Consumer Fraud

The Fraud List: Community Health Systems typifies fraud targeting government health care programs

the fraud list 370x210 The Fraud List: Community Health Systems typifies fraud targeting government health care programsCommunity Health Systems Inc. is the largest for-profit operator of general acute-care hospitals in the United States, with more than 200 hospitals in a network that spans 29 states. On its website, the Franklin, Ten.-based corporation says its hospitals “are dedicated to providing quality healthcare for local residents and contribute to the economic development of their communities.” But as The Fraud List demonstrates, some of the nation’s biggest corporations can also be some of its biggest fraudsters.

Earlier this year, Community Health Systems Services and three New Mexico hospitals in its network agreed to pay the U.S. government $75 million to settle allegations stemming from a whistleblower lawsuit alleging they violated the False Claims Act by making illegal donations to county governments in New Mexico, which were used to fund the state’s share of Medicaid payments.

New Mexico’s Sole Community Provider (SCP) program, which was discontinued last year, provided supplemental Medicaid funds to hospitals in mostly rural communities. The federal government reimbursed the state for approximately 75 percent of its health care expenditures. Under federal law, the remaining 25 percent, funded by the matching share, had to be covered by state or county funds, not by illegal donations from private hospitals.

The federal government requires states to contribute their share to Medicaid costs to ensure that the funds are spent on the needs of beneficiaries. When private hospitals violate the rules against hospital donations funding the state’s share of Medicaid, it destroys an important protection that curbs possible abuses and keeps costs manageable.

The U.S. Justice department, which investigated the whistleblower’s allegations and chose to back the case, alleged that Community Health Systems “knowingly caused the state of New Mexico to present false claims to the United States for payments made to [Community Health Systems] under the SCP program by making improper donations to Chaves, Luna and San Miguel counties, which were then used by the counties, and subsequently the state, to obtain federal matching payments.”

U.S. prosecutors alleged Community Health Services made the donations “with the expectation that they [would] receive a windfall from the Medicaid program.” The government also claimed that the company “concealed the true nature of these donations to avoid detection by federal and state authorities.”

Community Health Services revenue manager, Robert Baker, filed the complaint on behalf of the U.S. under the False Claims Act and received more than $18.5 million as his share of the total recovery.

In August 2014, Community Health Systems paid $98 million to resolve allegations made by several whistleblowers in multiple lawsuits that it cheated Medicaid, Medicare, TriCare, and government employee health plans through fraudulent billing practices and other wrongdoing.

According to the U.S. Justice Department, the whistleblower complaints accused 119 Community Health Systems hospitals of billing the federal government for inpatient admissions when those patients should have been billed as outpatient cases.

From 2005 through 2010, U.S. prosecutors alleged,  Community Health Services “engaged in a deliberate corporate-driven scheme” to increase hospital admissions of Medicare, Medicaid, and TriCare beneficiaries older than age of 65 who went to the emergency rooms of the 119 Community Health Services hospitals named in the lawsuit.

The complaint asserted that the inpatient admissions of these beneficiaries were unnecessary and that their care should have been provided on a less costly outpatient or observation basis. In other words, Community Health Systems hospitals admitted patients to its facilities so that it could bill the government for a range of services the patients did not need.

The U.S. also alleged that Community Health Services violated the Physician Self-Referral Law, usually called the Stark Law, which prohibits a hospital from submitting claims for patient referrals made by a physician with improper financial ties to the hospital.

In April 2014, an Oklahoma hospital and its parent company Health Management Associates, Inc., which Community Health Systems acquired in January 2014, settled health care fraud allegations by agreeing to pay the U.S. $1,065,000 and the State of Oklahoma $435,000.

The payments settled another False Claims Act lawsuit in which a whistleblower alleged that the Medical Center of Southeastern Oklahoma submitted claims to SoonerCare, the name for Oklahoma’s Medicaid program, for surgical procedures and other hospital services that beneficiaries did not need.

The surgical procedures in question were functional endoscopic sinus surgeries (FESS) performed on children who were SoonerCare beneficiaries. The complaint alleged that these children did not need the procedure or any of the resulting treatments and services that resulted from them – that it was simply a scheme to extract more money out of Medicaid. The suit also alleged that the hospital billed Medicaid for procedures that were never actually performed.

Community Health Systems paid $31 million to the U.S. in May 2000 to settle allegations that it fraudulently overbilled Medicare, Medicaid, and TRICARE by “upcoding” services rendered when it submitted claims for reimbursement.

According to the complaint, the hospital chain knowingly assigned improper diagnostic codes to hospital inpatient discharges to increase reimbursement amounts from the government health care programs. The U.S. alleged the company falsely used eight different diagnostic codes to increase its billings from 1994 through 1997.

Community Health Systems and many of its affiliated hospitals largely define many of the things that can go wrong in the increasingly for-profit health care system that the U.S. has embraced since the introduction of Medicare and Medicaid in the 1960s. Instead of treating government health care programs as a means for the poor and elderly to receive the medical attention they require, many hospital corporations view these programs as profit-making opportunities, even when making a profit means breaking the rules and cheating.

Over the last two decades especially, the U.S. health care industry has become rife with alleged fraud scandals, federal investigations, whistleblower lawsuits, record fines, multi-million penalties, and even prison sentences for a few medical professionals who succumbed to greed.

To combat the rising tide of fraud and other misconduct, federal and state governments have toughened old whistleblower laws and introduced new ones and set up special task forces in areas with historically high levels of fraud to monitor corporate activity that affects taxpayer-funded programs agencies.

Last year marked the fifth consecutive year that the U.S. recovered more than $2 billion in cases involving false claims against Medicare, Medicaid, and other government health care programs. Much of that sum was recovered from hospitals and hospital corporations. In fact, in its fiscal-year 2014 summary of False Claims Act activity, the U.S. Justice Department cites Community Health Systems as the leading example of hospital-based fraud targeting Medicare and other government programs.

Coming Up Next:

Next week is the final installment of The Fraud List. It will feature another repeat offender of the False Claims Act, Adventist Health Systems. A new story in this series has been published each Thursday for 13 weeks. Follow #thefraudlist on Google+, Facebook and Twitter.