Kusserow’s Corner: DOJ Intervenes against Health Management Association Hospitals

The Department of Justice (DOJ) has intervened in eight False Claims Act lawsuits against Health Management Associates Inc. (HMA), alleging that HMA billed federal health care programs for medically unnecessary inpatient admissions from the emergency departments at HMA hospitals and paid remuneration to physicians in exchange for patient referrals. The DOJ also joined in the allegations in one of the lawsuits that Gary Newsome, HMA’s former CEO, directed HMA’s corporate practice of pressuring emergency department physicians and hospital administrators to raise inpatient admission rates, regardless of medical necessity, and that this resulted in the submission of inflated or false claims to federal health care programs.

HMA operates 71 hospitals in 15 states: Alabama, Arkansas, Florida, Georgia, Kentucky, Mississippi, Missouri, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Washington and West Virginia. Last July it was announced that Community Health Services, the second-largest U.S. hospital system, agreed to buy HMA for $3.9 billion in cash and stock. Community Health Services added the HMA hospitals to their existing 135 hospitals.

Complaints also allege that HMA:

  1. improperly admitted patients for scheduled surgical procedures that should have been done on an outpatient basis;
  2. paid kickbacks, either in the form of bonuses or awarded contracts, to physician groups staffing HMA emergency rooms to induce the physicians to induce referrals and admit patients unnecessarily;
  3. provided improper remuneration, both through the provision of free office space and staffing and through direct payments to a physician practice group in exchange for referrals to HMA hospitals;
  4. gave kickbacks to physicians by paying inflated prices for physician-owned assets; and
  5. provided sham medical directorship contracts and selling assets to physicians for below fair market value.

The lawsuits were filed under the qui tam, or whistleblower, provisions of the False Claims Act. The eight lawsuits are pending in the Southern and Middle Districts of Florida, Middle District of Georgia, Northern District of Illinois, Western District of North Carolina, Eastern District of Pennsylvania and District of South Carolina.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2014 Strategic Management Services, LLC. Published with permission.