Health Management Associates to Pay Over $260M to Resolve False Claims; Whistleblowers to Receive $15M and $12.4M

Posted: 09/28/2018  browse the blog archive
Health Management Associates to Pay Over $260M to Resolve False Claims; Whistleblowers to Receive $15M and $12.4M

Health Management Associates, LLC (HMA), formerly a U.S. hospital chain headquartered in Naples, Florida, will pay over $260 million to resolve criminal charges and civil claims relating to a scheme to defraud the United States, the U.S. Department of Justice announced this week.  The government alleged that HMA knowingly billed government health care programs for inpatient services that should have been billed as outpatient or observation services, paid remuneration to physicians in return for patient referrals, and submitted inflated claims for emergency department facility fees. 

HMA was acquired by Community Health Systems Inc. (CHS), a major U.S. hospital chain, in January 2014, after the alleged conduct at HMA occurred.  Since July 2014, HMA has been operating under a Corporate Integrity Agreement (CIA) between CHS and the HHS-OIG.

As part of the criminal resolution, HMA entered into a three-year Non-Prosecution Agreement (NPA) with the Criminal Division’s Fraud Section in connection with a corporate-driven scheme to defraud Federal health care programs by unlawfully pressuring and inducing physicians serving HMA hospitals to increase the number of emergency department patient admissions without regard to whether the admissions were medically necessary.  The scheme involved HMA hospitals billing and obtaining reimbursement for higher-paying inpatient hospital care, as opposed to observation or outpatient care, from Federal health care programs, increasing HMA’s revenue.  Under the terms of the NPA, HMA will pay a $35 million monetary penalty.  Under the terms of the NPA, HMA and CHS, the current parent company, agreed to cooperate with the investigation, report allegations or evidence of violations of Federal health care offenses, and ensure that their compliance and ethics program satisfies the requirements of an amended and extended CIA between CHS and HHS-OIG.

In addition, an HMA subsidiary, Carlisle HMA, LLC, formerly doing business as Carlisle Regional Medical Center, has agreed to plead guilty to one count of conspiracy to commit health care fraud.  The plea agreement remains subject to acceptance by the court.  Up until 2017, Carlisle HMA, LLC owned and operated Carlisle Regional Medical Center, an acute care hospital located in Carlisle, Pennsylvania.  Carlisle HMA, LLC was charged in a criminal information filed today in the District of Columbia with conspiracy to commit health care fraud.

According to admissions made in the resolution documents, HMA instituted a formal and aggressive plan to improperly increase overall emergency department inpatient admissions at all HMA hospitals, including at Carlisle Regional Medical Center.  As part of the plan, HMA set mandatory company-wide admission rate benchmarks for patients presenting to HMA hospital emergency departments – a range of 15 to 20 percent for all patients presenting to the emergency department, depending on the HMA hospital, and 50 percent for patients 65 and older (i.e. Medicare beneficiaries) - solely to increase HMA revenue.  HMA executives and HMA hospital administrators executed the scheme by pressuring, coercing and inducing physicians and medical directors to meet the mandatory admission rate benchmarks and admit patients who did not need impatient admission through a variety of means, including by threatening to fire physicians and medical directors if they did not increase the number of patients admitted.

HMA also agreed to pay $216 million as part of a related civil settlement. The civil settlement resolves HMA’s liability for submitting false claims between 2008 and 2012 as part of its corporate-wide scheme to increase inpatient admissions of Medicare, Medicaid and the Department of Defense’s (DOD) TRICARE program beneficiaries over the age of 65.  The government alleged that the inpatient admission of these beneficiaries was not medically necessary, and that the care needed by, and provided to, these beneficiaries should have been provided in a less costly outpatient or observation setting.  HMA agreed to pay $62.5 million to resolve these allegations with $61,839,718 being paid to the United States and $706,084 being paid to participating States.

The civil settlement also resolves allegations that during the period from 2003 through 2011, two HMA hospitals in Florida, Charlotte Regional Medical Center and Peace River Medical Center, billed federal health care programs for services referred by physicians to whom HMA provided remuneration in return for patient referrals.  To induce patient referrals, Charlotte Regional provided a local physician group with free office space and staff, as well as direct payments, which purportedly covered overhead and administrative costs incurred by the group for its management of a Charlotte Regional physician.  HMA also provided another local physician with free rent and upgrades to his office space.  HMA agreed to pay $93.5 million to resolve these civil allegations, with the United States receiving $87.96 million, and the State of Florida receiving $5.54 million.

Additional allegations that are resolved by the civil settlement are that between 2009 and 2012, two former HMA hospitals, Lancaster Regional Medical Center and Heart of Lancaster Medical Center in Pennsylvania, billed federal health care programs for services referred by physicians with whom the facilities had improper financial relationships.  These relationships stemmed from HMA’s excessive payments to (1) a large physician group in return for two businesses owned by the group and for services allegedly performed by the group, and (2) a local surgeon that exceeded the value of the services provided.  The government alleged that these arrangements were structured in this manner to disguise payments intended to induce the referral of patients.  HMA agreed to pay $55 million to the United States to resolve these civil allegations.

Finally, the civil settlement will also resolve claims that Crossgates Hospital, an HMA facility in Brandon, Mississippi, leased space to a local physician from Jan. 15, 2005 through Jan. 14, 2007, but required the physician to pay rent for only half of the space he was actually occupying, in return for patient referrals to Crossgates Hospital.  HMA agreed to pay $425,000 to the United States to resolve these civil allegations.

Federal law, including the Anti-Kickback Statute and the Stark Law, prohibits hospitals from providing financial inducements to physicians for referrals.  These provisions are designed to ensure that physician decision-making is not compromised by improper financial incentives.

The government further alleged that from September 2009 through December 2011, certain HMA hospitals submitted claims to Medicare and Medicaid seeking reimbursement for falsely inflated emergency department facility charges.  HMA agreed to pay $12 million to resolve these civil allegations, with $11.028 million being paid to the United States and $972,000 being paid to participating States.

The allegations resolved by the settlement were originally brought in eight lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government for false claims and to receive a share of any recovery. The whistleblower in United States ex rel. Nurkin will receive approximately $15 million as a share of the recovery, and the whistleblowers in United States ex rel. Miller will receive approximately $12.4 million as their share of the recovery.  The whistleblower shares to be awarded in the remaining cases have not yet been determined.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.