Community Health Systems Pays $98 Million to Settle False Claims Act Allegations

In the largest-ever False Claims Act settlement in the Middle District of Tennessee, Community Health Systems has agreed to pay $98.15 million to resolve allegations it was engaging in fraudulent activity with Medicare and Medicaid patients, including unlawful referrals and kickback schemes. This settlement resolves several lawsuits filed by whistleblowers under the False Claims Act’s qui tam provisions – which provides for maximum rewards of up to 30 percent of the total settlement or recovery. While each relator’s share has not been fully determined as of yet, the case settles actions commenced by seven relators from across several states – each with varied employment positions ranging from a nurse to the Director of Health Information Management.

Details of the Case Against Community Health Systems

Community Health Systems (CHS) is the nation’s largest manager of acute care hospitals. It maintains facilities across 29 states and has over 200 affiliated hospitals. According to the details of the settlement, the U.S. government (which opted to intervene) alleged that for a five-year period spanning from 2005 through 2010, CHS was engaged in an intentional scheme to increase profit margins by drastically expanding the number of government-insured patients admitted for treatment on an inpatient basis. Specifically, the government alleged that hundreds of patients were admitted to CHS facilities for treatment of issues that could have easily been remedied on an outpatient basis, and that admission to the facility for an overnight stay was not medically necessary.

In addition to allegations of unnecessary inpatient classification of minor injuries or ailments, the U.S. Department of Justice has alleged that a CHS affiliate located in Laredo, Texas, presented several false claims to the federal Medicare program pertaining to its cardiac and renal dialysis patients. Specifically, Laredo Medical Center is alleged to have purposely performed high-cost inpatient procedures on these patients when outpatient or observational procedures would have been sufficient.

Other issues arising out of the Laredo Medical Center include allegations that it offered a certain physician a directorship position in exchange for the promise to refer a certain number of patients to the facility. This arrangement is considered an unlawful and improper financial relationship and violates the federal Stark Law, which requires physicians to always exercise independent medical judgment solely in the best interests of the patient. The misconduct occurring at the Laredo facility resulted in an additional $9 million settlement; however, CHS has not admitted any liability with regard to any of the claims made by the U.S. Department of Justice or the several whistleblowers.

Government’s Response

U.S. Attorney David Rivera commented on the outcome of the litigation, stating, “This is the largest False Claims Act settlement in this district and it reaffirms this office’s commitment to investigate and pursue healthcare fraud that compromises the integrity of our healthcare system….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 inpatient admissions of government healthcare program beneficiaries in order to increase profits.”

Contact Berger Montague Today

If you are aware of healthcare fraud similar to that described above, or you would like to speak with a knowledgeable whistleblower attorney, please contact our office right away.