Hospital Chain Said to Scheme To Inflate Bills

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Jacqueline Meyers says she was fired by a contractor after she refused to fire emergency room doctors who admitted fewer patients. Anne McQuary for The New York Times

“While the lawsuits against H.M.A. provide a stark look at the pressure being put on doctors and hospital executives to emphasize profits over their patients, similar accusations are being raised at other hospital and medical groups as health care in the United States undergoes sweeping changes….”

Editor’s Note: This article was sent to us from a fellow Health Care Revolutionary who noted: This is huge and continues to make our case.   Emergency room admissions is the tip of the iceberg.  Hospitals overcharge – PPOs create the opacity that allows the bills to be paid unscrutinized – Health insurers and administrators pay the bills and benefit from the illusion of discounting… to the detriment of employer sponsored plans  An employers only chance to protect themselves is through a professional audit and review service and eventually elimination of the contra-value PPO Networks

Every day the scorecards went up, where they could be seen by all of the hospital’s emergency room doctors.

Physicians hitting the target to admit at least half of the patients over 65 years old who entered the emergency department were color-coded green. The names of doctors who were close were yellow. Failing physicians were red.

The scorecards, according to one whistle-blower lawsuit, were just one of the many ways that Health Management Associates, a for-profit hospital chain based in Naples, Fla., kept tabs on an internal strategy that regulators and others say was intended to increase admissions, regardless of whether a patient needed hospital care, and pressure the doctors who worked at the hospital.

This month, the Justice Department said it had joined eight separate whistle-blower lawsuits against H.M.A. in six states. The lawsuits describe a wide-ranging strategy that is said to have relied on a mix of sophisticated software systems, financial incentives and threats in an attempt to inflate the company’s payments from Medicare and Medicaid by admitting patients like an infant whose temperature was a normal 98.7 degrees for a “fever.”

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Gary D. Newsome, former H.M.A. chief.

The accusations reach all the way to the former chief executive’s office, whom many of the whistle-blowers point to as driving the strategy.

For H.M.A., the timing could not be worse. Shareholders recently approved the planned $7.6 billion acquisition of the company by Community Health Systems, which will create the nation’s second-largest for-profit hospital chain by revenue, with more than 200 facilities. The deal is expected to be completed by the end of the month.

While the lawsuits against H.M.A. provide a stark look at the pressure being put on doctors and hospital executives to emphasize profits over their patients, similar accusations are being raised at other hospital and medical groups as health care in the United States undergoes sweeping changes.

Federal regulators have multiple investigations into questionable hospital admissions, procedures and billings at many hospital systems, including the country’s largest, HCA. Community Health Systems, the Franklin, Tenn., company from which H.M.A. hired its former chief executive in 2008, faces similar accusations that it inappropriately increased admissions. Community is in discussions with federal regulators over a settlement regarding some of the accusations.

The practice of medicine is moving more rapidly than ever from decision-making by individual doctors toward control by corporate interests. The transformation is being fueled by the emergence of large hospital systems that include groups of physicians employed by hospitals and others, and new technologies that closely monitor care. While the new medicine offers significant benefits, like better coordination of a patient’s treatment and measurements of quality, critics say the same technology, size and power can be used against physicians who do not meet the measures established by companies trying to maximize profits.

“It’s not a doctor in there watching those statistics — it’s the finance people,” said Janet Goldstein, a lawyer representing whistle-blowers in one of the suits, of a type known as qui tam litigation, against H.M.A.

What’s more, like their Wall Street bank counterparts, the mega-hospital systems, with billions of dollars in revenue, are more challenging to regulate, according to experts.

Still, when H.M.A. announced the Justice Department’s involvement in the lawsuits, investors and analysts shrugged, and the stocks for both companies involved in the merger barely budged.

Sheryl R. Skolnick, who follows health care for CRT Capital, recently wrote in a note to investors, “Investors seem to think that D.O.J. investigations, qui tam suits and allegations of serious Medicare fraud are simply a cost of doing business.” Many settlements run only into the tens of millions of dollars. That’s a corporate slap on the wrist for companies whose stocks typically soar when executives push the profit envelope. Only if the penalty is at least $500 million, Ms. Skolnick said, are corporations likely to find the cost a deterrent.

