Government Intervenes in Eight Lawsuits Against National Hospital Chain

Unnecessary inpatient admissions and paying kickbacks to physicians to induce those admissions and to order unnecessary diagnostic tests are among the allegations in eight whistleblower cases filed against Health Management Associates (HMA), a hospital chain that operates 71 hospitals in 15 states. The lawsuits were announced Jan. 13 by the Department of Justice, which said the government will intervene in all eight cases. The announcement includes examples from some of the lawsuits, one of which alleges that HMA’s former CEO, Gary Newsome, “directed HMA’s corporate practice of pressuring emergency department physicians and hospital administrators to raise inpatient admission rates, regardless of medical necessity.” Emergency room physicians were allegedly pressured by HMA corporate officers, or offered kickbacks in the form of rewards for meeting HMA benchmarks, to admit patients who could have been placed in observation, treated as outpatients, or discharged. The lawsuits cover the entire gamut of anti-kickback and physician self-referral (Stark) violations and allege sham management agreements to disguise kickback payments to physicians, less-than-fair market value lease arrangements, provision of free office space and staff, and paying inflated prices for physician owned assets. The alleged goal of these efforts was to increase referrals and admissions at HMA owned hospitals. “Improper hospital admissions cost the government millions of dollars in unnecessary fees and subject patients to excessive treatment and needless risk, driving up the cost of health care,” said Anne M. Tompkins, U.S. attorney for the Middle District of Florida, in announcing the lawsuits. Some of the lawsuits include other parties as defendants along with HMA. For instance, a lawsuit filed in North Carolina brought by two emergency room doctors includes two hospitals owned by HMA and an emergency room practice management company, Emergency Medical Services Corp. Another lawsuit names a physician group as a defendant along with individual hospitals and HMA. The lawsuits also claim violations of state anti-kickback laws and regulations in various states. Pro-MED Software The North Carolina lawsuit alleged the use of software to order unnecessary tests on emergency room patients before any physician had seen the patient. Many of these tests were laboratory tests and, according to the complaint filed in the Western District of North Carolina, were unnecessary and in some cases billed multiple times. These tests were ordered based on guidelines in the software system, known as Pro-MED, that linked complaints to test orders. In many cases, according to the complaint, once emergency room physicians saw patients, they tried to change the test orders or cancel them as unnecessary. It was unclear in the complaint whether the tests actually were cancelled or were billed. HMA Denies Allegations In a statement released by HMA, it denies the allegations but says that it is cooperating with the Justice Department in the cases. HMA also notes that the existence of the investigations has been disclosed in previous public Securities and Exchange Commission filings. HMA says it will contest the allegations. In an interview cited in a Jan. 3 posting by the Charlotte Observer (www.charlotteobserver.com), attorney Kirk Ogrosky, a Washington-based lawyer for HMA, said, “There will always be doctors who believe that any effort to manage them is designed to interfere with their medical decision-making. The question is whether a single doctor knows better than everyone else.” The allegations in the pending lawsuits are allegations only, and there has been no determination of liability. These cases are in their initial stages of development and how they will proceed over time cannot be predicted. Also, the amount of any fines or other monetary penalties have not yet been established, but many observers believe it will be in the hundreds of millions of dollars. Since these are all whistleblower cases, the aggregate whistleblower payouts in any case the government wins will be dependent on the individual case and its relators. In a related story, shareholders of HMA approved a merger with Community Health Systems (CHS) by an overwhelming majority. If the deal goes through, CHS will pay $7.6 billion to acquire HMA. The merged companies will be the largest for-profit hospital operator in terms of the number of facilities but not in revenue. Government Gaining Experience Federal Bureau of Investigation (FBI) Assistant Director Ron Hosko noted that the investigative agencies relied on a centralized team to provide nationwide support to the field offices. “Investigations such as these are a very high priority for the FBI because of the potential impact to the nation’s health care system and to the public,” he said. This kind of cooperation between departments of the federal government and it various agencies and state investigators and prosecutors is testimony to the commitment of the government to find and prosecute fraud and abuse against government programs like Medicare and Medicaid. The extensive use of whistleblower information in these cases demonstrates the value the government places on them and the help they provide in bringing these kinds of cases to light. Each case provides lessons for government agents and helps them learn to better detect fraud and abuse when it is present. Hospitals and other health care providers should take note of this commitment and this expanding understanding of how these frauds are perpetrated. If they are involved in any activities similar to those described in these lawsuits, even if they have had legal counsel review their activities, they may want to take a closer look to ensure they are not violating any laws or regulations. Takeaway: Because of increased government scrutiny and whistleblower activity, all health care providers should review compliance programs for effectiveness and conduct reviews of all contracts and relationships with referral sources to ensure compliance with both state and federal laws and regulations.