Fed's Whistleblower Suit Sends Message to Healthcare

It was decades before George W. Bush entered the White House—before he was born, actually—but humorist Will Rogers could have been speaking of the future 43rd president when he reputedly said that the motto of the Republican Party was "Boys, my back is turned."

I was reminded of that with the news last week that the U.S. Justice Department had intervened in a 4-year-old whistleblower suit filed in New Mexico against Franklin, TN-based Community Health Systems Inc.

What's interesting is not so much the content of the suit, but the fact that the Department of Justice has climbed aboard, something that many observers say didn't happen very much in the eight years that Bush occupied the White House.

"The Justice Department has a backlog of some 500-600 whistleblower and false claims cases in the healthcare industry that have not been taken up by the Bush administration," says Bruce Cranner, a board member of the Defense Research Institute, and a partner in the New Orleans firm of Frilot, LLC. "What does a 500 case backlog tell you about the Bush administration's attitude about pursuing these cases?"

"Now we see the Justice Department jumping in to a significant whistleblower case. That has a lot of ramifications in terms of what the new Obama administration and the new Justice Department will be looking for going forward," Cranner says.

According to the Justice Department, the suit alleges that CHS and three of its hospitals in New Mexico knowingly presented false claims for federal matching Medicaid funds, a violation of the False Claims Act.

A Justice Department media release did not detail how much money was at stake, but NashvillePost.com reports that a former employee in CHS' revenue management department—whistleblower Robert C. Baker—claims that $47.5 million was improperly collected from Medicaid in the form of disproportionate share payments.

According to DoJ, Baker'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 and Sole Community Hospital Supplemental Payments Medicaid programs. Baker alleges that CHS and its hospitals gave money to New Mexico counties which would be used by those 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.

Included in the suit were three CHS hospitals: Eastern New Mexico Medical Center in Roswell, Mimbres Memorial Hospital in Deming, and Alta Vista Regional Hospital in Las Vegas.

CHS issued a statement denying any wrongdoing and says it "views this issue as a funding dispute between government agencies." While pledging that it has cooperated with the government, CHS also says it is "disappointed" by the government's decision to join the suit and will "vigorously defend itself."

Cranner says the CHS case may set a precedent in how Obama's DoJ pursues whistleblower cases. "If I were called by a healthcare entity who is being sued in a whistleblower case I would look very carefully at the factual and legal elements of this claim before I made a decision about how to defend," he says. "Its characteristics will tell us something about what the Justice Department will be doing and that they will be acting to collect in cases that it thinks are strong, and clearly it thinks this case is strong, or it wouldn't be there."

Let me be clear. I have no idea who is right or wrong in this suit, or whether any of the charges leveled against CHS are justified. They deserve the chance to make their case. But, whether intentionally or not, by jumping on this lawsuit less than two months after the president took office, the Obama Justice Department is sending a message to the healthcare sector that there is a new sheriff in town.