Consumer Fraud

Top U.S. hospital system will pay $98 million to resolve whistleblowers’ fraud allegations

osha whistle Top U.S. hospital system will pay $98 million to resolve whistleblowers’ fraud allegationsA Tennessee-based hospital system has agreed to pay the U.S. more than $98 million to resolve lawsuits filed by several whistleblowers who alleged the company cheated Medicare, Medicaid, and other taxpayer-funded health care programs through fraudulent billing practices.

The U.S. Justice Department said that Community Health Systems Inc., the largest operator of acute-care hospitals in the U.S., will pay $98.15 million to resolve the lawsuits, which multiple physicians, nurses, other caregivers, and administrators filed under the qui tam or “whistleblower” provisions of the False Claims Act.

The whistleblowers accused 119 Community Health Systems hospitals of improperly billing the federal government for inpatient admissions when they should have been billed as outpatient cases.  The whistleblowers also claimed that the CHS hospitals provided physicians with financial incentives for patient referrals, a violation of the Physician Self-Referral, or “Stark” Law.

“CHS has engaged in a systematic scheme [to] increase its revenues by making or causing to be made false claims for payment and/or approval to Medicare, and likely other third-party government payors as well, such as Medicaid, TriCare and government employee health plans,” the Justice Department stated in its complaint.

The U.S. alleged that the scheme lasted between January 2005 and December 2010 and involved internal guidelines that encouraged physicians to admit emergency room patients 65 and older when in-patient admission was not medically necessary. The U.S. said the scheme was a “corporate-driven” one designed to elevate profits while potentially compromising patient care.

“Charging the government for higher cost inpatient services that patients do not need wastes the country’s health care resources,” Assistant U.S. Attorney General Stuart Delery said. “In addition, providing physicians with financial incentives to refer patients compromises medical judgment and risks depriving patients of the most appropriate health care available.”

Franklin, Tenn.-based Community Health Systems operates 206 hospitals in 29 states.

Whistleblowers have become one of the Justice Department’s most effective resources in fighting fraud against government agencies and programs. The False Claims Act authorizes U.S. citizens to sue on behalf of the U.S. Government when they possess solid, original evidence of financial fraud, waste, abuse, and other wrongdoing affecting programs such as Medicare and Medicaid.

The U.S. has recovered more than $20 billion through whistleblower cases since 2009, with more than $14 billion of that amount coming from cases involving health care fraud. Whistleblowers whose False Claims Act lawsuits lead to a successful recovery are awarded up to 30 percent of the recovery.


U.S. Department of Justice