deferred        |  |                            | 10,342 
|                |  |                            |        
|Total
  State   |  |                            | 26,324 
|                |  |                            |        
|Total           |  | $                          | 201,381
|                |  |                            |        

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

|                                                       |  | Year
  ended September 30, |        
|------------------------------------------------------ |  | -------------------------- | -------
|                                                       |  |                            |        
|                                                       |  | 2004                       |        
|                                                       |  |                            |        
|                                                       |  | Amount                     |        
|                                                       |  |                            |        
|Statutory income
     tax rate                         |  | $                          | 186,268
|                                                       |  |                            |        
|State income taxes, net
     of Federal benefit        |  |                            | 17,296 
|                                                       |  |                            |        
|Other items (each less
  than 5%
     of computed tax) |  |                            | (2,183 
|                                                       |  |                            |        
|                                                       |  |                            |        
|Total                                                  |  | $                          | 201,381
|                                                       |  |                            |        

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,  |        
| | ----------------------------------- |  | ---------------- | -------
| |                                     |  |                  |        
| |                                     |  | 2004             |        
| |                                     |  |                  |        
| |                                     |  | (in
  thousands) |        
| | Deferred income tax
  assets:       |  |                  |        
| | Allowance
  for doubtful accounts   |  | $                | -      
| | Accrued
  liabilities               |  |                  | 27,583 
| | Self
  insurance liability risks    |  |                  | 18,139 
| | Other                               |  |                  | 2,925  
| |                                     |  |                  |        
| |                                     |  |                  | 48,647 
| | Less: Valuation allowance           |  |                  | -      
| |                                     |  |                  |        
| | Net deferred income tax
  assets    |  |                  | 48,647 
| | Deferred
  income tax liabilities:  |  |                  |        
| | Depreciable
  assets                |  |                  | (79,217
| | Accrued
  liabilities and other     |  |                  | (2,964 
| | Goodwill                            |  |                  | (34,444
| | Convertible
  notes and debentures  |  |                  | (29,926
| | Accrued
  liabilities and other     |  |                  | (173   
| |                                     |  |                  |        
| | Net deferred income tax
  liability |  | $                | (98,077
| |                                     |  |                  |        

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, 2004 and 2003, respectively.

60

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---

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

5.       Income
taxes (continued)

Income
taxes paid (net of refunds) amounted to $127.2 million, $174.7 million, and
$139.7 million for the years ended September 30, 2004, 2003 and 2002,
respectively.

6.       Retirement
plans

The Company
has a defined contribution retirement plan which covers substantially all
eligible employees at its hospitals and the Companys 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 $9.1 million, $6.7 million and $6.0 million for the
years ended September 30, 2004, 2003 and 2002, 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.

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, |  
| | ------------------------------------------------------------------------------- | ------------------------ | -
| |                                                                                 |                          |  
| |                                                                                 | 2004                     |  
| |                                                                                 |                          |  
| | 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:                                                |                          |  
| | Stock options                                                                   |                          |  
| | Convertible
  debt                                                              |                          |  
| |                                                                                 |                          |  
| |                                                                                 |                          |  
| | Denominator
  for diluted
          earnings per share                          |                          |  
| |                                                                                 |                          |  
| | Basic earnings per share                                                        |                          | $
| |                                                                                 |                          |  
| | Diluted earnings per share                                                      |                          | $
| |                                                                                 |                          |  

Outstanding
options to purchase 2.1 million, 2.7 million, and 2.8 million shares of the
Companys common stock were not included in the computation of earnings per
share for the years ended September 30, 2004, 2003, and 2002, respectively,
because the options exercise prices were greater than the average market price
of the Companys common stock.

