DOJ Joins VS&G Client Lawsuit Against For-Profit Hospital Chain & Ex-CEO for ER Admissions Scheme

Whistleblower lawsuit alleges that HMA, its former CEO Gary Newsome, and ER contractor EmCare induced and coerced ER doctors to admit more patients

The U.S. Department of Justice (USDOJ) has intervened in a qui tam (whistleblower) False Claims Act lawsuit alleging that Health Management Associates, Inc. (HMA), the nation’s third-largest for-profit hospital chain, and its former CEO and President Gary D. Newsome engaged in a massive scheme to boost company profits and defraud Medicare and Medicaid by unlawfully inducing and pressuring hospital emergency room (ER) doctors to increase the rate of ER-to-hospital admissions over a period of at least four years.

The lawsuit was brought by Jacqueline Meyer, a former administrator with EmCare, the nation’s leading provider of emergency room physician services and a major contractor for HMA, and Michael Cowling, a former HMA Division Vice-President and CEO at three HMA hospitals. Including its intervention in the Meyer/Cowling lawsuit, the Justice Department has now joined eight whistleblower lawsuits in the last 30 days alleging that HMA defrauded Medicare and Medicaid.

The Meyer/Cowling lawsuit, which was filed under seal on July 15, 2011 in the U.S. District Court in South Carolina by the Washington, D.C. law firm Vogel, Slade & Goldstein and the Columbia, S.C., law firm Wyche, P.A., and first made public on January 6,2014, also names EmCare as a defendant. The complaint alleges that to curry favor with HMA, EmCare acted as a “willing and equally corrupt partner” in the alleged scheme to pressure ER physicians to admit more patients. The complaint also seeks damages from EmCare for allegedly terminating Meyer, who managed EmCare’s contracts with 20 HMA hospitals, after Meyer refused to coerce ER doctors to admit more patients. The Justice Department is seeking an additional 90 days in which to notify the District Court as to whether it will also intervene in the False Claims Act charges against EmCare.

The Meyer/Cowling lawsuit is one of eight actions that HMA acknowledged in a December 16, 2013 Securities and Exchange Commission filing. However, unlike the other seven actions, the Meyer/Cowling lawsuit is the first and only one of the eight to name former CEO Newsome as a defendant, alleging his personal and direct involvement in the alleged fraud.

Attorney Janet Goldstein, who represents Meyer and Cowling in the lawsuit, praised the Justice Department’s decision to join her clients’ claims against both HMA and Newsome. “To deter corporate fraud,” Goldstein said, “we must do more than seek damages from corporate defendants. We must put names and faces to the alleged perpetrators and seek to hold these individuals accountable in a court of law.”

The Meyer/Cowling complaint alleges that Newsome, who served as HMA CEO and President from 2008 to 2013, directed the alleged ER admission scheme and was personally involved in devising and implementing the tactics through which it was carried out. According to HMA regulatory filings, Newsome earned nearly $22 million in total compensation from 2010 through 2012. Following widespread media attention concerning HMA’s admissions practices, HMA announced in May 2013 that Newsome was retiring to lead a religious mission in Uruguay.

The Meyer/Cowling complaint states that defendants HMA, Newsome and EmCare employed a variety of coercive tactics to drive up ER-to hospital admissions without regard to medical necessity. The defendants allegedly set and enforced unrealistically high ER-to-hospital target admission benchmark rates, and then terminated and threatened to terminate hospital CEOs and ER medical directors who did not successfully coerce the admittance of more patients.

HMA and Newsome allegedly required hospital CEOs and CFOs, who were not medically trained, to interrogate ER doctors on “missed” admissions during mandatory daily “inquisition” meetings. Color-coded “physician scorecards” were allegedly posted in joint workspaces that flagged in red the failing grades of physicians who did not meet admission benchmarks. The defendants also allegedly paid bonuses to ER physicians who met the admission-related benchmarks and fired physicians with unsatisfactory admission rates.

During a 2009 meeting at an HMA hospital in Carlisle, Pennsylvania, an EmCare Regional Vice-President allegedly summed up the defendants’ modus operandi in a warning to Carlisle’s ER physicians: “If you want to be successful at an HMA hospital, you are going to have to admit more patients.”

“Patients depend on ER doctors to base their treatment decisions solely on their professional knowledge without outside interference,” said whistleblower attorney Janet Goldstein, counsel for Meyer and Cowling. “If proven, the kind of misconduct alleged in this case — that ER doctors could be pressured to abandon their medical judgment and admit patients irrespective of medical necessity — should alarm anyone who seeks treatment or takes a loved one for treatment in a hospital ER. An unnecessary hospital stay can be perilous, especially for elderly patients who are particularly susceptible to hospital-acquired infections, adverse drug reactions and hospital delirium.”

Co-counsel John Moylan noted that “those who would commit fraud on taxpayers should be on notice that there are courageous whistleblowers who will use the power of the False Claims Act to hold them accountable.”

HMA, headquartered in Naples, Florida, operates approximately 71 hospitals in 15 states, including Alabama, Arkansas, Florida, Georgia, Kentucky, Mississippi, Missouri, North Carolinas, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Washington and West Virginia. In 2012 HMA earned nearly $5.9 billion in net revenue, and approximately 37% of it derived from federal and state Medicare and Medicaid payments.

According to its website, EmCare services over 750 client contracts at more than 500 hospitals nationwide, ranging from high-volume emergency departments to community facilities. During 2012, EmCare had approximately 10.5 million patient encounters in 44 states and the District of Columbia. The company’s 2012 net revenues were approximately $1.9 billion.

US ex rel. Meyer & Cowling et. al v. HMA, Newsome, Emergency Medical Services Corp. and EmCare, 11-cv-01713  (D.S.C. 2011).

Read the statement from USDOJ

Read the complaint

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