Feds close Carolinas HealthCare investigation

The U.S. Department of Labor has closed its five-year investigation into Charlotte, N.C.-based Carolinas HealthCare System over allegations that its ownership of a health benefits company poses a conflict of interest, according to the Winston-Salem Journal.

The department is not taking any enforcement action at this time. However, it said it has reserved the right to bring a legal case against the health system in the future.

The investigation started in late 2010 after whistle-blower Joe Vincoli urged the Labor Department to scrutinize CHS' part ownership of for-profit MedCost, which administers health plans and contracts with hospitals and physician offices for medical services. MedCost provides benefits to more than 20,000 CHS employees, according to the report.

CHS and Wake Forest Baptist Medical Center in Winston-Salem, N.C., co-own MedCost. Baptist is not affected by the Labor Department's ruling. 

While CHS maintained its arrangement with MedCost did not pose a conflict of interest, Mr. Vincoli said it may have enabled the hospital chain to take advantage of its employees, according to the report.

Under the federal Employee Retirement Income Security Act, employers are prohibited from using companies they own to provide health benefits for employees, unless it is in the employees' best interest. However, CHS is not bound by the federal law because it is technically a government entity called a "hospital authority," and the measure excludes governmental employers.

While CHS is tax-exempt and has the power of eminent domain, critics say it doesn't resemble a government agency in other important aspects. For instance, board members are not appointed by elected officials and there is no period for public comment at their meetings, according to the report. Reports from the Labor Department show its investigation concentrated on determining whether the hospital system is really a governmental agency, according to the report.

In a Dec. 29 letter to CHS' attorneys, a regional director for the Labor Department wrote: "Although we believe that your arguments support CHS as a governmental entity, as CHS presently exists, may be incorrect…this is to advise you that at the present time we are closing our investigation of the Plan," according to the report.

The Labor Department may revisit the matter after the U.S. Treasury Department finalizes criteria to help agencies determine if retirement plans are governmental, according to the report.

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