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Former Health Management CEO Named in Kickback Lawsuit

A former chief executive officer of Health Management Associates Inc. (HMA), a hospital operator, was named as a defendant in an expanding federal whistle-blower probe into alleged kickbacks at the company.

A complaint unsealed Jan. 6, filed in South Carolina by former hospital executives and joined by the U.S. Justice Department, alleges ex-CEO Gary Newsome had a “personal and direct involvement” in Naples, Florida-based HMA pressuring emergency room staff to increase hospital admissions.

The government has intervened in nine whistle-blower cases filed in at least five states alleging HMA paid doctors in exchange for referrals to its hospitals as well as illegally seeking to boost admissions from its emergency rooms, according to complaints unsealed since December.

The government’s decision to join the case “speaks to the quality of the evidence,” Janet Goldstein, an attorney for Florida residents Jacqueline Meyer and Michael Cowling, said in an interview. Meyer and Cowling’s whistle-blower complaint is the only one to name Newsome, she said.

The plaintiffs claim the alleged scheme violated anti-kickback laws governing its Medicare and Medicaid programs.

Newsome announced his retirement in May to become president of a Uruguay mission for the Church of Jesus Christ of Latter-Day Saints.

Efforts to reach Newsome through Eric Hawkins at the church’s main press office weren’t immediately successful.

John Merriwether, a spokesman for HMA, didn’t immediately return a phone call left after regular business hours seeking comment on the suit.

Inpatient Admissions

Meyer, a former client administrator for EmCare Inc., and Cowling, former chief executive of an HMA hospital in Mooresville, North Carolina, filed the complaint in July 2011, claiming Newsome and HMA engaged in a nationwide, systematic practice of pressuring doctors to increase profit by pushing up inpatient admissions.

EmCare, a provider of emergency room physician services owned by Canadian buyout firm Onex Corp. (ONEXF), is accused of being a “willing and equally corrupt partner” to the scheme. Prosecutors have delayed until March 14 a decision on whether to intervene in the case against EmCare.

Jennifer Whitus, a spokeswoman for Dallas-based EmCare, said the “company can’t comment on ongoing legal proceedings.”

Health Management operates 71 hospitals in 15 states, mostly in rural areas. The company agreed in July to a $3.9 billion takeover by Community Health Systems Inc., the second-biggest U.S. hospital chain. The acquisition is scheduled to be completed in the first quarter of this year.

The South Carolina case is U.S. ex rel Meyer and Cowling v. Health Management Associates Inc., 11-cv-01713, U.S. District Court, District of South Carolina (Rock Hill).

To contact the reporter on this story: Sophia Pearson in federal court in Philadelphia at

spearson3@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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