Justice Dept. says Health Management Associates ex-CEO aided 'scheme'

Former Health Management Associates CEO Gary Newsome has emerged as a defendant in a broad whistle-blower investigation alleging the Naples-based hospital system engaged in kickbacks to boost patient admissions, regardless of medical necessity.

In a news release Monday, the Department of Justice alleges Newsome directed corporate officers to exert “significant pressure” on emergency physicians and hospital administrators.

“The Department of Justice is committed to ensuring that health care providers who attempt to misuse federal health care programs for their own profit are held accountable,” said Stuart F. Delery, assistant attorney general for the Justice Department’s civil division, in a statement. “Schemes such as this one can contribute significantly to the rising cost of delivering health care and create needless patient risk.”

Newsome stepped down from his post in July to serve as as president of The Church of Jesus Christ of Latter-day Saints’ Uruguay-Montevideo Mission in South America.

HMA did not immediately respond to the government’s Monday afternoon announcement.

The company operates 71 hospitals in 15 states, including Lehigh Regional Medical Center, two Physicians Regional Medical Center hospitals in Naples and two health centers in Charlotte County.

The Justice Department has joined eight related lawsuits in recent months. It also accuses HMA of inflating billing claims to Medicare and Medicaid and paying other physician groups for referrals.

The Florida case accused the company of providing up to $800,000 worth of office space, equipment and other payments to Primary Care Associates of North Port in exchange for patient referrals to its hospitals. According to the suit, Primary Care Associates referrals accounted for one-third of revenues for both HMA hospitals in Charlotte County between 2004 and mid-2007, or more than $48 million.

HMA shareholders last week overwhelmingly voted to approve a $7.6 billion deal that would turn the company over to Tennessee-based Community Health Systems.

http://www.news-press.com/article/20140114/HEALTH/301140026?gcheck=1

Health Management backs takeover by Community Health

Nov 13 (Reuters) - Health Management Associates Inc said on Wednesday its board backed its proposed takeover by Community Health Systems Inc after a review period spurred by activist investor Glenview Capital.

Health Management said that the board had agreed to the transaction at the price of $10.50 in cash plus 0.06942 share of Community Health common stock, or about $13.44, per Health Management share, plus a contingent value right of up to $1.00 per share.

Those were the terms of the deal when it was announced back in August by a previous board of directors, although a decline in Community Health's share price now puts the deal value at $3.6 billion plus the contingent value right compared with $3.9 billion it was when first announced.

Health Management shares have also traded off since the deal and closed on Tuesday at $12.52.

Glenview Capital, which owns 14.5 percent of Health Management's stock and is its largest shareholder, said that UBS Securities and Lazard Freres & Co had conducted a fairness opinion on the deal for the board.

Shareholders replaced Health Management's board in August with a slate of directors that Glenview had put forth, raising questions about whether the deal would go through or whether the terms would change.

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.

http://www.news-press.com/article/20131107/BUSINESS/311070041/Naples-HMA-to-return-31-million-in-questionable-incentive-money?nclick_check=1

Community Health to buy Health Management for $3.9 billion

(Reuters) - U.S. hospital chain Community Health Systems Inc said on Tuesday that it would buy smaller Health Management Associates Inc for $3.9 billion to increase its base during the overhaul of the country's healthcare system.

Both companies' hospitals are primarily in smaller cities and rural areas. Health Management has a strong presence in the U.S. Southeast, including Florida. Community Health is the second-largest for-profit chain behind HCA Holdings Inc .

Community Health said that based on Monday's share prices, it would pay $13.78 per share in cash and its own stock. The deal would give Health Management shareholders a 16 percent stake in the new company and an additional contingent value right worth up to $1 per share.

Health Management shares fell 6.9 percent to $13.89 before the market opened, while Community Health rose 2.4 percent to $48.35.

The contingent value right payment depends on the outcome of certain legal proceedings, the companies said in the statement, but they did not provide further details and were not immediately available for comment.

Health Management cut its earnings outlook in April, citing weak patient admissions. The company in December was the subject of a "60 Minutes" television news story that described aggressive policies aimed at increasing admissions. Health Management denied the allegations.

In its first-quarter financial filing, Health Management said it had received a subpoena from the U.S. Securities and Exchange Commission for documents involving accounts receivable, billing write-downs, contractual adjustments, reserves for doubtful accounts, and revenue.

In a separate statement in which Health Management forecast second-quarter earnings of 10 cents to 11 cents a share due to weak hospital admissions, it said that it received additional subpoenas from the U.S. Department of Health and Human Services about emergency room operations that supplemented ones received in 2011. It also received an additional subpoena on physician relationships.

Health Management also had faced a looming proxy fight with hedge fund Glenview Capital Management, which wanted to replace the entire board. In June, Health Management said it had hired Morgan Stanley and law firm Weil, Gotshal and Manges to consider its response to Glenview's campaign.

Glenview, which owns 14.6 percent of Health Management, said in a June letter to the hospital operator that there was "significant room for improvement" at the company, which it said had fallen short in its financial performance for more than a decade.

Health Management Chief Executive Officer Gary Newsome was due to retire at the end of the month. On Tuesday the company said John Starcher would be interim president and CEO.

The Community Health deal is the second major hospital merger agreement in as many months as the companies, faced with declining patient admissions and rising bad debts, struggle to shore up their finances as they await an expected influx of newly insured patients beginning next year under healthcare reform.

Last month, No. 3 hospital chain Tenet Healthcare Corp announced a deal to buy Vanguard Health Systems Incfor $1.73 billion.

Community Health, based in Franklin, Tennessee, on Monday reported a drop in second-quarter profit due to weak admissions and a rise in bad debt.

The boards of both companies have approved the deal, which they expect to close by the end of March.

Community Health said it had a financing commitment from its advisers on the deal, Bank of America Merrill Lynch and Credit Suisse . Kirkland & Ellis also advised the company.

(Reporting by Susan Kelly in Chicago and Caroline Humer in New York; Editing by Gerald E. McCormick, Jeffrey Benkoe and Lisa Von Ahn)

http://news.yahoo.com/community-health-buy-health-management-3-9-billion-111105172.html