Community Health Systems-owned hospital chain agrees to pay $262M settlement for kickback, fraud allegations

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Health Management Associates was accused of knowingly billing government healthcare programs for inpatient services that should have been billed as outpatient or observation services. (Getty Images/William_Potter)

A health system that is part of hospital giant Community Health Systems Inc. agreed to pay more than $262 million to resolve criminal charges and civil claims, the Justice Department announced on Tuesday.

Health Management Associates (HMA), a hospital chain formerly headquartered in Naples, Florida, was accused of knowingly billing government healthcare programs for inpatient services that should have been billed as outpatient or observation services. It was also accused of paying doctors to make patient referrals and submitting inflated claims for emergency department facility fees.

The alleged incidents took place before Community Health Systems acquired HMA in January 2014.

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HMA has been operating under a Corporate Integrity Agreement between CHS and Health and Human Services' Office of the Inspector General since July 2014.

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One of HMA's subsidiaries, which formerly did business as Carlisle Regional Medical Center, agreed to plead guilty to one count of conspiracy to commit health care fraud.

According to the accusations, physicians serving HMS were unlawfully pressured and induced into increasing the number of emergency department patient admissions without regard to whether the admissions were medically necessary.

According to admissions made in the resolution documents, HMA also said it instituted a formal plan to improperly increase overall emergency department inpatient admissions by setting mandatory companywide admission rate benchmarks for patients presenting to HMA hospital emergency departments—a range of 15-20% for all patients presenting to the emergency department and 50% for patients 65 and older.

“HMA pressured emergency room physicians, including through threats of termination, to increase the number of inpatient admissions from emergency departments—even when those admissions were medically unnecessary,” said Assistant Attorney General Brian Benczkowski in a statement. “Hospital operators that improperly influence a physician’s medical decision-making in pursuit of profits do so at their own peril."

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HMA also agreed to pay $216 million as part of a related civil settlement involving violations of the Anti-Kickback Statute and the Stark Law which prohibits hospitals from providing financial inducements to physicians for referrals. That civil settlement included:

  • Allegations that HMA submitted false claims between 2008 and 2012 in a corporate-wide scheme to increase inpatient admissions of Medicare, Medicaid and the Department of Defense’s Tricare program beneficiaries over the age of 65.
  • Allegations that during the period from 2003 through 2011, two HMA hospitals in Florida billed federal health care programs for services referred by physicians to whom HMA provided free office space and staff, as well as payments, in return for patient referrals.
  • Further allegations that between 2009 and 2012, two former HMA hospitals in Pennsylvania billed federal healthcare programs for services referred by physicians with whom the facilities had improper financial relationships.
  • Claims that an HMA facility in Mississippi leased space to a physician between 2005 and 2007 at a favorable rate in return for referrals.

Further allegations from the Department of Justice include claims that some HMA hospitals submitted claims to Medicare and Medicaid seeking reimbursement for falsely inflated emergency department facility charges.