61

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---

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         |  | Price
  Range |        | Weighted
  Average Price | 
| | ------------------------------- | -------------- |  | ------------- | ------ | ------------------------ | 
| |                                 |                |  |               |        |                          | 
| |                                 | (in thousands) |  |               |        |                          | 
| |                                 |                |  |               |        |                          | 
| |                                 |                |  |               |        |                          | 
| | Balance at September 30,
  2001 |                |  |               | 20,578 |                          | 
| | Granted                         |                |  |               | 1,808  |                          | 
| | Exercised                       |                |  |               | (2,847 | )                        | 
| | Terminated                      |                |  |               | (320   | )                        | 
| |                                 |                |  |               |        |                          | 
| |                                 |                |  |               |        |                          | 
| | Balance at September 30,
  2002 |                |  |               | 19,219 |                          | 
| | Granted                         |                |  |               | 2,023  |                          | 
| | Exercised                       |                |  |               | (1,490 | )                        | 
| | Terminated                      |                |  |               | (417   | )                        | 
| |                                 |                |  |               |        |                          | 
| |                                 |                |  |               |        |                          | 
| | Balance at September 30,
  2003 |                |  |               | 19,335 |                          | 
| | Granted                         |                |  |               | 2,126  |                          | 
| | Exercised                       |                |  |               | (3,026 | )                        | 
| | Terminated                      |                |  |               | (186   | )                        | 
| |                                 |                |  |               |        |                          | 
| |                                 |                |  |               |        |                          | 
| | Balance at September 30,
  2004 |                |  |               | 18,249 |                          | 

Stock
options exercisable at September 30, 2004, 2003, and 2002 were 13,296, 14,336,
and 14,073 at weighted average exercise prices of  $14.18, $12.51, and $12.14, respectively.

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

| | Options
  Outstanding          |  | Options
  Exercisable |          
| | ------------------------------ |  | --------------------- | ---------
| |                                |  |                       |          
| | Range of 
  Exercise 
  Prices |  | Number
  Outstanding  |          
| |                                |  |                       |          
| |                                |  |                       |          
| | $  5.16 - $12.13               |  |                       | 2,706,000
| | $12.72 - $17.13                |  |                       | 9,073,000
| | $18.56 - $22.77                |  |                       | 6,470,000

62

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---

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

8.       Stockholders
equity (continued)

At
September 30, 2004, there were approximately 9.2 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, 2004, there were approximately 130,000 options
outstanding at exercise prices ranging from $12.33 to $21.63 per share, expiring
in 2008 through 2014.

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, 2004, there were approximately 608,000 shares
reserved under the plan, for which the Company has recorded $3.3 million, $2.9
million and $2.9 million of compensation expense for the years ended September
30, 2004, 2003 and 2002, 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, 2004 and 2003, 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, 2004 and
2003, there were approximately 21.0 million shares of common stock reserved for
future issuance upon the conversion of the Companys 2023 Notes.

9.       Restricted
funds

The estimated fair value based on quoted market prices of restricted
funds at September 30, 2004 is as follows (table in thousands):

| |                   |  | Cost |        | Gross
  UnrealizedGains |  | Gross
  UnrealizedLosses |     | Estimated 
  Fair Value | 
| | ----------------- |  | ---- | ------ | ----------------------- |  | ------------------------ | --- | ----------------------- | 
| |                   |  |      |        |                         |  |                          |     |                         | 
| | Debt securities   |  | $    | 69,794 |                         |  | $                        | 403 |                         | 
| |                   |  |      |        |                         |  |                          |     |                         | 
| | Equity securities |  |      | 3,000  |                         |  |                          | 62  |                         | 
| |                   |  |      |        |                         |  |                          |     |                         | 
| |                   |  |      |        |                         |  |                          |     |                         | 
| | Total             |  | $    | 72,794 |                         |  | $                        | 465 |                         | 
| |                   |  |      |        |                         |  |                          |     |                         | 

Proceeds
from the sale of securities for the year ended September 30, 2004 were $17,000.
Gross gains of $34,000 were realized on those sales.

63

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

10.     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 the Companys 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.  Reserves
for professional liability risks were $86.3 million and $52.8 million at September 30, 2004 and
2003, respectively.

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 ($6.0 million effective October 1, 2004) in the aggregate per hospital and substantially all of the
Companys approximately 200 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.

11.     Insurance
claims

During
the fourth quarter ended September 30, 2004, four hurricanes and one tropical storm made
landfall in Florida, where the Company owns and operates 14 hospitals.  Hurricane
damage and disruption to Company hospitals located in the affected areas, as well as to
employees homes, local businesses and physicians offices, was extensive. One
Company hospital in South Carolina also suffered hurricane-related damage.

The
Company and its hospitals are insured for property damage and business interruption. The
Company has initiated the insurance claims process, and is working closely with its
insurers in order to resolve and settle all hurricane-related claims. Management expects
that the Company will recover the amounts claimed and to be claimed, including claims for
property damage and business interruption losses, subject to policy deductibles. However,
the insurance settlement process is complex and the actual results of that process could
differ from the Companys estimates.

