Bad Debt Hammers HCA

"This issue is particularly concerning for the company since it has yet to accurately anticipate its bad debt trend," noted Lieberman, who has an equal-weight rating on HCA shares.

Lehman Brothers analyst Adam Feinstein voiced similar concerns. He found HCA's latest bad debt adjustment surprising, especially following a number of similar charges taken by the company last year. And he pointed to "continued evidence" that HCA has been underreserving for bad debts for some time.

Feinstein also pointed out that HCA's earnings miss could have been larger. He calculated that the company had included up to 8 cents worth of unexpected malpractice benefits into its new full-year estimate.

"As a result," he said, "we believe that the decline in guidance is more significant than the headline may suggest."

Feinstein did point to rebounding admissions -- which jumped an estimated 2.5% -- as a "bright spot" in the quarter. But he also noted that much of the increase stemmed from uninsured patients whose unpaid bills will only compress the company's margins further.

HCA's stock plunged 7.8% to $39.28 on Tuesday's dismal update. Meanwhile, Lieberman questioned whether the company's warning could signal more bad news to come.

"The continued deterioration in HCA's bad debts obviously raises the question of whether other hospital companies will also experience additional issues with their bad debts," he stated.

Urban Blight

Leerink Swann analyst Kate Carr went a step further by predicting that three urban chains -- Triad, Universal Health and Tenet -- would be particularly vulnerable to sympathy pains on Tuesday. Almost on cue, all three racked up some of the biggest losses in the sector.

Triad spiraled 6% to $31.27 despite some expectations that the company's own bad debt problems may be moderating. Universal slid 2.8% to $43.11. And Tenet -- hit also with news of two fresh government probes -- plunged 4.1% to $10.53.