A whistleblower suit filed against a multibillion-dollar for-profit hospital network has been unsealed in federal court in Philadelphia and the U.S. Attorney’s Office for the Eastern District of Pennsylvania has decided to intervene.

The two relators who brought the suit on behalf of the government in 2010 had each been involved in the business operations of Health Management Associates’ Lancaster, Pa., facility, according to their unsealed complaint.

They allege that the company, called HMA for short, had a scheme to enlist physicians to refer patients to their facilities in exchange for kickbacks.

“Since mid-2006, HMA has embarked upon an aggressive and concerted effort to boost HMA’s profits by engaging in a national scheme to joint venture its facilities with local referral sources by inducing referring physicians with an opportunity to purchase an interest in the facility at a discount and to earn robust returns based on patient referrals,” the complaint alleges in United States v. Health Management Associates.

The company used the term “joint venture” to refer to the relationship between itself and the doctors who held shares in its hospitals. The plan involved having the doctors buy shares in an LLC that owned the HMA hospital, “creating a form of syndication of the hospital,” according to the complaint.

“HMA’s corporate modus operandi for presenting syndication opportunities to targeted physicians included a polished presentation by HMA corporate executives of well-rehearsed ‘return on investment’ PowerPoints,” the complaint alleges.

Those presentations were short on specifics about improved medical care and long on the details of the financial structure and appeal, according to the complaint.

“HMA incorrectly advised the prospective joint venture physicians that the proposed joint venture was in full compliance with applicable fraud and abuse laws, including the Stark Law and the federal Anti-Kickback Statute,” the complaint said. “The physicians’ investment in HMA facilities is calculated at far less than fair market value, resulting in a violation of the Anti-Kickback Statute.”

The Stark Law governs physician referrals and prohibits doctors from referring Medicare and Medicaid patients to entities in which they have a financial interest.

HMA, which has 55 hospitals in 15 states, operates in non-urban and rural locations, according to the complaint.

“One of the reasons for creating this type of business model is to take advantage of enhanced reimbursements and other financial benefits the Medicare and/or Medicaid programs offer for rural or small urban disproportionate share hospitals,” the complaint alleges.

“When relators began their employment with HMA, executives there … communicated a sense of urgency to complete as many joint ventures as possible because HMA executives feared that legislation pending before Congress in 2008 would prohibit joint ventures between hospitals and physicians entirely,” according to the complaint.

That legislation, which prohibits doctors from owning shares in a hospital, was part of Obamacare, which was enacted in 2010.

The year before that, in 2009, HMA created 16 joint ventures between 16 of its hospitals and local doctors, including two in Lancaster, according to the complaint.

Asked for comment on the suit, MaryAnn Hodge, spokeswoman for HMA, provided a prepared statement that said: “As a matter of policy we do not comment on pending litigation. The existence of the government’s investigation into the issues raised in the unsealed qui tam cases has been disclosed for some time in HMA’s public SEC filings.”

In the last month, 10 lawsuits have been unsealed, Hodge said.

“While our legal team addresses these matters and continues to cooperate with the Department of Justice’s ongoing investigation, HMA associates and physicians who practice at our facilities are focused on providing the highest quality patient care in all of our hospitals,” she said.

HMA is represented by Kirk Ogrosky of Arnold & Porter, Hodge said.

The relators, George Miller and Michael Metts, are represented by Marc Raspanti of Pietragallo Gordon Alfano Bosick & Raspanti.

“This is a significant and rather creative fraud aimed at influencing physicians’ independent medical judgment in determining where thousands of patients across the country should receive medical care,” Raspanti said in a prepared statement.

Prosecutors have elected to intervene in the case and moved for the complaint to be unsealed, which U.S. District Judge Mitchell S. Goldberg granted this week.

Prosecutors plan to also ask the Judicial Panel on Multidistrict Litigation to consolidate the qui tam cases against HMA, they said in a motion filed last month.

Charlene Fullmer and Veronica Finkelstein are prosecuting the case for the U.S. Attorney’s Office in Philadelphia.

Saranac Hale Spencer can be contacted at 215-557-2449 or sspencer@alm.com. Follow her on Twitter @SSpencerTLI. •