Health Care's 10 Dumbest Things, Part Two

3. HMA's Worthless Bribe

Bribery backfired at Health Management Associates (HMA Quote).

The Florida-based hospital chain kicked off the year with a brilliant idea. It would borrow billions of dollars -- wrecking its strong balance sheet in the process -- to finance a huge one-time dividend for its shareholders. By doing so, the company figured, it could soothe inpatient investors and buy more time for a turnaround.

The strategy worked -- for a few hours. After an early spike, HMA's stock soon went flat and has been spiraling lower ever since.

By mid-year, hit by weak volumes and bad debt from the uninsured, HMA was badly missing Wall Street estimates and slashing its guidance to boot.

By the time the third quarter rolled around, HMA searched for a novel way to reach its targets and please its tormented investors. By selling some receivables, which it had struggled to collect itself, it could book the proceeds and actually beat its numbers for a change.

But Kenneth Weakley, that astute analyst at Credit Suisse, quickly caught on.

"The selling of any asset is just that -- selling an asset," Weakley decided. "HMA, of course, is not in the 'selling assets' business; they're in the hospital business.

"It may not be a very good business right now, but that's the business they're in."

Even HMA Chairman William Schoen seems wary of the industry. He continues to dump large chunks of HMA stock despite its falling price.

Umm ... time to pull the plug here, folks?

Dumb-O-Meter Score: 89. "Bill is simply engaging in sound personal financial planning," HMA CEO Burke Whitman assured last month. "His confidence in HMA is unwavering."