In re Health Management Associates, Inc.

Updated: January 05, 2017
Status: Ongoing Case
Labaton Sucharow filed a complaint on behalf of lead plaintiffs against the privately owned hospital chain, Health Management Associates (HMA). HMA owns and operates acute care hospitals and other health care facilities throughout the United States.

The complaint alleges that HMA improperly admitted Medicare patients who did not meet admission criteria in order to systematically drive up Medicare billing. By employing this tactic, HMA artificially inflated its revenue, growth statistics and profits, thereby inflating the price of its stock.

On May 21, 2014 the court granted the defendants' motion to dismiss the complaint, with prejudice. Lead plaintiffs filed their Notice of Appeal on June 20, 2014. Lead plaintiff-Appellants' opening Appellate brief was filed on August 1, 2014. The defendant-appellee's Response was filed on September 19, 2014. On August 27, 2014, the parties participated in a mandatory telephonic mediation but could not reach an agreement to settle the case. Lead plaintiff-appellants' reply was filed on October 23, 2014. A hearing was held before the Court of Appeals on February 6, 2015.

The case is In re Health Management Associates, Inc., No. 12-cv-00046 (M.D. Fla.). Lead Plaintiffs are Norfolk County and New England Teamsters & Trucking Industry Pension Fund and the Operating Engineers Trust Fund. The defendants are Health Management Associates, Inc., Gary D. Newsome (President and CEO), Robert E. Farnham (Senior Vice President and CFO) and Kelly E. Curry (Vice President and CFO).

The truth about HMA's improper business practices began to be revealed on August 3, 2011, when HMA disclosed that it had received subpoenas from the US Department of Health and Human Services, Office of Inspector General. In reaction to this news, HMA's share price fell by 9.1 percent on August 4, 2011 on high trading volume.

On October 19, 2011, Paul Meyer, a retired FBI officer who specialized in healthcare fraud and a former Director of Compliance at HMA, filed a whistleblower suit against HMA pursuant to Florida's Private Sector Whistle Blower's Act. Meyer alleged that he was fired in retaliation for uncovering, reporting and demanding that HMA rectify its systemic Medicare billing fraud at four HMA-owned and -operated facilities.

On January 9, 2012, an equity analyst published a note to investors that discussed Meyer's lawsuit and allegations. As a result of these revelations, HMA's stock price declined more than 7 percent from January 6, 2012 to January 9, 2012 on above average trading volume.

On January 10, 2012, HMA disclosed that Timothy R. Parry, Senior Vice President, General Counsel and Secretary of the Company, had abruptly announced his intention to immediately resign from HMA. As a result of this news, HMA's stock price declined an additional 13.07 percent in a highly volatile trading session on extraordinarily high trading volume.

On December 2, 2012, CBS aired a segment on 60 Minutes entitled "Hospitals: The Cost of Admission." The 60 Minutes segment focused on revenue HMA generated from Medicare. The news program interviewed "more than 100 current and former [HMA] employees" who provided details demonstrating that HMA pressured its physicians and staff to admit patients who should not have been admitted in order to generate higher Medicare revenue, set quotas for admissions that could not legitimately be met in the absence of Medicare fraud, and customized its Pro-MED computer system in order to justify the improper admission of more patients.