Health Management Associates Reaches $260 Whistleblower Settlement on Medicare Fraud Charges

A former national health care company, which was the subject of a scathing 60 Minutes investigation in 2012, is finally facing repercussions for allegedly violating anti-kickback laws; threatening and coercing physicians; and defrauding Medicare, Medicaid and TRICARE.

Health Management Associates Reaches $260 Whistleblower Settlement on Medicare Fraud Charges

Health Management Associates (HMA), a hospital chain based in Naples, FL., has reached a $260 million settlement to bring an end to numerous civil and criminal fraud charges. The matter originates from eight separate whistleblower lawsuits filed in districts throughout the U.S., which were consolidated and transferred to the U.S. District Court for the District of Columbia. The Justice Department joined the lawsuits in 2014.

Whistleblowers involved in the case alleged that HMA implemented a company-wide scheme to admit as many Medicare beneficiaries and bill federal and state insurance programs as much as possible. According to the lawsuit, the company regularly submitted exaggerated claims for emergency department fees and billed for inpatient services that should have been categorized as outpatient or observation services.

HMA also set outrageous admission quotas for its emergency departments, demanding they admit at least 15 percent of all patients who showed up to the ER, whether admission was necessary or not. That number was even higher for patients over age 65 (aka Medicare recipients): an astounding 50 percent of elderly patients were supposed to be admitted. Physicians and medical directors who pushed back against these policies said they were coerced and threatened with termination.

Lawsuits Allege Fraud Happened in Health Management Associates Hospitals Across the U.S.

To resolve the criminal charges presented in the lawsuit, HMA has entered into a three-year Non-Prosecution Agreement, which will prevent the government from bringing charges against the company so long as it abides by the agreed-upon terms.

Per the settlement, HMA will pay a $35 million penalty. The company will also have to report any future suspected fraud, cooperate with federal investigations and develop a stronger compliance and ethics program.

One of HMA’s subsidiaries, an acute care facility located in Carlisle, PA, has also agreed to plead guilty to conspiracy to commit health care fraud. Carlisle HMA, formerly known as Carlisle Regional Medical Center, allegedly admitted numerous patients who did not need emergency care. The plea has yet to be accepted by the court.

In addition, HMA has agreed to pay $216 million as part of a civil settlement, which will resolve allegations that it submitted false claims to Medicare, Medicaid and TRICARE from 2008 to 2012, and that it violated federal anti-kickback laws and the Stark Law, which prohibits hospitals from paying doctors for referrals. According to the lawsuit, this was happening at HMA hospitals throughout the country, including:

  • Charlotte Regional Medical Center and Peace River Medical Center, both in Florida, were submitting false claims for services provided to patients who were referred illegally. The hospitals paid a physicians’ group and gave it free office space and staff in exchange for the referrals.
  • Lancaster Regional Medical Center and Heart of Lancaster Medical Center in Pennsylvania paid a physicians’ group and a surgeon for referrals. The payments were disguised as excess payments for services the physicians’ group and the surgeon provided to the medical centers.
  • Crossgates Hospital in Brandon, Mississippi charged a doctor rent for only half of the office space he used, in exchange for patient referrals.

Two Former Doctors Blew the Whistle on HMA

None of this would have come to light if it were not for the whistleblowers who came forward and told the government about what was happening at Health Management Associates’ hospitals.

Two of the qui tam plaintiffs, Drs. Steven Folstad and Thomas Mason, had contracts to perform ER services at two North Carolina HMA hospitals, Davis Regional and Lake Norman. When they confronted the company about its unethical behavior and refused to go along with its ER admissions scheme, they were fired. The physicians filed a formal complaint in 2010. 

The court has not decided how much Drs. Folstad and Mason will receive as part of the settlement, but the Department of Justice has announced that one whistleblower will receive $12.4 million, and another will receive $15 million.

Under the False Claims Act, whistleblowers who initiate fraud lawsuits on behalf of the government are entitled to a portion of any settlement or verdict.

Although this is one of the largest settlements HMA has reached with the Justice Department, it’s by no means the first fraud lawsuit it’s been involved in:

  • 14 HMA hospitals, including Florida’s Lehigh Acres Medical Center, reached a $15 million settlement in May 2015. The settlement resolved allegations that the hospitals billed for unnecessary psychiatric services.
  • Clearview Regional Medical Center, an HMA hospital in Georgia, settled a previous whistleblower lawsuit in June 2015 for $595,155. According to the lawsuit, the facility paid kickbacks to an obstetric clinic for referring patients to the hospital for labor and delivery.
  • In Dec. 2017, HMA allegedly paid kickbacks to two physician groups: EmCare, Inc. in Dallas and Physicians’ Alliance in Lancaster, PA. The Department of Justice reached a $33 million settlement with the physician groups for accepting the payments.

Health Care Company Had History of Lawsuits—And They May Not Be Over Yet

What’s more, during all of these lawsuits, HMA had already been under a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services’ Office of the Inspector General.

The CIA was put in place in July 2014, when HMA was purchased by Tennessee-based Community Health Systems (CHS) for $7.6 billion. The sale made CHS the largest hospital system in the U.S.

According to CHS CEO Wayne Smith, CHS purchased HMA with the understanding that it would take on the chain’s debt and legal problems, and the goal was always to resolve the case rather than battle it out in court. In fact, settling fraud lawsuits is something CHS is familiar with: in August 2014, the company paid $98 million to resolve multiple fraud lawsuits that alleged facts eerily similar to the allegations levelled against HMS.

The $262 million HMA settlement will end CHS’ legal woes for now. The company is expected to make the payment in Oct. 2018. The settlement also extended the Corporate Indemnity Agreement between HMA, CHS and the federal government for another two years.

One person who may still be in hot water?

Gary Newson, former CEO of HMA, who ran the company when the numerous whistleblower lawsuits were filed. He stepped down in 2013, before the company was sold to CHS, but well after the federal government was tipped off to potential fraud.

The settlement does not absolve him of any wrongdoing, and he still faces personal accusations. It’s unclear where his charges stand.

CHS may be the largest hospital chain in the country accused of fraud, but it’s certainly not the only one. If you know of a hospital admitting patients improperly, paying kickbacks for referrals or defrauding Medicare, Medicaid and TRICARE, you may be entitled to a whistleblower award. You can report fraud online today


Medicaid Fraud Hotline: 888.742.7248 or Report Online
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