The uninsured impact from
these storms for the year ended September 30, 2004 amounted to approximately
$9.5 million in lower net income for the fourth quarter and year ended
September 30, 2004.   That amount
represented lost revenues and uninsured costs, including insurance deductibles,
net of income taxes.

12.     Commitments
and contingencies

A number of
hospital renovation and/or expansion projects were underway at September 30,
2004.  None of these projects are
individually significant nor do they represent a significant commitment in
total at September 30, 2004.  In
addition, the Company plans to replace two of its existing hospitals
(Brooksville, Florida, and Carlisle, Pennsylvania) and build one new hospital
(Naples, Florida) over the next three years. As of September 30, 2004, the remaining
construction cost of these three hospitals is expected to be approximately
$133.9 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 four years.  The cost for this hospital has not yet been
determined.

On
September 3, 2004 a lawsuit, Olga S. Estrada v. Health Management Associates, Inc., was filed against the Company in the Court of Common Pleas
in Cherokee County, South Carolina, which lawsuit challenges
the prices the Company charges insured and uninsured patients. The case was subsequently transferred to the United States
District Court for the District of South Carolina, Spartanburg Division.
The plaintiff in
the lawsuit seeks damages and injunctive relief on behalf of a purported class
of patients treated in the Companys South Carolina facilities.

64

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---

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

12.     Commitments
and contingencies (continued)

On August
5, 2004 a lawsuit, Jose Manuel Quintana v. Health Management Associates, Inc., was filed against the Company in the Circuit Court for the 11th
Judicial Circuit in Miami-Dade County, Florida, which lawsuit alleges that the
Company violated the State of Floridas unfair trade practices laws by charging
uninsured patients more than insured patients. The plaintiff in the lawsuit
seeks damages and injunctive relief on behalf of a purported class of patients
treated in the Companys facilities.

Both of
these lawsuits are similar to lawsuits filed against many other hospital
systems throughout the country in respect to hospital charges billed to
uninsured patients. The Company believes that our billing and collection
practices are appropriate, reasonable and in compliance with all applicable
laws, rules and regulations and the Company intends to vigorously defend
against the allegations contained in these lawsuits. At this time, it is not possible to estimate the ultimate
loss, if any, related to these lawsuits and therefore no accrual for loss has been recorded at September 30, 2004.

13.    Subsequent events

Effective
October 1, 2004, the Company acquired Chester County Hospital, a 82-bed
hospital located in Chester, South Carolina. 
The future operations of Chester County Hospital are not expected to
materially affect the Companys results of operations.

On October
7, 2004, the Company signed an agreement with LifePoint Hospitals, Inc.
pursuant to which the Company will acquire from LifePoint Hospitals, Inc.
substantially all of the assets of the 56-bed Bartow Memorial Hospital, in
exchange for substantially all of the assets of the Companys 76-bed Williamson
Memorial Hospital.  This transaction is
not expected to materially affect the Companys results of operations.

On November
24, 2004, the Company completed a consent solicitation that amended the indenture governing the 2023
Notes to eliminate a provision in the indenture that prohibited the Company
from paying cash upon conversion of the Notes if an event of default as defined
in the indenture exists at the time of conversion.

On November
30, 2004, the Company further amended the indenture governing the 2023 Notes to provide that in lieu
of providing shares of common stock upon a conversion event, the Company will satisfy any conversion up to its par value
of the 2023 Notes by making a cash payment.

The Company
presently is in the process of offering the holders of its outstanding 2022
Notes the ability to exchange all or a portion of their Notes for an equal
amount of a new issuance of Zero-Coupon Convertible Senior Subordinated
Notes due 2022, or New 2022 Notes. The terms of the New 2022 Notes will be
substantially similar to the terms of the existing 2022 Notes, except that: (i)
upon conversion, the Company will pay holders cash equal to the accreted value
of the New 2022 Notes being converted and the remainder in cash or shares of
common stock, at the Companys option; (ii) holders may require the Company to
repurchase their New 2022 Notes on January 28, 2006, (iii) the New 2022 Notes
will contain additional anti-dilution protection for cash dividends until
January 28, 2007, (iv) the New 2022 Notes will require the Company to pay only
cash (in lieu of cash, shares of common stock or a combination of cash and
shares of common stock) when New 2022 Notes are repurchased at the option of
the holders, whether on a specified purchase date or upon the occurrence of a
fundamental change, and (v) contingent interest payable will equal to 0.125% of
the average price of the New 2022 Notes during the relevant specified period.
The exchange offer expires on December 28, 2004, unless extended at the
Companys option. Those 2022 Notes which are not exchanged will be considered dilutive, and based on current and proposed
accounting pronouncements, the Company believes that the New 2022 Notes generally will not be considered dilutive.

