March 9, 09

NEWS / United States Joins Suit Against Community Health Systems Inc. and Three of Its Hospitals in New Mex

WASHINGTON – The United States has intervened in a whistleblower suit filed in the District of New Mexico against Community Health Systems Inc. (CHS) and three of its hospitals in New Mexico: Eastern New Mexico Medical Center in Roswell, Mimbres Memorial Hospital in Deming, and Alta Vista Regional Hospital in Las Vegas. The suit alleges that CHS and its three hospitals violated the False Claims Act (FCA) by knowingly causing to be presented to the United States false claims for federal matching Medicaid funds, the Justice Department announced today.

Title XIX of the Social Security Act (the Medicaid Act) authorizes federal matching funds to the states for Medicaid programs to provide medical assistance to persons with limited income and resources. In order to ensure that state or local funds are the basis for the federal matching money, the Medicaid Act prohibits federal funding in instances where the state or county has received donations from health care providers that are related to the amount of Medicaid reimbursement paid to the provider.

The suit was filed under the qui tam or whistleblower provisions of the FCA by Robert Baker, a former revenue manager in CHS’ corporate office. Under those FCA provisions, a private party, known as a relator, can file an action on behalf of the United States and receive a portion of the recovery. Under the FCA, the United States may recover three times the amount of its losses plus civil penalties.

The relator’s complaint alleges that beginning in the summer of 2000, CHS and its three New Mexico hospitals improperly obtained federal funds through the New Mexico Sole Community Provider Fund (SCPF) and Sole Community Hospital Supplemental Payments (SCHSP) Medicaid programs. In particular, the relator alleges that CHS and its hospitals made donations to New Mexico counties which they knew would be used by the counties and the state to claim and obtain triple that amount in federal funding that was then paid to the hospitals under the SCPF and SCHSP programs. The relator alleges that CHS’ donation arrangement violated the Medicaid Act’s prohibition of provider donations that are related to the amount of Medicaid reimbursement paid to the provider.

While the qui tam action contains additional allegations, the United States is intervening only in allegations that CHS and its three New Mexico hospitals caused the submission of false claims to the United States.

The investigation was conducted by the Civil Division of the U.S. Department of Justice and the Office of Inspector General of the Department of Health and Human Services.