From Eric Borneman's Aquarium Corals:
"Large-polyp recession condition 1 is most common in large-polyped corals such as faviids (favia, favites,etc.), mussids (Lobophyllia, Symphyllia, etc.) An apparantly healthy coral with good expansion begins to display a loss of tissue from the margins, expanding septa and the rest of the skeleton. The condition may or may not be accompanied secondarily by Ostreobium algae or protozoan brown jelly infections. the tissue recession seems 'forced,' as even marginal tissue at the edges of recession appear healthy, though slightly shrunken or 'stretched.'. The coral may experience a certain amount of tissue loss, and then have the progression halt as quickly as it began. At other times, the entire coral is lost through a slow wasting.
Again, the coral seems unresponsive to normal coursees of action. It may well be that a nutritional deficit is being exeprienced, as other massive corals show tissue atrophy and necrosis in salinities lower than those of natural seawater seem to increase the incidence of this syndrome. The separation of the polyp from the skeleton in Catalaphyllia may be related to this condition."
IME Euphyllia corals appreciate random, medium flow. My hammers, torch and frogspawn, as well as the other LPS, have all shown increased growth since I improved flow in the 65g. The flow pattern is random (direct flow can tear their tissues), and they seem to like having their tentacles tossed around.
Borneman does mention that Euphyllia corals don't like overly strong flow, but also says this:
"Sedimentation of detritus, sand or other particulate matter in the tank can have serious consequences to corals. Stagnant water can lead to a 20-fold increase in bacterial populations, and the resultant hypersecretion of mucus can create pathogenic conditions or even suffocate the coral [...] Because of the accumulatoin of microbes and other microorganisms, including sulfer-reducing bacteria that thrive in locally anoxic conditions, local necrosis can spread beyond the area of settling, potentially killing the entire coral. Good water flow, or at least periodic blasting of dead water areas, eliminates the likelihood of such depositions, as well as the problems asociated with them."
How much do you feed your hammer, and how much flow is it exposed to? It's not necessarily a factor, but if your water parameters are the same as always, these are the two things I'd look at next.
