Naples HMA to return $31 million in questionable incentive money

Health care giant promises more diligent oversight

Health Management Associates Inc. is repaying $31 million in technology incentives it improperly collected through federal and state programs and will tighten its financial controls as it restates financial results dating back to 2010, the Naples-based hospital company reported.

HMA disclosed that 11 of its hospitals collected the $31 million through the Medicare and Medicaid Health Information Technology program, but made an error in applying the requirements of the program. The program is intended to encourage health care providers to upgrade their electronic records systems.

HMA did not name the hospitals involved and did not return calls seeking additional information on Wednesday.

In a press release, HMA said it has notified the Centers for Medicare and Medicaid Services and has repaid “the majority of the funds” and is still working to pay back some state agencies that participate in the programs.

HMA operates 71 hospitals in 15 states, including Lehigh Regional Medical Center in Lehigh Acres; two Physicians Regional Healthcare System hospitals in the Naples area; Bayfront Health Port Charlotte; and Bayfront Health Punta Gorda.

The $31 million recorded as income from the program was consistently less than 2 percent of earnings before interest, taxes, depreciation and amortization in each impacted quarter, said analyst Sheryl Skolnick, analyst with CRT Capital Group.

“As these kinds of restatements go, it is fairly minor,” Skolnick said. “The degree of overstatement is not huge, but it is not acceptable. It’s the material failure of the controls that raises the level of seriousness.”

Skolnick said HMA will likely get some leniency for reporting the problem itself, but the Securities and Exchange Commission may investigate the company’s controls further.

HMA already faces whistle-blower suits alleging Medicaid and Medicare fraud, federal investigations from the Department of Justice and the Securities and Exchange Commission and class-action suits from shareholders saying the company isn't acting in their best interest.

In August, Glenview Capital Management — HMA's largest shareholder — replaced the company's board and put its own directors in place.

On July 30, Franklin, Tenn.-based Community Health Systems Inc. announced it intended to buy HMA for cash and stock valued at about $13.78 a share, or about $7.6 billion, including $3.7 billion in debt. That deal is expected to close in the first quarter, HMA said in its statement.

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