For those who may be unfamiliar with the procedural jumpstart of a False Claims Act whistleblower action, these cases are filed by an individual plaintiff who has firsthand, original knowledge of facts tending to suggest fraud. Plaintiffs are usually current or former employees, but can also be customers, clients, or patients of the defendant. As long as the information contained in the complaint is not general, public knowledge, the plaintiff could possibly recover up to 30 percent of any amount recouped on behalf of the federal government. Under FCA rules, the plaintiff must be represented by an attorney, must file the complaint under seal, and serve the Department of Justice with a “Disclosure Statement” setting forth the plaintiff’s evidence.
In some cases, after a dutiful investigation by the Department of Justice, it will choose to intervene in the case. According to the DOJ, the government intervenes in approximately 25 percent of qui tam actions and reserves this right for the most significant, severe, or harmful cases of fraud.
Earlier this month, the DOJ announced it would be intervening in eight FCA cases involving Health Management Associates, Inc., a Florida-based hospital chain with a presence across the United States. As the details emerge, it is clear that the type of fraud present in these cases is of an extensive, widespread nature, prompting the DOJ to jump in and take the reins of the investigation.
Details of Cases Against HMA, Inc.
The qui tam cases against HMA involve some of the most familiar types of healthcare fraud: unnecessary procedures and inflated physician compensation. According to allegations, HMA was involved in a scheme whereby it offered incentives to doctors for admitted patients to its hospitals when a simple outpatient procedure would have been appropriate. These incentives included monetary kickbacks and investment opportunities at below-market buy-in prices. As a result of these kickbacks, patients received unnecessary emergency care while Medicare and Medicaid footed the bill.
Evidence provided by former employees of HMA, including several emergency room doctors, revealed a corporate governance structure centered on hospital admission goals. This practice, coupled with an “underutilization of supervision,” was uncovered in an audit report which then-CFO Ralph D. Williams ordered his staff to burn. Further, emergency department doctors were routinely required to attend meetings wherein executives questioned the doctors as to why certain patients were treated on an outpatient basis when an admission would have been possible.
Several allegations, particularly involving two Pennsylvania-area hospitals, centered around an unlawful investment scheme involving hospitals, HMA, and emergency department physicians. According to the complaint, HMA encouraged hospitals to reorganize as a “joint venture,” which is defined by the IRS as a merger between a not-for-profit (i.e., tax exempt) hospital and a for-profit hospital management company. These joint ventures have been popular lately as there are apparently incentives to this sort of arrangement under the Affordable Care Act. Executives of HMA offered doctors who were willing to buy-in and invest in the new joint ventures a return of 20 percent over ten years in exchange for their promise to admit at least one additional emergency department patient per day. The buy-in rates were allegedly well below market value for such an investment. Under the FCA, offers of investment between medical entities ultimately seeking Medicare or Medicaid reimbursements are strictly prohibited if for below market value.
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