65

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---

14.    Quarterly data
(unaudited)

|                                          |  | Years ended September 30, 2004 and 2003
  (in thousands, except per share data) |         |                             |  
|----------------------------------------- |  | ------------------------------------------------------------------------------- | ------- | --------------------------- | -
|                                          |  |                                                                                 |         |                             |  
|                                          |  | Quarter                                                                         |         | Year Ended 
  September 30, |  
|                                          |  |                                                                                 |         |                            
|                                          |  | First                                                                           |         | Second                      |  
|                                          |  |                                                                                 |         |                             |  
|2004                                      |  |                                                                                 |         |                             |  
|                                          |  |                                                                                 |         |                             |  
|                                          |  |                                                                                 |         |                             |  
|Net patient
     service revenue          |  | $                                                                               | 756,553 |                             | $
|Income
  before income
     taxes         |  | $                                                                               | 115,549 |                             | $
|Net income                                |  | $                                                                               | 71,311  |                             | $
|Net income
  per share:                   |  |                                                                                 |         |                             |  
|Basic                                     |  | $                                                                               | .30     |                             | $
|Diluted                                   |  | $                                                                               | .29     |                             | $
|Weighted
  average
     number of shares: |  |                                                                                 |         |                             |  
|Basic                                     |  |                                                                                 | 241,322 |                             |  
|Diluted                                   |  |                                                                                 | 246,153 |                             |  
|                                          |  |                                                                                 |         |                             |  
|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 |                             |  

66

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

None.

Item 9A. 
Controls and Procedures

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.

Changes
In Internal Control 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.

Item 9B.  Other Information

On December
8, 2004, our Board of Directors granted the following contingent stock
incentive awards of shares of common stock to the following executive officers
under our Executive Incentive Compensation Plan:  Robert E. Farnham - 12,413 shares, Timothy R. Parry - 11,542
shares, Peter M. Lawson - 13,175 shares, Jon P. Vollmer - 13,175 shares, and
Joseph V. Vumbacco - 36,749 shares.  The
shares awarded were credited to each recipients account under the plan and
will vest and be issued on the fourth anniversary of the date of the award,
provided the recipient is still our employee. 
The form of Contingent Stock Incentive Award is included as Exhibit
10.37 to this Form 10-K.

67

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PARTIII

Item 10. 
Directors and Executive Officers of the Registrant

Except as
set forth below, 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 15,
2005 under the headings Election of Directors, Corporate Governance  Board
Meetings and Committees of the Board, and Corporate Governance  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,
2004; 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 5.05 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.

During the
fourth quarter of our fiscal year ended September 30, 2004, our Board of
Directors adopted procedures for security holders to communicate directly with
the Board of Directors, including for the purpose of recommending Director
nominees. Security holders may make such communications by sending a written
communication to our Corporate Secretary at our executive officers in Naples,
Florida. The Corporate Secretary will promptly forward all security holder
communications directly to the entire Board of Directors, to the Chairman of
the Board, or to such Committee or individual Director to which communications
relate. The Corporate Secretary will also be responsible for identifying
communications that (i) do not directly relate to matters for which the Board
of Directors is responsible and forwarding such communications to the
appropriate person(s) within our company, and (ii) identifying and, if
appropriate, directly responding to irrelevant or improper communications.

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 15, 2005 under the heading
Executive Compensation, which proxy statement will be filed within 120 days
after the end of our fiscal year ended September 30, 2004.

Item 12.  Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters

Except as
set forth below, 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 15, 2005 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, 2004.

