CHS to pay $98M in false claims settlement

Agreement with DOJ ends investigation into improper billing practices

Community Health Systems has agreed to pay more than $98 million to settle a whistleblower investigation alleging multiple False Claims Act violations by the Franklin-based company.

The settlement ends the U.S. Department of Justice's investigation into short-stay admissions in a number of CHS' emergency departments. The government accused 119 hospitals of filing claims to Medicare, Medicaid and TRICARE for inpatient admissions that should have been billed as outpatient or observation cases. 

CHS has agreed to pay $88 million in resolution of all federal claims and nearly $900,000 to state-affiliated Medicaid programs. The settlement also includes $9 million resolving the government's investigation into a CHS hospital in Laredo, Texas, also related to improper billing and a financial relationship between the hospital and a member of the medical staff. 

The settlement dismisses actions filed in Illinois, Tennessee, North Carolina, Texas and Indiana. In a release, counsel for some the whistleblowers accused the company of knowingly admitting patients who did not need hospitalization.

"The allegations supporting this lawsuit tell the story of a large, publicly traded, for-profit hospital chain gobbling up local community hospitals and running them with an eye toward financing their acquisitions by a scheme to bill the government for unnecessary medical services," said Reuban Guttman, director at Grant & Eisenhofer and counsel for whistleblowers Dr. James Doghramji and Sheree Cook, who filed a lawsuit in the U.S. District Court of Middle Tennessee. 

However, in a separate release, CHS denied any wrongdoing and under the terms of the settlement agreement, there is no finding of improper conduct.

"Our organization is dedicated to high ethical standards as we strive to operate in a complex and ever changing regulatory environment," Wayne Smith, CHS chairman and CEO, said in a statement. "The question of when a patient should be admitted to a hospital is, and always has been, a matter of medical judgement 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-wise 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."

Shares of CHS (Ticker: CYH) rose about 1 percent Monday afternoon to $47.69. Year to date, they're up 21 percent.