Community Health Systems' subsidiary to pay more than $260 million over alleged kickback, billing, inpatient admissions scheme

WHAT HAPPENED

Health Management Associates, a U.S. hospital chain formerly headquartered in Naples, Florida, has agreed to pay more than $260 million, including criminal and civil penalties, to resolve criminal charges and civil claims relating to a billing and kickback scheme.

The government alleges HMA knowingly billed government healthcare programs for inpatient services that should have been billed as outpatient or observation services, paid kickbacks to physicians in return for patient referrals, and submitted "inflated claims for emergency department facility fees," according to the Department of Justice.

HMA agreed to a three-year non-prosecution agreement with the DOJ's Criminal Division Fraud Section in connection to scheme that included unlawfully pressuring and causing physicians at HMA hospitals to increase the number of emergency department patient admissions whether the inpatient admissions were medically necessary or not. The scheme also involved HMA hospitals billing and being reimbursed for higher-paying inpatient hospital care, instead of observation or outpatient care, from federal healthcare programs.  

HMA and current parent company Community Health Systems had to cooperate with the investigation and must report allegations or evidence of violations of federal healthcare offenses. They must also ensure that their compliance and ethics program satisfies the requirements of an amended and extended corporate integrity agreement between CHS and HHS-OIG.

HMA was acquired by Community Health Systems in January 2014, after the alleged conduct at HMA occurred.  Since July 2014, HMA has been operating under a corporate integrity agreement between CHS and the HHS-OIG.

THE IMPACT/WHY IT MATTERS

Federal law, including the anti-kickback statute and the Stark Law, prohibits hospitals from providing financial inducements to physicians for referrals. These provisions are designed to ensure that physician decision-making is not compromised by improper financial incentives.

WHAT IS THE TREND

Like other systems before it, HMA was accused of violating Stark Law and the anti-kickback statute for financial gain. The activities alleged by the DOJ in this case and others like it bilk government payers for millions of dollars, damage reputations, and distort the hospital/physician relationship.

ON THE RECORD

"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. We are pleased to have reached the settlement agreements so we can move forward now without the burden or distraction of ongoing litigation. As an organization, we are committed to doing our very best to always comply with the law in what is a very complex regulatory environment and to operate our business with integrity, ethical practices and high standards of conduct,"  said Wayne Smith, chairman and CEO of Community Health Systems.

THEIR TAKE

The DOJ said resolution documents show HMA set mandatory company-wide admission rate benchmarks for patients presenting at HMA hospital emergency departments of between 15 to 20 percent and 50 percent for patients 65 and older "solely to increase HMA revenue." HMA executives and hospital administrators pressured and coerces physicians and medical directors to meet the benchmarks and admit patients who did not need inpatient care by such means as threatening to fire physicians and medical directors if they didn't boost inpatient admissions.

HMA also agreed to pay $216 million as part of a related civil settlement that resolved HMA's liability for submitting false claims between 2008 and 2012 to Medicare, Medicaid and the Department of Defense's TRICARE program for beneficiaries over the age of 65.  The government alleged that inpatient care was not appropriate and care could have been given in a less costly setting.

The civil settlement also resolves various regarding kickbacks to physicians by HMA in return for patient referrals. 

"To induce patient referrals, Charlotte Regional provided a local physician group with free office space and staff, as well as direct payments, which purportedly covered overhead and administrative costs incurred by the group for its management of a Charlotte Regional physician. HMA also provided another local physician with free rent and upgrades to his office space," the DOJ said in a statement.

Twitter: @BethJSanborn
Email the writer: beth.sanborn@himssmedia.com