Medicare Fraud and For-Profit Hospitals- A Story That Never Ends

Sunday, CBS’ Sixty Minutes took a close look at Health Management Associates (HMA) a for-profit hospital chain that, according to its employees, has “relentlessly pressured its doctors to admit more and more patients—regardless of medical need—in order to raise revenues”

“We talked to more than 100 current and former employees and we heard a similar story over and over,” CBS correspondent  Steve Kroft reported.  Emergency room physicians were told “that if they didn’t start admitting more patients to the hospital, they would lose their jobs.” The orders came from the top:

With 71 hospitals in 15 states, HMA is the fourth-largest for profit chain in the country. Last year it raked in revenues of nearly $5.8 billion;  half of that came from Medicare and Medicaid. In other words, taxpayers were footing the bill for a large share of those unnecessary hospitalizations.

Patients also paid. As one doctor observed: “If you are put into the hospital for reasons other than a good, justifiable medical reason, it puts you at significant risk for hospital-acquired infections and what we would refer to as ‘medical misadventure’” (i.e. “preventable medical errors)

     :                           “Putting Heads on Beds” –An Old Story

 The piece was shocking. But it is not a new story. It is an old story. To be more precise, it is a never-ending story. In Money-Driven Medicine: The Real Reason HealthCare Costs So Much, I profiled several for-profit hospital companies that did just what Health Management Associates has done: “put heads on beds”– even though the patients didn’t need to be hospitalized.

At Tenet, in Redding, California, patients weren’t just hospitalized, they underwent heart surgery. An investigation would reveal that in many cases, they “had no serious cardiac problems whatsoever.”

 A FBI affidavit estimated that in one-quarter of all cases, Tenet’s two “rainmaker” heart surgeons were slicing  open patients who should never have been on an operating table. Other doctors tried to alert the hospital’s administration. They were ignored.

Some of those patients did not survive. Others were crippled. All suffered psychological trauma. 

                    HCA:  Florida Governor Rick Scott’s Back-Story                       

In 1997, Health Corporation of America (HCA) made headlines when FBI agents swarmed HCA offices in five states, and found evidence that at HCA, executive salaries hinged on meeting financial targets such as “growth in admissions and surgery cases.”

The FBI also discovered that HCA had been keeping two sets of books—one to show to Medicare, a second that contained the real numbers. Ultimately the investigation would reveal that the hospital chain had been bilking Medicare while simultaneously paying kickbacks to physicians who steered patients to its hospitals

Just as at HMA, whistleblowers said that the directives came from the top. Rick Scott, who would later become governor of Florida, was the CEO of HCA. .(You will find footnotes documenting the details in Money-Driven Medicine (Harper Collins, 2006) .

In 2000 HCA finally settled with the government, pleading guilty to no  fewer than 14 felonies— the biggest case of Medicare fraud ever. The company paid $1.7 billion in fines. 

No one went to jail –probably because the Frist family (as in Senate Majority Leader Bill Frist) had founded the hospital and hired Scott to run it.  (Some would say he was hired to do their dirty work.)

 HCA settled with the government shortly before the Senator’s brother, Dr. Tommy Frist, (who served as  HCA’s chairman) was scheduled to be deposed by the government’s attorneys. 

Rick Scott was never indicted, and waltzed away with $10 million in severance. In 2009 when he led a committee to kill health reform, I told his story here on HealthBeat  and wrote about him again when he became Florida’s governor.  

                                For-Profit Hospital Chains: the Pattern                                 

Tenet, HCA and HMA are just three examples of corrupt for-profit hospitals. After defrauding Medicare and hurting patients for years, these chains are caught, and pay a huge fine. No one goes to prison.  Frequently they change the name of the chain, paint the front door, hire executives who are cronies of the former management team, and start all over again.

Update: Sure enough, HMA CEO Gary Newsome has announced that he will be retiring July 1. Newsome, 55, said in a news release that he is stepping down after being “called by the First Presidency of the Church of Jesus Christ of Latter-day Saints to serve as the president of its Uruguay-Montevideo mission. (It appears that he’s getting out of Dodge.)

”Newsome, who has been at the helm of the company since September 2008, took home $8.3 million in total compensation last year.

Meanwhile, the word on Wall Street is that HMA is now a takeover targetBloomberg reports that, according to  financial analysts, Community Health Systems (CMS), a sister for profit hospital chain is the most likely suitor

 HMA and CMS have quite a lot in common:  CMS has disclosed that it, too, has received requests for information from numerous law-enforcement agencies regarding its  admissions policies, some of which are based at least in part on whistle-blower allegations

Unfazed by charges of wrong-doing, shareholders have sent HMAs share price soaring, up 25% in a week. (Typically, take-over rumors spur buying.)

