Health Management Associates (HMA) Sued Over Alleged Medicare Fraud

By on January 27, 2012

Health Management Associates (NYSE: HMA) violated federal securities laws by misleading investors over its financial performance and growth, its increase in hospital admission rates, and its compliance with all applicable laws, a class action filed in the United States District Court for the Middle District of Florida alleges.  The lawsuit, filed on behalf of investors who purchased Health Management common stock from July 27, 2009 through January 9, 2012, claims that Health Management shares were trading at inflated levels as a result of false statements made by company executives.

On August 3, 2011, the Wall Street Journal reported that Health Management received subpoenas, on two separate occasions, from the U.S. Department of Health and Humans Services’ Office of Inspector General.  On May 16, 2011, regulators requested information on physician referrals, plus ownership and management at the company’s “whole-hospital physician joint ventures,” among other items.  On July 21, 2011, the agency requested information on emergency room management, including the use of “Pro-Med” software.

In reaction to the news, Health Management shares fell 9.12% on the following trading day.

Share fell another 13% after its general counsel resigned and an analyst raised concerns about an October 2011 lawsuit filed against the company relating to Medicare billing.  Health Management announced that Timothy Perry will retire immediately as counsel and leave in March 2012.

On January 10, 2012, Sheryl Skolnick, an analyst with CRT Capital Group LLC wrote in a note [that was referenced in a Bloomberg article] that a lawsuit was filed against Health Management by a former employee named Paul Meyer.  Meyer claims in the lawsuit that he was wrongfully terminated after identifying compliance issues regarding the company’s Medicare policies.  Several Health Management hospitals had submitted “fraudulent billing to Medicare through improper admission of patients as inpatients even though such patients clearly did not meet the standards for inpatient admission,” the lawsuit stated.  As a result, Health Management had improperly received higher government payments from the Medicare program.

Citi Investment Research analyst Gary Taylor said Meyer may be a credible plaintiff because he is a former FBI agent and was the compliance director at Health Management.

Meyer may receive back wages and damages in the lawsuit under the Florida Whistleblower Act.

“What investors are going to do is assume the worst,” said Whit Mayo, an analyst with Robert W. Biard. “Pressures from the any investigation-related matters could be weighing on the company.”

If you purchased Health Management Associates common stock from July 27, 2009 through January 9, 2012, you may file a motion with the court no later than March 26, 2012, and request that the court appoint you as lead plaintiff.  A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation.  To be appointed lead plaintiff, the court must decide that your claim is typical of the claims of other class members and that you will adequately represent the class.  Your share in any recovery will not be enhanced or diminished by your decision of whether or not to serve as a lead plaintiff.  You can recover as an absent class member without moving for lead plaintiff.  The action discussed here was not filed by Milberg.

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