Investors: Hospital group hid whistleblower suit
Health Management Associates (HMA) shareholders filed a class action in Florida federal court recently and claimed stock prices dropped after it was revealed the hospital group had used Medicare fraud to inflate prices and hidden a wrongful-termination whistleblower suit by an employee who uncovered the alleged fraud.
The shareholders claim that between July 27, 2009, and Jan. 9, 2012, the company and its most senior officers touted the company's solid financial performance and growth in hospital admissions rates, but that seemingly strong performance was based on the group's fraudulently billing Medicare, explains Barbara E. Hoey, JD, a shareholder with the law firm of Littler Mendelson in New York City. The fraud allegedly consisted of admitting elderly and disabled Medicare recipients who did not, in fact, meet Medicare standards for inpatient treatment, later revealed by an employee who was subsequently fired.
"Rather than being based on sound business practices and efficiencies, HMA's financial performance was due, in substantial part, to fraudulently generated hospital admissions and treatment statistics, as well as fraudulent Medicare billing," the complaint says.
Shareholders claim that they realized something was wrong on Aug. 3, 2011. The Naples, FL-based company, which operates 59 hospitals and other health facilities, disclosed that the Department of Health and Human Services had issued subpoenas requesting information on physician referrals and the company's management. Stock prices dropped more than 9% the next day, according to the lawsuit.
The August disclosure also was incomplete, the shareholders say. In October 2011, HMA leaders disclosed more details and said that the subpoenas related to the Anti-Kickback Statute and the False Claims Act.
On Jan. 9, 2012, an analyst from CRT Capital Group issued a report saying that HMA's former director of compliance, Paul Meyer, was suing the company for violation of Florida's Private Sector Whistleblower Act. He claimed that he had been fired illegally after he uncovered evidence of the Medicare fraud. Hoey notes that prior to his HMA position, Meyer worked for the Federal Bureau of Investigation for 30 years, most recently as supervisor of the healthcare fraud unit based in Miami.
After news of Meyer's lawsuit surfaced, stock dropped more than 8%. The following day, the company announced that its general counsel had resigned, and stock prices again tumbled, dropping almost 13% in a single day.
The shareholders are suing the company and individual executives for violations of the Securities and Exchange Act of 1934. They are seeking compensatory damages for the money they claim to have lost as a result of HMA and its executives' alleged fraud. n
Health Management Associates (HMA) shareholders filed a class action in Florida federal court recently and claimed stock prices dropped after it was revealed the hospital group had used Medicare fraud to inflate prices and hidden a wrongful-termination whistleblower suit by an employee who uncovered the alleged fraud.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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