Gary D. Newsome, Former CEO of Hospital Chain, HMA, to Pay $3.46 Million to Resolve False Billing and Kickback Allegations


Gary D. Newsome, former CEO of Health Management Associates LLC (HMA),  a hospital chain that was headquartered in Naples, Florida, has agreed to pay the United States $3.46 million to settle allegations that he caused HMA to knowingly submit false claims to government health care programs by admitting patients who could have been treated on a less costly, outpatient basis, the Department of Justice announced. The settlement also resolves allegations that Newsome caused HMA to pay remuneration to Emergency Department (ED) physicians in return for referrals.  

“Those who bill federal health care programs for unnecessary hospital stays will be held accountable for wasting federal dollars,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “Patients deserve the unfettered, independent judgment of their health care professionals. We will pursue those who cause hospitals to offer financial incentives to physicians in return for improper patient referrals that undermine the integrity of our health care system.”

“A physician’s health care decisions should be driven by what is in the patient’s best interest, not by what helps line a provider’s pockets,” said Barbara Bowens, the Acting U.S. Attorney for South Carolina for purposes of this case. “The U.S. Attorney’s Office will not tolerate false claims based on unnecessary hospital admissions, which drive up health care costs and can harm patients.”

“Providers are expected to closely follow rules and bill properly. Further, in this case, the government contended that Newsome directed illegal payments for referrals,” said Derrick L. Jackson, Special Agent in Charge of the Office of Inspector General of the U.S. Department of Health and Human Services. “Taxpayer money wasted is money stolen from vital government health programs.”

The settlement resolves allegations that Newsome caused HMA to pressure ED physicians to increase inpatient admissions by recommending admission without regard to medical necessity. The government claimed that the inpatient admission of these beneficiaries was not medically necessary, and that the care needed by, and provided to, these beneficiaries should have been provided in a less costly outpatient or observation setting. Hospitals generally receive significantly higher payments from Medicare for inpatient admissions as opposed to outpatient treatment; therefore, the admission of beneficiaries who do not need inpatient care, as alleged here, can result in substantial financial harm to the Medicare program. 

The United States also alleged that Newsome caused HMA to pay remuneration to EmCare, a company that provided physicians to staff HMA hospital EDs, to recommend admission when patients should have been treated on an outpatient basis.  As part of the alleged scheme, Newsome caused HMA to make certain bonus payments to EmCare ED physicians and tied EmCare’s retention of existing contracts and receipt of new contracts to increased admissions of patients who came to the ED.

Newsome served as CEO of HMA from September 2008 through July 2013. HMA was acquired by Community Health Systems Inc. (CHS), another hospital chain, in January 2014, after the alleged conduct at HMA occurred. 

HMA and EmCare have already resolved their liability to the government for these allegations. In September 2018 HMA entered into a civil settlement under which it paid $61.8 million.  Simultaneously, HMA entered into a Non-Prosecution Agreement (NPA) with the Criminal Division’s Fraud Section under which it paid a $35 million monetary penalty. In addition, an HMA subsidiary that formerly owned one hospital pled guilty to a single count of conspiracy to commit healthcare fraud, and paid a $3.25 million fine. In December 2017, EmCare paid $29.6 million to resolve these allegations.   

This settlement resolves a lawsuit originally filed in the U.S. District Court for the District of South Carolina by Jacqueline Meyer, a former employee of EmCare, and J. Michael Cowling, a former employee of HMA, under the qui tam or whistleblower provisions of the False Claims Act, which permit private citizens to bring lawsuits on behalf of the United States and share in any recovery. Meyer and Cowling will receive approximately $725,000 from the settlement. The case was transferred to the U.S. District Court for the District of Columbia and is United States ex rel. Meyer & Cowling v. HMA, Inc., 1:14-cv-00586-RBW (D.D.C).

The settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the District of South Carolina, the U.S. Department of Health and Human Services Office of Inspector General, and the Federal Bureau of Investigation.    

The claims resolved by this settlement are allegations only, and there has been no determination of liability.