You’ll find the rest of this post on   where I published a longer version yesterday. Just scroll down to these sub-headlines : “Why Do They Do It?” (where I explain what is wrong with the for-profit hospital model) and
Non-Profits Follow the For-Profit Model” (the story of a non-profit Catholic hospital that insisted that doctors admit more ER patients. )


10 thoughts on “Medicare Fraud and For-Profit Hospitals- A Story That Never Ends

  1. It bewilders me how Scott won the governorship in FL. Wasn’t this info openly published by the media during the governor’s election race, or do people in FL not care about such things?. That would seem unlikely to me, but the guy did win??

    • Yes, he won. I’ve told this same story here to many people before the election, and was outright called a liar. I lived in Northern California when the stuff went down at Redding, so I was very familiar with the story before the whole thing with HCA came out.

      Rick Scott is a crook.

      • Panacea–
        Good to hear from you.
        And yes, many people probably just didn’t believe Scott’s backstory.
        How could he be running for governor if he’s a crook??

  2. Sounds like the first thing to do is outlaw for-profit hospitals.
    Just sayin…..

    • Orderly Joe–
      Thanks for commenting.

      Actually, New York State did that a long time ago.

      They are most popular in the South.

  3. NG

    Thanks for the comment. It is amazing.
    But people have very short memories. And this includes jouranlists.

    When Scott surfaced to head up a committee devoted to killing Obamacare, the Wall Street Journal identified him as the former CEO of HCA– without mentioninng that he had been ousted from HCA after it was accused of the
    biggest Medicare fraud in U.S. history.

    It’s quite possible that the reporer who wrote the WSJ piece was too young to remember the HCA story.

    I spotted his name in the WSJ story and wrote a post about it at the time. As I recall, at that point no one else wrote in depth about his past. Though if memory serves, at least one reporter from Florida got in touch with me.

    Of course Scott was never indicted –so some editors might say you shouldn’t mention the scandal. But anyone who knew the story of HCA at all well knew that whistleblowers who were deposed testified that he was in charge of the operation.

    What I don’t know is whether his oppostion in the Florida race publicized his role in the HCA fraud. I would suppose they must have.

    But voters don’t read. Most vote based on their impression of the candidate–his looks, whether they find him charismatic, whether he seems like someone they would like to have a beer with, how he handles himself in a debate. (Is he stiff or wooden, is he condescending, is he funny.)
    Sadly, this is how we elect our politiicans.
    And of course $$$ determines how much face-time they get on television.

  4. Rick Scott’s back story needs to be widely published each October and November as a living memorial for him. it is the alternative to the jail time that he wrongfully escaped from.

    • Bruce–

      What a truly wonderful idea!
      Thanks so much for commenting. You should come back here and comment more often.

  5. I live in Brevard county fl.-a very conservative area-candidates running against Scott did try to get the message out but the voters ignored it-swept it under the rug-he was a conservative candidate-that is all that mattered-he would have won if his last name was Hitler and unfortunately he has a good chance of winning a 2nd term -he bought the last election using millions of his own money-money he acquired through columbia hca. At the time he purchased columbia he had to put in everything he had to come up with the 125,000 purchase price. when he left columbia it was at the request of their board of directors as the medicare fraud that occurred under him was being investigated-he left with millions of dollars in stocks and monetary compensation-those millions helped him buy Fl. and reportedly his fortune has grown substantially since he became governor. In fact, in august of 2012 he was rated by Modern Health care as no. 43 out of 100 hundred” Most Influential in Healthcare”-quite an accomplishment for a man who was barely 2 years into serving in any type of government office-he’s a fast learner-he’s fast in many ways. In January of this year (2014) he got his new campaign kicked -off by a generous 1 ,000,000 donation from Miguel “Mike” Fernandez, who in 2009 led MBF Healthcare partners who were currently in the process of filing for a Medicaid contract with the state of Florida. You can rest assured that a very large portion of his campaign contributions for this year will be large corporations in the medical field. Florida is the perfect place for Scott to be governor-all these unsuspecting retirees and medicare benificeries – remember Florida, regardless of your political preference, voting for Scott will put innocent lives at risk in the name of money. I know- I have written before about Kindred Healthcare in Melbourne Fl. and the false imprisonment of my husband there. Along with others, he was held captive by forcibly being kept on a respirator he did not need and kept chemically restrained as well as horrible physical and mental abuse and torture while I, his wife of 43 years, was trespassed for 2 years for reporting him to DCF (an agency under Scott’s jurisdiction) . We finally got him out – but it was forcibaly -not with any government assistance.Today, almost 2 yrs. later we are still working on getting an honest investigation into what happened at Kindred but, so far, the DCF,AHCA, the Inspector Generals office (all Florida offices under the jurisdiction of Governor Scott ) have all refused. The fictionalized reports by Kindred, DCF and AHCA is the only evidence allowed although there is documentation and witnesses to the contrary .