The former CEO of Health Management Associates has agreed to pay nearly $3.5 million to settle false claims and kickback allegations, the U.S. Justice Department announced Tuesday.
The False Claims Act settlement resolves the government's assertion that Gary Newsome oversaw unnecessary patient admissions and the subsequent billing of government healthcare programs for more expensive services. It also settles allegations that Newsome caused HMA to pay kickbacks to emergency department physicians in return for referrals.
Assistant Attorney General Jody Hunt of the Justice Department's Civil Division said in a statement that those who waste federal dollars by billing federal healthcare programs for unnecessary hospital stays will be held accountable.
"Patients deserve the unfettered, independent judgment of their healthcare professionals," he said. "We will pursue those who cause hospitals to offer financial incentives to physicians in return for improper patient referrals that undermine the integrity of our healthcare system."
The settlement comes about seven months after HMA agreed to pay the government $262 million to settle related criminal charges and civil claims.
The government alleged Newsome caused HMA to pressure emergency department physicians to increase inpatient admissions by recommending admissions even when those patients could have been treated in less expensive outpatient or observation settings. Hospitals typically receive significantly higher payments from Medicare for inpatient admissions compared with outpatient treatment.
The Justice Department alleged Newsome caused HMA to pay EmCare, a company that provided physicians to staff HMA hospital emergency rooms, to recommend the unnecessary admissions. As part of that, the government said Newsome prompted HMA to pay EmCare's physicians bonuses based on increased admissions of emergency department patients, with that metric tied to EmCare's retention of existing contracts and receipt of new contracts.
Newsome was HMA CEO from September 2008 through July 2013. His attorney, Barry Sabin of Latham & Watkins, said in a statement that Newsome is pleased to have the matter behind him.
"In reaching a settlement, Mr. Newsome continues to emphatically deny the government's claims," Sabin said. "He is pleased to now end the uncertainty and high expense of protracted litigation."
Fellow for-profit hospital chain Community Health Systems acquired HMA in 2014 and has struggled financially ever since. It's currently in the midst of an aggressive campaign to sell off underperforming hospitals, but fell far short of its divestiture targets last year.
According to documents obtained during the HMA investigation settled in September 2018, HMA allegedly set mandatory companywide admission rate benchmarks for emergency department patients: 15% to 20% for all emergency department patients and 50% for those age 65 and older. HMA executives allegedly threatened to fire physicians and medical directors if they did not drive up admissions.
HMA's $262 million settlement included a $35 million penalty to the Justice Department criminal division's fraud section and entered a nonprosecution agreement with the division.
EmCare also paid nearly $30 million to resolve the allegations in December 2017.
Former EmCare employee Jacqueline Meyer and former HMA employee J. Michael Cowling will receive about $725,000 as whistleblowers in the case.
