Community Health Systems to Pay $75 Million To Settle False Claims Act Allegations

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March 2, 2015

Community Health Systems Professional Services Corporation has agreed to pay $75 million to settle allegations that it violated the False Claims Act. Three of the systems affiliate hospitals in New Mexico will also participate in the settlement (EasternNew MexicoMedicalCenter, MimbresMemorialHospital and Nursing Home, and AltaVistaRegionalMedicalCenter).

The claims asserted the company violated the False Claims Act by making illegal contributions to county government so funds could be used as Medicaid payments to hospitals.

Took Advantage of the Sole Community Provider Program

New Mexico utilized its Sole Community Provider (SCP) program to provide supplemental Medicaid funds to hospitals throughout rural communities. The program was discontinued last year. The state received approximately three quarters of its health expenditures costs from the federal government under the program.

According to a law enacted by Congress to curb system abuses of Medicaid and discourage rising Medicaid costs, the remaining 25% must come from state or county funds. Problems arose when it was determined the money was coming from donations from private hospitals.

The accusations were the result of a whistleblower report and brought against Community Health Systems by the federal government. The company was accused of violations that occurred between August of 2000 and December 2010. The allegations included the charge that CHS knowingly caused the state to present false claims to the federal government for payments by making the improper donations to the listed medical facilities. The donations were then used by the counties in which the hospitals were located and subsequently, the state in order to qualify for the federal matching payments.

The federal government believed CHS concealed the true story behind the donations to avoid detection by authorities. As a result of the illegal activity, the company received payments funded by the United States which were three times more than they should have been.

Whistleblower Complaint Led to the Investigation

The whistleblower in the case, Robert Baker, was a former revenue manager at CHS. His complaint was filed pursuant to the qui tam provisions of the False Claims Act. This provision allows whistleblowers to share in the proceeds of the lawsuit, an action put into place to encourage whistleblowers to come forward when they have knowledge of illegal activity. In addition to three hospitals named in the settlement, Baker named two additional facilities which are part of the total settlement. For his role in the case, Baker will receive more than $18 million.

Based in Tennessee, Community Health Systems manages more than 200 affiliated hospitals located in 29 states.