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CHS Faces Pension Fund Shareholder Suit

Margaret Dick Tocknell, for HealthLeaders Media, June 27, 2011

Community Health Systems, already fighting legal battles on several fronts including subpoenas from two federal oversight agencies, is facing another federal class action and securities fraud suit.

This time, it's the Minneapolis Firefighters' Relief Association that has filed the suit in the U. S District Court of Middle Tennessee in Nashville.

The plaintiff's attorney, Karen Hanson Riebel with Lockridge Grindal Nauen PLLP in Minneapolis, made the filed court documents available to HealthLeaders Media on Friday.

The shareholder suit alleges that the Franklin, TN-based CHS "failed to disclose or recklessly disregarded" that its financial performance was driven by "the improper and undisclosed practice of systematically admitting patients into Community Health Systems' hospitals despite no clinical need."
According to the suit, CHS "artificially increased inpatient admissions for the purpose of receiving substantially higher and unwarranted payments from Medicare and other sources that wrongly inflated its financial performance."

As a result, CHS's common stock traded at "artificially inflated prices" during the almost five-year class period (July 26, 2006 through April 11, 2011) reaching a high of $44.50 on July 18, 2007.

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