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CHS to pay $98.15M on False Claims Act allegations

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Community Health Systems Inc. has agreed to pay $98.15 million to resolve multiple lawsuits alleging that the company knowingly billed government health care programs for inpatient services that should have been billed as outpatient or observation services, the Justice Department has announced.

Tennessee-based CHS is the nation’s largest operator of acute care hospitals, including several in Central Pennsylvania. However, the settlement does not include any of those local hospitals, as Memorial Hospital in York joined CHS after the 2005 to 2010 timeframe covered by the settlement and the rest were acquired from Health Management Associates in January.

CHS noted that it is still working to resolve litigation against those former HMA hospitals. It also emphasized that under the terms of the agreement, there is no finding of improper conduct by CHS or its affiliated hospitals and that CHS has denied any wrongdoing.

"The United States alleged that from 2005 through 2010, CHS engaged in a deliberate corporate-driven scheme to increase inpatient admissions of Medicare, Medicaid and the Department of Defense’s (DOD) TRICARE program beneficiaries over the age of 65 who originally presented to the emergency departments at 119 CHS hospitals," the release said.

“This is the largest False Claims Act settlement in this district and it reaffirms this office’s commitment to investigate and pursue health care fraud that compromises the integrity of our health care system,” said U.S. Attorney David Rivera for the Middle District of Tennessee. “This office is committed to ensuring that all companies billing government healthcare programs are responsible corporate citizens and that hospital providers do not engage in schemes to increase medically unnecessary in-patient admissions of government healthcare program beneficiaries in order to increase profits.”

CHS noted that it previously established a $102 million reserve to cover these settlements and related legal costs. The settlement resolves lawsuits filed by eight whistleblowers under the qui tam provisions of the False Claims Act, which permit private parties to file suit on behalf of the government and obtain a portion of the government’s recovery. The relators’ share of the settlement has not yet been determined, the release said.

The settlement also resolved specific false claims and Stark Law allegations against a CHS hospital in Laredo, Texas. The Stark Law prohibits a hospital from submitting claims for patient referrals made by a physician with whom the hospital has an improper financial relationship. It is intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives and is instead based on the best interests of the patient.

“Our organization is dedicated to high ethical standards as we strive to operate in a complex and ever changing regulatory environment," CHS Chairman and CEO Wayne T. Smith said in a news release. "The question of when a patient should be admitted to a hospital is, and always has been, a matter of medical judgment by the individual physician responsible for a patient’s care. Unfortunately, shifting and often ambiguous standards make it extremely difficult for physicians and hospitals to consistently comply with the regulations. We are committed to doing our best, despite these challenges. Because this is an industry-wide issue, we hope the government will work to devise sound and reasonable rules for the important decision about whether to admit an individual for inpatient care, and we appreciate the opportunity to engage in meaningful dialogue with the government over these incredibly complicated issues.”

As part of the settlement, CHS entered into a corporate integrity agreement with the U.S. Department of Health and Human Services Office of Inspector General, requiring the company to engage in significant compliance efforts over the next five years.

Under the agreement, CHS is required to retain independent review organizations to review the accuracy of the company’s claims for inpatient services furnished to federal health care program beneficiaries.

CHS trades its shares on the New York Stock Exchange under the ticker CYH.

Heather Stauffer

Heather Stauffer

Heather Stauffer covers Lancaster County, nonprofits, education and health care. Have a tip or question for her? Email her at heathers@cpbj.com. Follow her on Twitter, @StaufferCPBJ.

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