Health Management Associates: When Refusing an Admission Needed an Explanation

Health Management Associates agreed to a $216 million civil settlement in 2018 over alleged unnecessary inpatient billing, physician referral payments and inflated emergency department fees. For an emergency physician, the telling detail is how HMA allegedly made declining an admission something to explain. Its software prompted an admission. The doctor who disagreed had to override the prompt and document why the patient did not need to be admitted.

Health Management Associates Admission Quotas Put Revenue Ahead of Patient Need

Health Management Associates set company-wide targets for turning emergency visits into inpatient stays. In admissions made in its criminal resolution, the Naples, Florida health care chain acknowledged setting mandatory company-wide admission rates of 15 to 20 percent for all emergency department patients, depending on the hospital, and 50 percent for patients 65 and older, solely to increase its revenue, according to the Justice Department’s announcement.

Those hospital admission rate targets singled out Medicare-age patients for a much higher benchmark. According to those admissions, it was a formal and aggressive plan to increase emergency department inpatient admissions at all its hospitals, and executives and hospital administrators carried it out by pressuring, coercing and inducing physicians and medical directors to meet the targets and admit patients who did not need inpatient care, including by threatening to fire them.

The target reached across HMA’s hospitals, including Carlisle Regional Medical Center in Pennsylvania. The clinical decision happened at the bedside. Management had already chosen the percentage it wanted.

Why the Inpatient Decision Was Worth Money

Inpatient status changes how Medicare pays the hospital. Under its prospective payment systems, inpatient care is paid by the admission, while outpatient care is paid through a separate system. The diagnosis group assigned to the stay helps determine the inpatient payment.

The government alleged that Health Management Associates’ institutional billing policy put inpatient services on claims when the care should have been billed as outpatient or observation services. That part of the civil settlement covered claims submitted between 2008 and 2012 for the inpatient admissions of beneficiaries over the age of 65 in Medicare, Medicaid and the Defense Department’s TRICARE program. HMA agreed to pay $62.5 million to resolve those allegations. The same care could reach Medicare under a more expensive classification because of the admission decision.

A two-midnight expectation is about the patient. Today, Medicare’s two-midnight benchmark turns on the admitting physician’s expectation that the patient needs hospital care crossing two midnights. HMA’s percentage target measured how many people the hospital admitted.

How Software and Bonuses Reached the Physician

The whistleblowers’ complaints describe how Health Management Associates allegedly put the admission targets into daily practice. In one complaint, the physicians alleged that a QualCheck admission alert made the doctor justify a decision against admission:

The same complaint alleged that HMA wanted overrides below 30%, requiring physicians to admit at least 70% of patients selected by the software. That was a separate target for software-flagged patients, alongside the broader emergency department admission benchmark. The alleged pressure reached the precise moment when a doctor decided that a prompt was wrong.

Another complaint alleged that HMA used customized Pro-Med software to generate daily, weekly and monthly admission-rate reports for hospital administrators. It also described what happened when emergency physicians called patients’ primary care doctors:

The whistleblowers alleged that monthly bonuses rewarded emergency physicians and medical directors for exceeding benchmarks for calls and protocol-driven tests, and for keeping admission overrides below the benchmark. They alleged that admissions rose with the bonus plans and fell when HMA stopped them. EmCare allegedly helped enforce the targets through physician oversight, training and instructions to admit more patients.

An emergency physician threatened over an inpatient admission percentage would recognize the next part of the government’s account: executives and administrators threatened to fire physicians and medical directors who did not raise admissions. The demand was backed by control over their work.

The Civil Settlement Also Reached Referrals and Facility Fees

The civil claims covered how patients arrived, whether the hospital admitted them and what it charged for the emergency visit. Alongside unnecessary admissions, the government alleged that Health Management Associates paid physicians for referrals.

In Florida, Charlotte Regional Medical Center and Peace River Medical Center allegedly billed federal health care programs from 2003 through 2011 for services referred by physicians HMA paid for those referrals. The alleged inducements included free office space, staff and direct payments for a local physician group, and free rent and office upgrades for another local physician. HMA agreed to pay $93.5 million to resolve those claims.

