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Healthcare Business News

Feds to intervene in HMA whistle-blower suits

By Beth Kutscher
Posted: December 23, 2013 - 3:30 pm ET

The federal government plans to intervene in four whistle-blower suits against Health Management Associates, Naples, Fla., the hospital chain said in a stock exchange filing after three federal district courts unsealed the complaints.

Whistle-blower suits that have the support of the government are historically more likely to succeed.

HMA also disclosed that the government plans to intervene in four additional qui tam cases. The chain said in the filing that it intends to contest the complaints and seek dismissal of the suits.

The unsealed complaints offered revealing details of alleged HMA practices to boost Medicare and Medicaid payments.

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Two of the unsealed complaints—filed in the Middle District of Georgia and the Southern District of Florida—allege that HMA inappropriately admitted patients to its hospitals and then violated the False Claims Act in submitting the claims for Medicare and Medicaid reimbursement.

In the Southern District of Florida, for instance, the complaint alleges that “numerous” Medicare one-day stay patients were billed as inpatients at an HMA hospital in Durant, Okla., and the hospital admitted patients who did not meet admission criteria “under extreme pressure exerted by (the) hospital CEO.”

At Physicians Regional Medical Center, Naples, HMA collected $300,000 from improper admissions in the first six months of 2010 alone, according to the whistle-blower, who worked in HMA's compliance department.

The other two complaints—in the Middle and Southern Districts of Florida—allege that HMA had inappropriate financial relationships with physicians, violating Stark and anti-kickback laws.

In the Middle District of Florida, the whistle-blower was the CEO of Charlotte Regional Medical Center. He alleged that the hospital spent $20,000 to $40,000 a month—in free office space, staff, equipment and direct payments—to induce a primary-care physician practice to make referrals and admissions. The revenue generated from these patients exceeded $36 million a year, or about one third of the hospital's revenue, from 2004 until mid-2007, according to the complaint. At Peace River Regional Medical Center, another HMA hospital that received these patients, the referrals also accounted for one third its revenue, exceeding $12 million a year during the same time period.

“We closely monitor our billing practices, healthcare practices and compliance programs to maintain compliance with prevailing industry interpretations of applicable laws and regulations and make changes from time to time, as necessary,” HMA said in the filing.

HMA is also under investigation by HHS' inspector general's office and the Justice Department relating to its short-stay admissions practices and physician relationships.

Community Health Systems, which is seeking to buy HMA in a $3.9 billion deal, is facing similar government investigations; the Franklin, Tenn.-based chain recently set aside $98 million in a reserve fund to cover an anticipated settlement with the Justice Department.

On Community's last earnings call, President and CEO Wayne Smith stressed that “every one of these investigations at each company is totally different. … HMA's issues are not exactly the same issues as ours, even though some components are the same. So I don't think you can extrapolate or make any judgment about HMA related to our settlement.” Asked if the chain was working with the government on the HMA matters, Smith said they are “totally separate.”

The deal for HMA includes a $1 a share, or roughly $270 million, contingent value right that would be paid depending on the resolution of the government investigations.

Follow Beth Kutscher on Twitter: @MHbkutscher

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