CHS Legal Problems

The cost of CHS' legal problems may be significant. CHS executives have already set aside $101.5 million in anticipation of potential fines and the cost of a settlement with the federal government. They are unable to estimate the exposure the company faces related to the significant outstanding allegations regarding Medicare and Medicaid fraud and other questionable business practices in the recently-acquired HMA hospitals, a company previously led (until his sudden and controversial resignation in July 2013) by a former top CHS executive.

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Medicare and Medicaid Fraud and Other Questionable CHS Business Practices

Medicare and Medicaid fraud, along with other questionable business practices, have led to a number of investigations by state and federal agencies including:

The United States Department of Justice (DOJ)
The Securities and Exchange Commission (SEC)
The United States Department of Health and Human Services Office of the Inspector General (DHHS-OIG)
The United States Attorneys of the Eastern District of Pennsylvania
The Middle and Southern District of Florida
The Eastern District of Oklahoma
The Middle District of Tennessee
The Western District of New York
The Western District of North Carolina
The District of South Carolina
The Middle District of Georgia
The Northern District of Illinois
The Texas attorney general
The State of Georgia

The United States Department of Justice has already joined eight qui tam lawsuits that have been filed at CHS hospitals, based in large part upon the whistle-blowing activity of former hospital employees.

In addition, CHS remains the subject of several still-pending class-action lawsuits filed on behalf of shareholders that are based on its questionable business practices, and has been the subject of federal injunctions and highly uncommon sanctions by the National Labor Relations Board for its failure to abide by federal labor law.

CHS’ legal issues may be continuing. In a recent filing with the Securities and Exchange Commission, CHS acknowledges that it may continue to face legal problems, particularly as it relates to liabilities under the federal False Claims Act and the federal anti-physician kickback Stark laws, which prohibit hospitals like CHS from offering incentives for physicians in exchange for patient referrals.

Below are just a few links to the lawsuits, rulings, and other materials that give a flavor for the types of legal issues and questionable business practices of CHS and its subsidiaries, including Quorum Health Resources:

CHS' latest SEC 10K annual report. Item 3. Legal Proceedings p. 40-46

Government Intervenes in Lawsuit Against Tenet Healthcare Corp. and Georgia Hospital Owned by Health Management Associates Inc. Alleging Payment of Kickbacks
Department of Justice, Office of Public Affairs, 01/13/14

Government Intervenes in Lawsuits Against Health Management Associates Inc. Hospital Chain Alleging Unnecessary Inpatient Admissions and Payment of Kickbacks
Department of Justice, Office of Public Affairs, 02/19/14

MCSO in Durant to pay $1.5 million to resolve false claims act lawsuit
News 12 Fox, 04/19/14

Norfolk County Retirement System v. Community Health Systems, Inc. et al
Tennessee Middle District Court (tnmd), Date filed: 2011-05-09

Hancock Medical sues management company (QHR)
WLOX 13, 02/24/14

NLRB decision on Fallbrook Hospital - Pay Union Expenses
Decision and Order, 04/14/14

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