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HMA whistleblower suit focuses on Lancaster hospitals

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Two people who worked at Lancaster County hospitals owned by Health Management Associates Inc. are accusing the company of illegally giving physicians kickbacks in return for referrals, according to a newly unsealed federal lawsuit that was filed in 2010.

HMA, based in Florida, currently operates 71 hospitals in 15 states, including three local facilities: Carlisle Regional Medical Center, Lancaster Regional Medical Center and Heart of Lancaster Regional Medical Center.

HMA stockholders on Wednesday approved a proposed deal in which the for-profit hospital company will be acquired by Tennessee-based Community Health Systems Inc., which owns, leases or operates 135 hospitals in 29 states,

Plaintiffs in the whistleblower case are as follows:

  • George E. Miller, who was CEO of Heart of Lancaster Regional Medical Center from June 2, 2008, to May 6, 2009; CEO of Lancaster Regional Medical Center from June 2, 2008, until January 2009; and during the same time, CEO of 13 physician clinics related to both hospitals. The lawsuit says Miller was terminated in 2009.
  • Michael J. Metts, a CPA who was system CFO and compliance officer for both hospitals and the clinics from June 2 through December 2008, then CFO and compliance officer at Lancaster Regional Medical Center until September 2009.

According to the lawsuit, the hospitals engaged in joint venture arrangements, with HMA selling shares to the physicians at significant discounts, highlighting projected return on investment based on set increases in admissions.

For Lancaster Regional, the lawsuit says, HMA executives viewed Physicians Alliance Ltd. as integral to the hospital's success. PAL was formed in 1998 by a group of family physicians and internists in order to avoid being employed by Lancaster General Hospital and to provide a competitive advantage to purchase goods and services and to negotiate with insurance carriers, the lawsuit says; it currently has about 100 members and, prior to the joint venture, PAL referred only 35 percent of its patients to Lancaster Regional.

The lawsuit says that non-PAL physicians had to pay cash to be part of the joint venture but that HMA accepted a transfer of interest in two medical facilities from PAL instead, and then, at PAL's demand, set up a sham co-management agreement under which HMA paid PAL $500,000 annually.

The lawsuit focuses on the Lancaster County hospitals but alleges that HMA used similar tactics at other facilities around the country. It also says HMA executives, including Gary Newsome and Britt Reynolds, were active in the schemes.

Newsome became HMA's president and CEO in 2008, after serving as president of hospital operations for a division of Community Health Systems Inc.; he retired from HMA on July 31, 2013.

Reynolds also joined HMA in 2008, leading the division that includes Pennsylvania; he previously served as vice president of operations for CHS, managing hospitals in Illinois, New Jersey, Pennsylvania and West Virginia.

HMA has issued the following statement on the matter:

"As a matter of policy we do not comment on pending litigation. The existence of the government's investigation into the issues raised in the unsealed qui tam cases has been disclosed for some time in HMAs' public SEC filings.

"While our legal team addresses these matters and continues to cooperate with the Department of Justice's ongoing investigation, HMA associates and physicians who practice at our facilities are focused on providing the highest quality patient care in all of our hospitals."

CHS and HMA are listed for trading on the New York Stock Exchange under the symbols CYH and HMA.

Click here to read the lawsuit.

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