H.M.A. also faces shareholder lawsuits and a federal securities investigation. A former executive was indicted late last year on an obstruction charge related to these investigations.

The company said it could not comment on pending litigation, but was cooperating with the Justice Department investigation. In a statement, the company defended the quality of its medical care. “H.M.A. associates and physicians who practice at our facilities are focused on providing the highest-quality patient care in all of our hospitals,” it said.

The architect of the strategy to raise admissions, according to several of the lawsuits, brought by an array of physicians, individual hospital administrators and compliance officers, was the company’s former chief executive, Gary D. Newsome.

“Gary vigorously denies the allegations,” according to an email from his lawyer, Barry Sabin of Latham & Watkins.

Mr. Newsome joined H.M.A. in September 2008 from a high-ranking post at Community Health. He left H.M.A. last summer to head a religious mission in Uruguay. His compensation in the three years before his departure totaled $22 million.

Shortly after joining H.M.A., Mr. Newsome traveled to North Carolina to meet with local hospital officials. He informed them he was putting in place new protocols, using customized software, meant to “drive admissions” at hospitals, according to allegations in a federal suit filed by Michael Cowling, a former division vice president and chief executive of an H.M.A.-owned hospital in Mooresville, N.C.

To reach admission goals, administrators were directed to monitor on a daily basis the percentage of patients being admitted, using a customized software program called Pro-Med. The progress of the physicians in meeting their goals was updated daily on the scorecards.

When Mr. Cowling confronted Mr. Newsome with physician concerns that the new protocols were clinically inappropriate and would result in unnecessary tests and admissions, and said that his doctors “won’t do it,” Mr. Newsome responded: “Do it anyway,” according to the lawsuit.

As a result, according to a former physician who cited multiple examples, patients who did not need inpatient treatment often were admitted, which allowed the hospital to bill Medicare and Medicaid more for the care.

In Georgia, a baby whose temperature was 98.7 degrees was admitted to the hospital with “fever,” according to a lawsuit filed in federal court by Dr. Craig Brummer, a former medical director of emergency departments at two H.M.A. hospitals.

In one case, an 18-year-old Medicaid patient with a right-knee laceration was admitted, though he could have been treated and discharged, Dr. Brummer said in his lawsuit.

Executives who raised questions about H.M.A.’s policies and procedures were often fired.

When Jacqueline Meyer, a regional administrator for EmCare, a company that provided emergency room physicians to a number of H.M.A. hospitals, refused to follow H.M.A.’s directives and fire doctors who admitted fewer patients than H.M.A. wanted, she was fired, according to the lawsuit she filed with Mr. Cowling. The Justice Department has not yet decided whether to join her lawsuit against EmCare, which declined to comment.

Likewise, shortly after Ralph D. Williams, an accountant with 30 years’ experience in hospital management, was hired as the chief financial officer for an H.M.A. hospital in Monroe, Ga., he asked an outside consulting firm to review the hospital’s inpatient admission rate.

When Mr. Williams showed the report, which confirmed a higher admission rate, to a higher-level division executive, he was told to “burn it.” Mr. Williams was soon fired, according to a qui tam lawsuit Mr. Williams filed in federal court in Georgia.

The last year has been particularly tumultuous for H.M.A., starting with the announced departure of Mr. Newsome, a battle for control of the board with Glenview Capital Management, the hedge fund founded by Lawrence M. Robbins, and the announcement of the acquisition by Community Health Systems.

The merger — and the fact that Glenview controlled big blocks of stock in both H.M.A. and Community Health — recently drew fire from some critics who questioned whether shareholders knew enough about the whistle-blower lawsuits before they voted on the merger.

H.M.A. has disclosed in regulatory filings dating back almost two years that it was the subject of investigations by attorneys general in numerous states. But the shareholder vote on the merger started before the Justice Department joined the multiple lawsuits and the company disclosed that fact.

“I find it incredibly troubling that a few days after voting had started on the merger that the company announced that the Justice Department was joining a bunch of these suits,” said Randi Weingarten, the president of the American Federation of Teachers. The union represents nurses at some of the company’s hospitals, but also trustees of teacher pension funds that own shares.