CHS settles false claims allegations for $75M

Franklin, Tenn.-based Community Health Systems has agreed to pay the federal government $75 million to settle allegations it violated the False Claims Act by providing funds to county governments that were used to fund Medicaid payments to hospitals, according to the Department of Justice.

The settlement agreement was entered into on behalf of Community Health Systems Professional Services Corporation and three affiliated hospitals in New Mexico: Eastern New Mexico Medical Center in Roswell, Mimbres Memorial Hospital and Nursing Home in Deming, and Alta Vista Regional Medical Center in Las Vegas.

New Mexico formerly had a Sole Community Provider program that "provided supplemental Medicaid funds to hospitals in mostly rural areas," according to the report. Under the program, which was discontinued in 2014, the federal government reimbursed the state for 75 percent of its healthcare expenditures, and the 25 percent New Mexico "matched" was required to consist of state or county funds.

In its lawsuit, the government alleged CHS knowingly made improper donations to three New Mexico counties, which were used to obtain "federal matching payments" and caused the state to present false claims for payments to the federal government. The alleged improper donations were made from Aug.1, 2000 to Dec. 31, 2010, according to the report.

The lawsuit was originally filed under the qui tam, or whistle-blower, provisions of the False Claims Act.

"It was not a matter of CHS making the donations out of the goodness of its heart," said Stephen Hasegawa, a whistle-blower attorney with Phillips & Cohen. "As we alleged in the case, CHS' hospitals made payments to trigger much larger Medicaid payments back to the hospitals. Then they called it 'charity' to disguise that the real purpose was to get Medicaid money to which they were not entitled," he said.

Regarding the settlement, Joyce R. Branda, acting assistant attorney general for the Justice Department's Civil Division said, "Congress expressly intended that states and counties use their own money when seeking federal matching funds in order to encourage them to join the federal government in ensuring that Medicaid funds are spent on the needs of beneficiaries. When private hospitals violate the rules against hospital donations funding the state share, that important protection of the Medicaid program is destroyed."

CHS released the following statement regarding the settlement.

"Under the terms of the settlement agreement, there is no finding of illegal or improper conduct by the defendants and the allegations of the lawsuit are expressly denied by CHSPSC and the hospitals. CHSPSC and the hospitals agreed to the settlement to end a protracted case that has been pending since 2005 and to avoid the continued expense and uncertainty of ongoing litigation and a trial."

"The use of hospital donations originated with and was approved by the state's Medicaid representatives and nearly every other private SCP hospital in New Mexico made similar donations."

In CHS' financial report for the third quarter of 2014, the system disclosed it paid $2 million in legal fees related to the lawsuit.

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