68

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Securities Authorized for Issuance under
Equity Compensation Plans

Equity Compensation Plan Information

|Plan category                                                  |  | Number of securities
  to be issued 
  upon exercise of 
  outstanding options, 
  warrants and rights |  | Weighted-average 
  exercise price of 
  outstanding options, 
  warrants and rights |  | Number of securities 
  remaining available for future 
  issuance under equity 
  compensation plans (excluding 
  securities reflected in column (a)) | 
|-------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|                                                               |  |                                                                                                        |  |                                                                                      |  |                                                                                                                                                         | 
|                                                               |  | (a)                                                                                                    |  | (b)                                                                                  |  | (c)                                                                                                                                                     | 
|                                                               |  |                                                                                                        |  |                                                                                      |  |                                                                                                                                                         | 
|Equity
  compensation plans
  approved by security holders     |  |                                                                                                        |  | 18,987,000                                                                           |  |                                                                                                                                                         | 
|                                                               |  |                                                                                                        |  |                                                                                      |  |                                                                                                                                                         | 
|Equity
  compensation plans not
  approved by security holders |  |                                                                                                        |  | -                                                                                    |  |                                                                                                                                                         | 
|                                                               |  |                                                                                                        |  |                                                                                      |  |                                                                                                                                                         | 
|                                                               |  |                                                                                                        |  |                                                                                      |  |                                                                                                                                                         | 
|Total                                                          |  |                                                                                                        |  | 18,987,000                                                                           |  |                                                                                                                                                         | 
|                                                               |  |                                                                                                        |  |                                                                                      |  |                                                                                                                                                         | 

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 15, 2005 under the heading
Certain Transactions, which proxy statement will be filed within 120 days
after the end of our fiscal year ended September 30, 2004.

Item 14.  Principal Accountant 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 15, 2005 under the heading
Relationship with Independent Registered Public Accounting Firm, which proxy statement will be
filed within 120 days after the end of our fiscal year ended September 30,
2004.

PART IV

Item 15. 
Exhibits and Financial Statement Schedules

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
this Item 15.

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.

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.

69

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

|Description                                                       |  | Balance at
  
  beginning of 
  period |   | Acquisitions
  
  and 
  Dispositions |  | Charges to
  
  Operations (a) |  | Charged to
  
  Other 
  Accounts |        | Deductions 
  (b) |  | Balance at
  end of 
  period |  
|----------------------------------------------------------------- |  | -------------------------------------- | - | ------------------------------------- |  | ------------------------------ |  | --------------------------------- | ------ | ----------------- |  | ----------------------------- | -
|                                                                  |  |                                        |   |                                       |  |                                |  |                                   |        |                   |  |                               |  
|Year ended September 30,
  2002
  allowance for doubtful accounts |  |                                        | $ | 116,785                               |  |                                |  | $                                 | 33,143 |                   |  |                               | $
|                                                                  |  |                                        |   |                                       |  |                                |  |                                   |        |                   |  |                               |  
|Year ended September 30,
  2003
  allowance for doubtful accounts |  |                                        | $ | 138,616                               |  |                                |  | $                                 | 1,061  |                   |  |                               | $
|                                                                  |  |                                        |   |                                       |  |                                |  |                                   |        |                   |  |                               |  
|Year ended September 30,
  2004
  allowance for doubtful accounts |  |                                        | $ | 151,015                               |  |                                |  | $                                 | 2,376  |                   |  |                               | $

| | (a) | Charges to
  operations include amounts related to provisions for doubtful accounts,
  before recoveries.
| | --- | ---------------------------------------------------------------------------------------------------------
| |     |                                                                                                          
| | (b) | Includes
  amounts written-off as uncollectible, net of revenues.                                        

70

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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                                
|                                  
|                                  
|                                  

