Former Health Management CEO Named in Kickback Lawsuit

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

Ex-CEO Gary Newsome had “personal and direct involvement” in Naples, Florida-based HMA pressuring emergency room staff to increase hospital admissions, according to a complaint unsealed Jan. 6 in federal court in Rock Hill, South Carolina. The case was brought by former hospital executives and joined by the U.S. Justice Department.

The government has intervened in at least eight whistle-blower cases filed in at least five states alleging HMA paid doctors in exchange for referrals to its hospitals and illegally sought 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 Medicare and Medicaid programs in the U.S.

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 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, is accused of being a “willing and equally corrupt partner” to the scheme. EmCare was owned by Canadian buyout firm Onex Corp. until 2011. 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.

Physician Scorecards

In their case against HMA, Meyer and Cowling said that Newsome directed the alleged ER admission scheme and was personally involved in devising and implementing the tactics to carry it out, including setting high target admission benchmark rates and terminating doctors and administrators who failed to admit more patients.

Newsome, who served as CEO from September 2008 until his departure in May, allegedly required hospital chief executives to interrogate ER doctors on “missed” admissions and employ the use of physician scorecards that flagged red for failing grades on meeting admission benchmarks. The scorecards were allegedly posted in joint workspaces. HMA also allegedly tied bonuses for ER doctors to hospital admissions, according to the complaint.

Orlando Meeting

During an October 2008 meeting in Orlando, Newsome allegedly directed HMA hospital administrators to follow protocols that would drive up ER inpatient admission rates. Among the protocols was use of a Pro-Med software program that identified diagnostic tests to run on ER patients before they were seen by a doctor.

After the meeting, Cowling said he told Newsome, “My docs won’t do it.” Newsome responded “Do it anyway,” according to the complaint.

During an April 2011 earnings call, Newsome described the Pro-Med software as a “data gathering tool” that didn’t affect decisions on admissions, according to the complaint.

‘Clinical Judgment’

“Doctors are making decisions based on their clinical judgment and that’s what you want doctors to do,” Newsome was quoted saying at the time.

Meyer, who oversaw EmCare’s ER practices at 20 HMA hospitals, was fired in January 2011 after she complained in writing to EmCare’s compliance department. Cowling was fired in February 2009, according to the complaint.

HMA revealed the whistle-blower lawsuits in a regulatory filing last month saying it intends to contest the allegations and seek dismissal of the complaints.

In another complaint unsealed this week, former executives of HMA hospitals in Pennsylvania alleged the company signed bogus contracts with physicians and overpaid doctors for services in exchange for referrals to their hospitals.

The lawsuit was filed in 2010 by plaintiffs George Miller, a chief executive for two HMA facilities in Lancaster, Pennsylvania, from June 2008 until January 2009, and Michael Metts, who served as chief financial officer of HMA’s Lancaster locations in 2008 and 2009.

Prosecutors have requested that the cases be consolidated in one jurisdiction, according to court papers filed Dec. 16. No additional information or timeline was given on the consolidation request to the Judicial Panel on MultiDistrict Litigation.

Brian Fallon, a spokesman for the Justice Department, didn’t immediately return an e-mail seeking comment.

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). The Pennsylvania case is U.S. v. Health Management Associates Inc., 10-cv-03007, U.S. District Court Eastern District of Pennsylvania (Philadelphia).

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