Community Health Systems unit settles false-billing case for $262M

Community Health Systems subsidiary Health Management Associates agreed to pay the federal government $262 million to settle false billing and kickback allegations, authorities announced late Tuesday.

The government alleged that HMA knowingly billed government healthcare programs for inpatient services that should have been billed as outpatient or observation services, paid physicians in return for patient referrals and submitted inflated claims for emergency department facility fees. The alleged activity occurred between 2003 and 2012, before CHS acquired HMA.

"Since acquiring HMA in 2014, it has been our goal to resolve the government's investigation into all of these allegations which occurred prior to the acquisition and which were already under investigation at the time of the transaction," CHS Chairman and CEO Wayne Smith said in a statement. "We are pleased to have reached the settlement agreements so we can move forward now without the burden or distraction of ongoing litigation."

Franklin, Tenn.-based CHS has struggled since it acquired Naples, Fla.-based HMA and its $3.7 billion in debt as it has tried to turn around HMA's embattled facilities and integrate its vast hospital footprint.

The federal government noted that CHS tried to right the ship after it acquired HMA by removing the HMA board of directors and senior executives and integrating the HMA affiliated hospitals into CHS' compliance program.

According to admissions made in the documents obtained during the investigation, HMA improperly increased overall emergency department inpatient admissions at all HMA hospitals. The company allegedly set mandatory companywide admission rate benchmarks for patients that came to HMA hospital emergency departments—a range of 15% to 20% for all patients who visited the ED and 50% for patients 65 and older.

HMA executives and hospital administrators allegedly threatened to fire physicians and medical directors if they did not increase the number of patients admitted.

A related civil settlement resolved HMA's liability for allegedly admitting Medicare, Medicaid and Tricare beneficiaries to inpatient facilities when cheaper outpatient or observation settings would've sufficed.

"By manipulating patient status, HMA increased Medicare costs and pocketed taxpayer funds to which it was not entitled," Charles Peeler, U.S. attorney for the Middle District of Georgia, said in a statement.

Two HMA hospitals in Florida, Charlotte Regional Medical Center and Peace River Medical Center, allegedly paid a local physician group and provided free office space and staff to induce referrals.

Additional allegations include two former HMA hospitals, Lancaster Regional Medical Center and Heart of Lancaster Medical Center in Pennsylvania, which overpaid a large physician group and a local surgeon for related business. That ultimately pressured them to refer more patients to HMA, authorities said.

Crossgates Hospital, an HMA facility in Brandon, Miss., allegedly leased space to a local physician for two years but only required the physician to pay half the rent.

The government further alleged that certain HMA hospitals submitted claims to Medicare and Medicaid seeking reimbursement for falsely inflated emergency department facility charges.

The settlement includes a non-prosecution agreement in which the government agreed not to bring criminal charges as long as HMA and CHS agreed to cooperate with the investigations, report any wrongdoings, and ensure that their compliance and ethics program is satisfactory.

In addition, HMA's defunct subsidiary formerly known as Carlisle Regional Medical Center agreed to plead guilty to one count of conspiracy to commit healthcare fraud.

The whistle-blower in one case will receive approximately $15 million while the whistle-blowers in another case will receive $12.4 million. The whistle-blower shares to be awarded in the remaining cases haven't been determined.

Pietragallo Gordon Alfano Bosick & Raspanti represented two whistle-blowers, Dr. Thomas Mason and Dr. Steven Folstad.

"As a result of the fortitude of Drs. Mason and Folstad and their practice, and their willingness to stand up for their patients against two national behemoths, unsuspecting emergency room patients are no longer subject to this fraud," Pamela Coyle Brecht, partner at the law firm, said in a statement.