Merger Ignores Fed Interest

The sale of Health Management Associates, parent company of Knoxville's Tennova hospitals, became final this week. The company has been purchased by Community Health Systems, based in Franklin, Tenn. The stock prices of the companies have not seemingly been affected by the merger and the fact that the U.S. Justice Department has joined eight whistle-blower lawsuits against HMA. Community Health Systems is also in settlement negotiations with federal regulators over reimbursements.

The New York Times on Sunday outlined how HMA is accused of admitting people to the hospital unnecessarily, and thus collecting Medicaid and Medicare reimbursements improperly. The story describes a system in which emergency-room doctors were awarded a green code for getting more than half of patients over 65 admitted, a yellow code for an almost admitted, and a red code for failure to admit the patient. Too many red codes meant getting fired, according to the suits.

A financial analyst is quoted in the Times as saying investors view Department of Justice investigations, lawsuits, and allegations of Medicare fraud as "a cost of doing business" for hospitals and that investors reward CEOs who push profits up.