Health Management Associates

(HMA)

has another headache.

The rural hospital operator, already suffering from a slowdown in growth, now faces demands from a group of activist shareholders. The Sheet Metal Workers International Association, a union that has pushed for reforms at other companies in the past, wants HMA to change both its hospital pricing strategy and its stock-based compensation system for executives.

Specifically, the union wants HMA to stop charging "impoverished, uninsured patients" more than it charges the insured. It points out that HMA already faces a big lawsuit, filed by a high-profile attorney, for allegedly violating trade laws in its home base of Florida. And it suggests that HMA should change its pricing strategy -- considered aggressive by some -- before it is forced to do so by others.

The lawsuit portrays HMA's list prices, often charged only to the uninsured, as especially high. It claims that some HMA hospitals charge uninsured patients "500% and even 600%" of what it actually costs them to deliver services.

"The allegation that this is going on has already generated awful publicity for the company," the union states in a recent regulatory filing. And "we believe it is better for our company to try to get on the high ground on this issue on its own."

HMA had no one available to comment on the matter Wednesday. However, the company has defended its treatment of uninsured patients in the past, pointing out that it has provided hundreds of millions of dollars' worth of uncompensated care to those in need. During the past fiscal year, for example, HMA wrote off more than $421 million worth of charity and indigent care.

Nevertheless, plaintiff's attorney Archie Lamb -- known for a multibillion-dollar settlement against health maintenance organizations -- continues to pursue his own claim against the company. Lamb is seeking both monetary damages and a change in HMA's business practices. He is involved in similar cases against

HCA

(HCA) - Get Report

and

Universal Health

(UHS) - Get Report

.

HMA's stock inched up 4 cents to $22.17 on Wednesday.

Options

The union has also urged HMA to seek shareholder permission before showering well-rewarded executives with additional stock options.

The group notes that former CEO William Schoen has already amassed 9.2 million exercisable, in-the-money stock options worth more than $100 million. By exercising those options, the group says, Schoen could suddenly surpass a big institution as the largest shareholder, with 9.2% of the company's outstanding stock.

The union also complains about compensation for current CEO Joseph Vumbacco. First, the group points out that Vumbacco scored more than $1.45 million in salary and bonuses -- plus extras like use of the company's aircraft -- in 2003. Moreover, it says that Vumbacco also raked in 100,000 new stock options. Now, it says, Vumbacco currently holds 1.39 million exercisable, in-the-money stock options -- or more than all other senior company executives combined.

"In our opinion, there should be a limit to how much money and dilution that shareholders should bear in order to motivate executives to do their jobs," the union's filing states. "While there is nothing a shareholder vote can do about options granted in the past, we can say that in the future there needs to be some restraint."

The union is asking shareholders to support proposals for both changes at HMA's annual meeting on Feb. 5.

Motivation

To be fair, the same union has been accused of looking out for itself, rather than other shareholders, in the past.

For example, manufacturer

Paul Mueller

(MUEL)

in 2001 portrayed the union -- then representing 390 of its employees -- as a "self-interested" group simply trying to place a union-friendly director on its board after a dispute with the company. Paul Mueller also noted that the union owned just 90 shares of the company's stock.

By then, the union had already tried -- but failed -- to replace another Paul Mueller director a year earlier despite support from the company's largest institutional shareholder. That director, then 28 and a grandson of the company's founder, allegedly scored a special appointment and continues to sit on the board today.

The current situation looks at least somewhat similar. For starters, the union has already mentioned personal differences with HMA.

"In addition to its concerns as a shareholder," the union's regulatory filing states, "SMWIA also is concerned that construction work at HMA facilities has been done by non-union contractors who are believed not to be providing health insurance to all their workers (in contrast to SMWIA-signatory contractors)."

The union also acknowledges that it owns just 120 shares of HMA's stock.

Chorus

But the group is hardly alone in voicing concerns about HMA's pricing strategy, at least. Kenneth Weakley, the UBS analyst best known for exposing the aggressive pricing at

Tenet

(THC) - Get Report

, has singled out HMA for scrutiny as well.

Weakley, too, portrays HMA's hospital prices as higher than normal and warns that the company's pricing strategy may prove unsustainable in the future.

Uninsured patients in Florida go a step further. They claim that HMA has already harmed them by attempting to collect on high-priced bills they cannot afford. In some instances, they say, HMA has even placed liens on their homes, garnished their wages and seized their bank accounts.

"As a result of HMA's unconscionable, deceptive and unfair practices," their complaint states, "HMA has become one of the most profitable health care companies in the U.S."

The lawsuit goes on to say that HMA employs its strategy, in part, to inflate figures for charity and indigent care so that it can collect bigger so-called "disproportionate share hospital," or DSH, reimbursements from the government. Medicaid, which funds the lion's share of such payments, accounts for 9% of HMA's total revenue.

The complaint says that HMA also charges high prices to boost its tax write-offs and any profits it does collect from the uninsured. And it claims that HMA has broken its own promise to respect the dignity of all patients in the process.

"The fact is that HMA provides 'individual dignity' only to those consumers who are able to afford health insurance," the lawsuit states, "but treats all others in a discriminatory and unconscionable manner that violates Florida law."

The lawsuit seeks relief for all uninsured patients treated by HMA hospitals since August 1994.