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. Schoen          |  | Chairman of
  the Board
     of Directors |  | December 8,
  2004
|------------------------------ |  | ----------------------------------------- |  | ------------------
|                               |  |                                           | 
|William J. Schoen              |  |                                           | 
|                               |  |                                           |  |                   
|/s/ Joseph V. Vumbacco         |  | President,
  Chief Executive Officer,     |  | December 8,
  2004
|                               |  | and
  Director (Principal                 |  |                   
|Joseph V. Vumbacco             |  | Executive
  Officer)                      |  |                   
|                               |  |                                           |  |                   
|/s/ Robert E. Farnham          |  | Senior Vice
  President                   |  | December 8,
  2004
|                               |  | and
  Chief Financial Officer             |  |                   
|Robert E. Farnham              |  | (Principal Financial Officer              |  |                   
|                               |  | and
  Principal Accounting Officer)       |  |                   
|                               |  |                                           |  |                   
|/s/ Kent P. Dauten             |  | Director                                  |  | December 8,
  2004
|                               |  |                                           |  |                   
|Kent P. Dauten                 |  |                                           |  |                   
|                               |  |                                           |  |                   
|/s/ Donald E. Kiernan          |  | Director                                  |  | December 8,
  2004
|                               |  |                                           |  |                   
|Donald E. Kiernan              |  |                                           |  |                   
|                               |  |                                           |  |                   
|/s/ Robert A. Knox             |  | Director                                  |  | December 8,
  2004
|                               |  |                                           |  |                   
|Robert A. Knox                 |  |                                           |  |                   
|                               |  |                                           |  |                   
|/s/ William E. Mayberry        |  | Director                                  |  | December 8,
  2004
|                               |  |                                           |  |                   
|William E. Mayberry, M.D.      |  |                                           |  |                   
|                               |  |                                           |  |                   
|/s/ William C. Steere, Jr.     |  | Director                                  |  | December 8,
  2004
|                               |  |                                           |  |                   
|William C. Steere, Jr.         |  |                                           |  |                   
|                               |  |                                           |  |                   
|/s/ Randolph W. Westerfield    |  | Director                                  |  | December 8,
  2004
|                               |  |                                           |  |                   
|Randolph W. Westerfield, Ph.D. |  |                                           |  |                   

71

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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, are
  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 dated as of May 14, 2004 among the Company, Bank of America, N.A.,
  as Administrative Agent, Wachovia Bank, National Association, as Syndication
  Agent, JPMorgan Chase Bank and Suntrust Bank, as Co-Documentation Agents, and
  Banc of America Securities LLC and Wachovia Capital Markets, LLC, as Joint
  Lead Arrangers and Joint Book Managers, previously filed and included as
  Exhibit 4.5 to the Companys Quarterly Report on Form 10-Q for the fiscal
  year ended June 30, 2004, 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.                                                                                  

72

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| | 4.6 | First
  Supplemental Indenture between Health Management Associates, Inc., as Issuer,
  and Wachovia Bank, National Association, as Trustee, dated as of November 24,
  2004 to Indenture dated as of July 29, 2003 pertaining to the 1.50%
  Convertible Senior Subordinated Notes due 2023. 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                               
| | 4.7 | Second
  Supplemental Indenture between Health Management Associates, Inc., as Issuer,
  and Wachovia Bank, National Association, as Trustee, dated as of November 30,
  2004 to Indenture dated as of July 29, 2003 pertaining to the 1.50%
  Convertible Senior Subordinated Notes due 2023.

(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.                                                                                                                                                                  

73

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| | 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.    
| |       |                                                                                                                                                                                                                                                                                                                   
| | 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.

74

---

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| | 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.                                                                                   
| |       |                                                                                                                                                                                                                                                                                                                                                                            
| | 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 | 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.                                                                                      
| |       |                                                                                                                                                                                                                                                                                                                                                                            
| | 10.27 | 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.                  
| |       |                                                                                                                                                                                                                                                                                                                                                                            
| | 10.28 | 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.
| |       |                                                                                                                                                                                                                                                                                                                                                                            
| | 10.29 | 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.                                                                                   
| |       |                                                                                                                                                                                                                                                                                                                                                                            
| | 10.30 | 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.                                                                                         
| |       |                                                                                                                                                                                                                                                                                                                                                                            
| | 10.31 | 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.                                       
| |       |                                                                                                                                                                                                                                                                                                                                                                            
| | 10.32 | 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.                    

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| | 10.33 | 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.                                                                                                   
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 10.34 | 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.
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 10.35 | Form of
  Director Stock Option Agreement under the Health Management Associates, Inc.
  Stock Option Plan for Outside Directors, as amended.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 10.36 | Form of
  Stock Option Agreement under the Health Management Associates, Inc. 1996
  Executive Incentive Compensation Plan, as amended.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 10.37 | Form of
  Contingent Stock Incentive Award under the Health Management Associates, Inc.
  1996 Executive Incentive Compensation Plan, as amended.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

(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.

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(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.

77

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