CHS subsidiary coughs up $262M for fraud settlement
- The Department of Justice has slapped Health Management Associates, a subsidiary of Community Health Systems, with a $262 million settlement fee after an investigation into the hospital chain's billing practices between 2008 and 2012 revealed a fraudulent kickback scheme.
- During that time, HMA and its affiliates billed Medicare, Medicaid and the U.S. military's TRICARE for inpatient admissions following ER visits that should have been billed as outpatient or observation cases. Kickbacks were than paid out to physicians in exchange for patient referrals and inflated ER claims.
- CHS was aware of what were then alleged practices when it acquired HMA in 2014 and took what DOJ considers "remedial measures" during the acquisition by removing HMA's board of directors and senior executives and bringing the chain into its own compliance program.
As part of the settlement, the government has agreed to not bring criminal charges against HMA. One affiliated entity, Carlisle HMA, which owned and operated Carlisle Regional Medical Center (now a property of UPMC), has pleaded guilty to one count of conspiracy to commit healthcare fraud. The $262 million settlement is expected to be paid next month, with $61,839,718 going to the feds and $706,084 to states.
In a statement, Assistant Attorney General Brian Benczkowski said HMA "pressured emergency room physicians, including through threats of termination," to inflate inpatient admissions from ERs without medical cause.
"Hospital operators that improperly influence a physician's medical decision-making in pursuit of profits do so at their own peril," Benczkowski said. "Where we find such conduct, the Criminal Division’s Health Care Fraud Unit, together with our Civil Division and law enforcement colleagues, will aggressively prosecute those responsible to the fullest extent of the law."
Wayne Smith, CEO of CHS, said in a statement that it has been his company's goal to resolve the investigation since the HMA acquisition in 2014.
"We are pleased to have reached the settlement agreements so we can move forward now without the burden or distraction of ongoing litigation," Smith said "As an organization, we are committed to doing our very best to always comply with the law in what is a very complex regulatory environment and to operate our business with integrity, ethical practices and high standards of conduct."
Regardless, the settlement is still a hit to the otherwise debt-laden hospital system. While HMA shareholders are liable for the charges, terms which were agreed upon at the time of the 2014 transaction, CHS shares were down 2.2% on Wednesday morning as a result, adding up to a drop of nearly 20% so far in 2018. The 20-state hospital system hired financial advisors in March to restructure its long-term debt, which totaled $13.8 billion at the end of last year.
DOJ is ramping up its efforts to curb healthcare fraud. Earlier this summer, the feds announced their largest healthcare fraud takedown to date, charging 601 people more than $2 billion for falsely billing Medicare, Medicaid and TRICARE. HHS has barred 2,700 people from participating in federal healthcare programs since July 2017.
"The payment of kickbacks in exchange for medical referrals undermines the integrity of our healthcare system," Chapa Lopez, an attorney with DOJ, said in a statement. "Today's resolution should remind healthcare providers of their duty to comply with the law, and the heavy price to be paid for corrupt practices committed by their executives. Our Civil Division will continue to invest itself in the pursuit of health care providers who violate the law for personal gain."
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