In Pennsylvania, Lancaster Regional Medical Center and Heart of Lancaster Medical Center allegedly billed between 2009 and 2012 for services referred by physicians HMA paid too much: a large physician group and a local surgeon. The government alleged those arrangements were structured to disguise payments meant to induce referrals, and HMA agreed to pay $55 million. Crossgates Hospital in Brandon, Mississippi, allegedly required a local physician to pay rent for only half of the space he occupied from January 15, 2005 through January 14, 2007, in return for referrals. HMA agreed to pay $425,000 to resolve that claim.

A whistleblower’s physician-compensation complaint described alleged kickbacks concealed through joint ventures and excessive payments under management or services agreements, including payments for services never performed.

The emergency department facility-fee allegations concerned the bill for the visit itself. The government said certain HMA hospitals submitted falsely inflated facility charges to Medicare and Medicaid from September 2009 through December 2011. HMA agreed to pay $12 million to resolve that part of the case.

Eight Qui Tam Cases Behind the Civil Claims

Whistleblowers brought eight qui tam cases behind Health Management Associates’ civil resolution. Their complaints covered admission practices and financial arrangements, giving the government accounts of decisions made inside the business. The Justice Department joined the cases over unnecessary admissions and kickbacks.

The Justice Department disclosed a reward of approximately $15 million to the whistleblower in one HMA case and approximately $12.4 million to the whistleblowers in another.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. In HMA, the complaints put the internal instructions, software and financial incentives into the account of how the claims arose.

Community Health Systems’ Settlement Left HMA Hospitals Out

Community Health Systems‘ admission fraud settlement in 2014 expressly excluded the HMA hospitals it had acquired that January. The Justice Department’s announcement described a separate alleged admission scheme at 119 Community Health Systems hospitals, where patients should have received less costly outpatient or observation care.

Buying HMA had brought the chains under common ownership, but their admission cases had separate resolutions.

What the Admission Reports Could Explain

The trail runs from management’s admission target to the patient’s care and the bill. An admission report can show what management measured. The physician’s override and explanation can show where the target collided with clinical judgment. A utilization review nurse, physician or case manager may recognize the inpatient-versus-observation decision, while coding and billing staff see the classification that reached the claim.

A 2023 study, Types of Hospital Frauds: Nature and Methods of Prevention, in the Journal of Forensic and Investigative Accounting, examined hospital-fraud cases reported by the Justice Department. It found fraudulent billing was the most common category in its sample and identified comparisons of billing records with medical records, together with coding analysis, as ways to detect healthcare billing schemes.

Its discussion of collusion explains why a chain of approvals can fail: once the people in it act together, the internal controls meant to check them can lose all meaning.

In the whistleblowers’ account, the same admission target ran through the software, the supervisor’s demands and the physician’s incentives. Each reinforced the others. Someone who knows how the instruction traveled can connect the management decision to the bill.

Other Hospitals, Other Ways to Push the Admission

At Dignity Health, the government alleged inpatient billing for procedures and conditions that should have received outpatient or observation care. At Banner Health, the allegations also reached inflated reports of hospital observation hours.

San Mateo County Medical Center settled allegations that included admissions for social reasons and lack of alternative placements. That is a different pressure on a hospital case manager from a corporate admission quota, but it reaches the same question of what medical need supported the inpatient bill.

At Oroville Hospital, the government alleged that physicians received a bonus based on the number of patients they admitted. For a hospitalist facing an admission-based bonus, the payment formula is the connection to the inpatient claim. Prime Healthcare‘s admission case also involved alleged billing for more expensive diagnoses than patients actually had. A performance-improvement director brought that admission and coding case.

When the Target Reaches Your Patients

If an admission quota, a software override or a bonus plan shaped the patients you were told to admit, speak with our whistleblower experts about what management demanded. We build the case around what you know, bring in hospital fraud whistleblower lawyers who understand admission decisions and billing, and stay beside you through the case.