HMA responds to fraud allegations

As the company shares continue a price decline, officials with Naples, Fla.-based Health Management Associates fired back Tuesday (Jan. 17) against allegations of Medicare fraud.

On Jan. 9, Stamford, Conn.-based CRT Capital Group issued an investor note about a lawsuit alleging that officials at four HMA hospitals (Medical Center of Southeastern Oklahoma in Durant; Physicians Regional Medical Center, Naples, Fla., and Collier, Fla., facilities; and the Dallas Regional Medical Center in Mesquite, Texas) participated in “widespread Medicare fraud.”

HMA is the parent company of Fort Smith-based Sparks Health System, and operates Summit Medical Center in Van Buren.

The lawsuit was filed by Paul Meyer, a former HMA director of compliance and a 30-year veteran of the Federal Bureau of Investigation. HMA has countersued Meyer, and is saying he was fired for insubordination. HMA also alleges that Meyer took confidential documents and has refused to return them.

CRT also said the sudden resignation — announced Jan. 10 — of Tim Parry, a senior vice president and general counsel and secretary, increased concerns about the company’s future legal jeopardy.

Also on Jan. 10, CRT analysts noted that HMA’s preliminary fourth quarter results missed a CRT revenue estimate by $88 million. CRT said it suspects the decline in revenue may be related to an up to 4% decline in inpatient admissions during the quarter and revenue from the recent acquisition of HMA.

The CRT reports caused the price of HMA shares (NYSE: HMA) to drop below $6. The shares attempted to recover, but closed Tuesday at $5.79 after opening the trading day at $5.98. During the past 52 weeks, the share price has ranged from a $11.74 high to a $4.81 low.

HMA on Tuesday released a letter from Parry to HMA Senior Vice President of Human Resources Patrick Lombardo saying his departure was for personal reasons.

“Dear Patrick:
Unfortunately, it appears the media and stock market wrongly connected my departure from the Company with the Company’s litigation in the Paul Meyer case.

It is my intent with this letter to hopefully clear up and end this speculation. Let me be clear – I resigned from the Company purely for personal reasons, my reasons are my reasons alone, and they have absolutely nothing to do with the Meyer case.
Sincerely,
S/ Timothy R. Parry
Timothy R. Parry”

The company also released the following statement about Parry and the Meyer lawsuit.
“Tim has been a valued member of Health Management’s leadership team for the past 16 years, serving as General Counsel for 14 of those years. We are grateful for his years of service to our Company and wish him the very best,” said Gary D. Newsome, President and Chief Executive Officer of Health Management Associates, Inc. “We will continue our search for a new General Counsel and get back to the task at hand, enabling America’s best local healthcare.”

The Meyer v. Health Management Associates, Inc. lawsuit recently received public attention that inaccurately characterized the parties’ allegations and legal claims against each other.

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“Paul Meyer, as a former Health Management employee, has filed an individual wrongful termination lawsuit,” explains Susan J. Toepfer, Esq., defense counsel for Health Management in the Meyer lawsuit. “The facts will show that Meyer was terminated for insubordinately refusing to cooperate with Health Management’s efforts to comply with its legal obligations under a government subpoena. More specifically, Meyer refused to return documents that were company property and were necessary for Health Management to continue its full and complete cooperation with the government’s request for information.”

The failure of any employee, in this case Meyer, to fully and completely cooperate with the company in response to a subpoena is so fundamentally adverse to the intent and purpose of our compliance department and program that Health Management took immediate and decisive action to terminate Meyer. The facts in the Meyer case will establish that it is Health Management’s wholehearted commitment to full and complete compliance that led to Meyer’s termination.

“Health Management takes very seriously and is committed to ensuring that its hospitals and associates are compliant with all federal and state rules and regulations,” added Newsome. “Based upon this long-standing commitment, Health Management has established and maintained a robust compliance program and policies, as well as a compliance department with a highly qualified staff headed by former FBI agent, Matt Tormey, Vice President of Compliance and Security. Mr. Tormey has a direct reporting line to the Health Management Board of Directors, through the audit committee and the CEO, as the integrity of the organization is of paramount importance.”

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