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Justice News

Department of Justice
U.S. Attorney’s Office
Middle District of Tennessee

FOR IMMEDIATE RELEASE
Tuesday, August 5, 2014

Franklin, Tennessee-based Community Health Systems, Inc. To Pay $98.15 Million To Resolve False Claims Act Allegations

Alleged Medically Unnecessary In-Patient Admissions & Violations of the Stark Law Results in Largest Ever FCA Settlement in Middle Tennessee

NASHVILLE, Tenn., July 30, 2014 ? Community Health Systems, Inc. (CHS), the nation’s largest operator of acute care hospitals, has agreed to pay $98.15 million to resolve allegations that the company knowingly billed government health care programs for inpatient services that should have been billed as outpatient or observation services, announced David Rivera, U.S. Attorney for the Middle District of Tennessee and Stuart F. Delery, Assistant Attorney General for the Department of Justice?s Civil Division.  The settlement also resolves allegations that one of the company’s affiliated hospitals improperly billed the Medicare program for certain inpatient procedures and for services rendered to patients referred in violation of the Physician Self-Referral Law (commonly known as the Stark Law).  CHS is based in Franklin, Tennessee, and has 206 affiliated hospitals in 29 states.

"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 David Rivera, the United States Attorney 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.”

Charging the government for higher cost inpatient services when patients need only lower cost outpatient services wastes the country’s health care resources,” said Stuart F. Delery, Assistant Attorney General for the Department of Justice?s Civil Division.  In addition, providing physicians with improper financial incentives to refer patients compromises medical judgment and risks depriving patients of the most appropriate health care available.  This Department will continue to enforce the laws to prevent this type of abuse of the nation’s health care resources and to ensure patients receive the most appropriate care.”

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 TRICARE program beneficiaries, over the age of 65, who originally presented to the emergency departments at 119 CHS hospitals.  The United States further alleged that the inpatient admission of these beneficiaries was not medically necessary, and that the care needed by, and provided to, these beneficiaries should have been provided in a less costly outpatient or observation setting.  CHS agreed to pay $89.15 million to resolve these allegations. The settlement does not include hospitals that CHS acquired from Health Management Associates (HMA) in January 2014.

In addition, the United States alleged that from 2005 through 2010, one of CHS’s affiliated hospitals, Laredo Medical Center, Laredo, Texas (LMC), presented false claims to the Medicare program for certain cardiac and hemodialysis procedures performed on a higher cost inpatient basis that should have been performed on a lower cost outpatient basis.  The United States also alleged that from 2007 through 2012, LMC improperly billed Medicare for services referred to LMC by a physician who was offered a medical directorship at LMC, in violation of the Stark Law.  That law prohibits a hospital from submitting claims for patient referrals made by a physician with whom the hospital has an improper financial relationship, and 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.  CHS agreed to pay $9 million to resolve the allegations involving LMC.

As part of today’s agreement, CHS entered into a Corporate Integrity Agreement (CIA) with the United States Department of Health and Human Services, Office of Inspector General, requiring the company to engage in significant compliance efforts over the next five years.  Included in the CIA is the requirement that CHS retain independent review organizations to review the accuracy of the company’s claims for inpatient services furnished to federal health care program beneficiaries.

The settlement resolves lawsuits filed by several 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.  Those relators include Kathleen Bryant, former Director of Health Information Management at CHS’s Heritage Medical Center in Shelbyville, Tennessee; Bryan Carnithan, former Emergency Medical Services Coordinator at CHS’ Heartland Hospital in Marion, Illinois; Amy Cook-Reska, former coder for CHS’ Laredo Medical Center in Laredo, Texas; Sheree Cook, former nurse at CHS’s Heritage Medical Center in Shelbyville, Tennessee; James Doghramji, former internal medicine and emergency room physician at CHS’s Chestnut Hill Hospital in Philadelphia, Pennsylvania; Thomas Mason, former emergency room physician at Lake Norman Regional Medical Center in Mooresville, North Carolina; Scott Plantz, former emergency room physician at CHS’s Longview Regional Medical Center in Longview, Texas; and Nancy Reuille, former nurse and Supervisor of Case Management at CHS’s Lutheran Hospital in Fort Wayne, Indiana.  The relators’ share of the settlement has not yet been determined.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $20.2 billion through False Claims Act cases, with more than $14 billion of that amount recovered in cases involving fraud against federal health care programs.

This settlement was the result of a coordinated investigation led by the United States Attorney’s Office for the Middle District of Tennessee, the Department of Justice, Civil Division, Commercial Litigation Branch and the United States Attorney’s Office for the Southern District of Texas and also involved the efforts of the United States Attorney’s offices of the Northern and Southern Districts of Illinois, Northern District of Indiana, and Western District of North Carolina as well as the Department of Health and Human Services, Office of Inspector General; the Department of Health and Human Services, Office of Audit Services; the Department of Defense, Defense Health Agency, Program Integrity Office; and the Federal Bureau of Investigation.  Locally, Assistant United States Attorney John-David H. Thomas of the Middle District of Tennessee represents the government.

The lawsuits are captioned United States ex rel. Bryant v. Community Health Systems, Inc., et al., Case No. 10-2695 (S.D. Tex.);  United States ex rel. Carnithan v. Community Health Systems, Inc., et al., Case No. 11-cv-312 (S.D. Ill.);  United States ex rel. Cook-Reska v. Community Health Systems, Inc., et al., Case No. 4:09-cv01565 (S.D. Tex.);  United States ex rel. James Doghramji; Sheree Cook; and Rachel Bryant v. Community Health Systems Inc., et al., Case No. 3-11-cv-00442 (M.D. Tenn.);  United States ex rel. Mason v. Community Health Systems, Inc., et al., Case No. 3:12-cv-817 (W.D.N.C.);  United States ex rel. Plantz v. Community Health Systems, Inc., et al., Case No. 10C-0959 (N.D. Ill.); and United States ex rel. Reuille v. Community Health Systems Professional Services Corporation, et al., Case No. 1:09-cv-007RL (N.D. Ind.).  The claims resolved by this agreement are allegations only, and there has been no determination of liability.
Updated March 19, 2015