Federal Government Agrees to Global $260M Settlement with Florida Hospital Chain

The United States recently agreed to a $260 million settlement of criminal charges and related civil claims under the False Claims Act arising from a scheme to defraud conducted by Naples, Florida-based hospital chain Health Management Associates, LLC (HMA). The Department of Justice (DOJ) announced the settlement on September 25.

The settlement is evidence of the federal government’s continuing aggressive enforcement posture in the institutional health care provider space, and the importance of enforcing compliance standards related to billing protocols and financial relationships between hospitals and referring professionals.

According to the DOJ press release, HMA (which was acquired by another major hospital chain in January 2014 after the misconduct underlying the settlement had occurred) had (1) billed government health care programs for inpatient services that should have been billed as outpatient or observation services, (2) paid remuneration to physicians in return for patient referrals and (3) submitted inflated claims for emergency department facility fees. More specifically, the press release explained that HMA had defrauded federal health care programs by:

unlawfully pressuring and inducing physicians serving HMA hospitals to increase the number of emergency department patient admissions without regard to whether the admissions were medically necessary. The scheme involved HMA hospitals billing and obtaining reimbursement for higher-paying inpatient hospital care, as opposed to observation or outpatient care, from Federal health care programs, increasing HMA’s revenue.

The press release further explained how “HMA executives and HMA hospital administrators executed the scheme by pressuring, coercing and inducing physicians and medical directors to meet . . . mandatory admission rate benchmarks and admit patients who did not need impatient admission through a variety of means, including by threatening to fire physicians and medical directors if they did not increase the number of patients admitted.”

In resolving the criminal portion of the settlement, HMA entered into a Non-Prosecution Agreement with DOJ under which HMA agreed to pay a $35 million monetary penalty, and HMA and its corporate parent (Community Health System, Inc.) agreed to cooperate with the investigation, report any allegations or evidence of federal health care offenses and ensure that their compliance program satisfied the requirements of Corporate Integrity Agreement imposed by the Office of Inspector General, Department of Health and Human Services. Additionally, an HMA subsidiary, doing business as Carlisle Regional Medical Center, agreed to plead guilty to one count of conspiracy to commit health care fraud.

HMA paid the bulk of the settlement amount to settle civil claims under the False Claims Act. The settlement covered the submission of false claims between 2008 and 2012, based on inpatient admissions that were not medically necessary, resulting in excessive payments for care that should have been provided in a less costly outpatient or observation setting. The settlement also covered claims submitted between 2003 and 2011 for services generated through unlawful financial incentives paid by HMA hospitals to referring physicians in the form of direct payments as well as free office space, rent and staffing – conduct that was alleged to have violated the Federal Anti-Kickback Statute and Stark Self-Referral Law.