Marlan Wilbanks. (John Disney/ALM)

The chief financial officer of two Middle Georgia hospitals and an emergency room physician didn't know each other when they blew the whistle on a scheme orchestrated by Florida-based hospital chain Health Management Associates to fraudulently boost profits.

But nine years after they filed whistleblower suits, they stand to collect for their roles in a $262 million settlement the U.S. Justice Department announced with HMA and corporate parent Community Health Systems Tuesday.

The Justice Department announced that HMA will pay $262 million to resolve civil claims and criminal charges stemming from a scheme to defraud Medicare and other federal health care programs. The scheme involved billing federal programs for inpatient admissions and services that should have been handled as outpatient or observation services in HMA emergency rooms in six states.

HMA was acquired by national hospital chain Community Health Systems in 2014 while the whistleblower cases were pending.

Tuesday's global settlement resolves eight whistleblower suits against HMA in Georgia, Florida, Pennsylvania, Illinois, North Carolina and South Carolina. The suits were consolidated as multidistrict litigation in the U.S. District Court for the District of Columbia

Under the terms of the settlement, Carlisle HMA in Pennsylvania—an HMA subsidiary formerly known as Carlisle Regional Medical Center—agreed to plead guilty to a health care fraud conspiracy charge.

HMA and parent company CHS have operated under a corporate integrity agreement with the Justice Department's inspector general since 2014  that required the companies to establish an ethics and compliance reporting program. That agreement allowed the companies to continue to participate in Medicare, Medicaid and other federal health care programs.

CHS acknowledged the settlement, which also resolved kickback allegations against several HMA hospitals, will be paid in October.

“Since acquiring HMA in 2014, it has been our goal to resolve the government's investigation into all of these allegations which occurred prior to the acquisition and which were already under investigation at the time of the transaction,” Wayne Smith, chairman and chief executive officer of Community Health Systems, said in a written statement. “We are pleased to have reached the settlement agreements so we can move forward now without the burden or distraction of ongoing litigation.”

The civil settlement also resolved fraud allegations involving improper physician referrals at two former HMA hospitals in Pennsylvania and two Florida hospitals.

Ralph D. Williams was fired by HMA in 2009 after six months on the job after he questioned corporate goals to artificially boost unnecessary hospital admissions. The 30-year accounting veteran filed a false claims action against HMA in Macon that same year, according to his attorney.

Marlan Wilbanks of Atlanta's Wilbanks & Gouinlock said Williams and ER physician Craig Brummer will each receive between 15 percent and 25 percent of about $53 million from the total settlement. Under the False Claims Act, successful whistleblowers receive a portion of the recovered damages associated with the reported fraud.

“The very first steps taken in the $260 million recovery related directly to the fact that Dr. Brummer and Mr. Williams came forward here in Georgia and exposed a scheme that was occurring across the nation,” Wilbanks said.

Neither Williams, the financial chief for Walton Regional Medical Center in Monroe and Barrow Regional Medical Center in Winder, nor Brummer knew each other, nor were they employed by the same company when they became whistleblowers, Wilbanks said. But both men uncovered the same scheme.

Hospital executives were pressuring staff to admit ER patients when admission was not medically necessary in order to collect high federal reimbursements and artificially boost corporate profits, Wilbanks said. Hospital executives were given ambitious admission goals, and HMA installed software to track whether individual hospitals were meeting them.

By admitting patients who did not need to be, hospitals could secure higher reimbursements, Wilbanks explained. Once those patients were quickly released, the hospital could repeat the cycle.

The scheme generated higher profits because hospitals were reimbursed based on inpatient diagnoses, not by the length of a hospital stay, Wilbanks said.

HMA “threatened to fire emergency department physicians who didn't meet expectations,” said Susan Gouinlock, Wilbanks' partner and co-counsel. “It was top-down, corporate-driven fraud.”

Williams uncovered the dubious corporate practice shortly after he was hired in April 2009. He commissioned an independent report to analyze hospital admissions from the emergency room, Wilbanks said. When Williams presented the report to his corporate supervisor, he was told to burn it, Wilbanks said. Williams was fired a short time later.

Corporate executives “didn't want to see the report. They didn't want to change,” Wilbanks said.

Wilbanks called the settlement “a double win” for taxpayers. “Not only has this practice been stopped of inappropriately putting people in the hospital in a way that wasn't based solely on their medical condition … and a large amount of money recovered,” he said. “They have also been helped because of the safety component. If you don't need to be put in the hospital, that's the last thing that should happen. No one should be exposed to hospitalization if it's not solely based on whether that's the place you need to be treated.”

The HMA settlement marked the second whistleblower settlement for Williams, both of which resulted from his six-month tenure at Walton Regional Medical Center.

He learned the hospital had a deal with a string of clinics that catered to undocumented pregnant women. The clinics were paid kickbacks by hospitals in return for sending them thousands of pregnant women in labor who qualified for Medicaid. Wilbanks said Williams discovered the contract with Clinica de la Mama in a desk drawer and was soon informed by his superiors that other Georgia hospitals owned by Tenet Healthcare Corp. also were involved in the scheme.

Williams' 2009 whistleblower suit against HMA also included the Clinica de la Mama allegations, which federal prosecutors later spun out as a separate case. Tenet settled the whistleblower and a separate criminal kickback case against Tenet in 2016 for $513 million.