2nd UPDATE: US Joins Suit Versus Community Health Systems

(Updates with comment from company)

 
   DOW JONES NEWSWIRES 
 

The U.S. joined a whistleblower suit against Community Health Systems Inc. (CYH) and three of its hospitals in New Mexico regarding Medicaid billing practices.

The suit accused the company and Eastern New Mexico Medical Center in Roswell, Mimbres Memorial Hospital in Deming and Alta Vista Regional Hospital in Las Vegas, N.M., of fraudulently taking more than $47.5 million from a Medicaid program that helps states make supplemental payments for indigent health care.

Company spokeswoman Tomi Galin said the suit comes three years after the government launched an investigation. She noted that the company cooperated with that probe and "is disappointed in the government's decision to pursue litigation."

"The company views this issue as a funding dispute between government agencies. The government has never alleged that the hospitals filed false claims or that they received reimbursement under the Sole Community Provider program for services the hospitals did not provide," Galin said.

The suit was filed under the qui tam provisions of the federal False Claims Act by Robert Baker, a former revenue manager in Community Health's corporate office.

Under the law, a private person can sue on behalf of the U.S. and receive a portion of the money recovered. The U.S. may recover three times the amount of its losses plus civil penalties, according to the False Claims Act.

Baker's complaint alleges Community Health and the three hospitals improperly obtained federal funds through two Medicaid programs starting in the summer of 2000. In one program, the federal government "matches" funds that state or local governments agree to invest in discretionary Medicaid payments that provide extra money to hospitals that treat a "disproportionate share" of low-income patients.

Community Health and the hospitals were accused of donating money to New Mexico counties that they knew would be used by the counties and state to claim and obtain triple the amount in federal funds that then were paid to the hospitals under the Medicaid programs.

Baker alleges the donation arrangement violated the Medicaid law's prohibition of federal funding when the state or county has received donations from health-care providers related to the amount of Medicaid reimbursement paid to the provider.

Community Health's shares were at $13.42, down 3.8%, in after-hours trading.

-By Kathy Shwiff, Dow Jones Newswires; 201-938-5975; [e-mail]