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CHS Subsidiary Pleads Guilty to Criminal Fraud Atop $260M Settlement

Analysis  |  By Steven Porter  
   September 26, 2018

Executives fired some hospital administrators who opposed their illegal revenue-driving initiatives, the DOJ says.

A former hospital chain that Community Health Systems acquired in 2014 has agreed to pay more than $260 million to settle allegations it overbilled government programs and violated Stark and antikickback statutes, the Department of Justice announced Tuesday.

In addition to the civil settlement signed by Health Management Associates, which had been headquartered in Naples, Florida, an HMA subsidiary confessed to a criminal charge, the DOJ said: one count of conspiracy to commit healthcare fraud.

Carlisle HMA—which had operated Carlisle Regional Medical Center in Carlisle, Pennsylvania, until last year, when CHS sold the facility—pleaded guilty to the criminal charge, admitting that certain members of its leadership and executive teams had unlawfully pressured physicians to boost patient admissions at HMA hospital emergency departments even when medically unnecessary.

"Hospital operators that improperly influence a physician's medical decision-making in pursuit of profits do so at their own peril," U.S. Assistant Attorney General Brian A. Benczkowski of the DOJ's Criminal Division said in a statement.

Beginning about 10 years ago, HMA's executives established inpatient admission quotas of 15-20% for all patients presenting at the chain's hospital emergency departments. The quota was 50% for patients 65 and older, according to DOJ records. Executives then tracked each physician's admissions statistics using customized software and color-coded scorecards that listed in red when a physician fell short of the quota.

"At some HMA Hospitals, these scorecards were posted in the physicians' workspace and improperly used to pressure physicians with 'failing' admission grades to admit patients who did not require inpatient admission," the DOJ documents state.

Executives even fired some HMA hospital administrators who refused to challenge emergency physicians over their admission decisions.

Related: More Than 600 Charged in 'Largest Healthcare Fraud Takedown in History'

Related: Banner False Claims Settlement is Whistleblower's Third

Related: CHS CEO Pay Has Sunk Alongside Stock Price

Although CHS was aware of the investigations before finalizing its HMA acquisition in 2014, CHS Chairman and CEO Wayne Smith was quick to point out that all of the alleged wrongdoing occurred before the deal—a claim backed up by the DOJ.

"We are pleased to have reached the settlement agreements so we can move forward now without the burden or distraction of ongoing litigation," Smith said in a statement. "As an organization, we are committed to doing our very best to always comply with the law in what is a very complex regulatory environment and to operate our business with integrity, ethical practices and high standards of conduct."

The total payment will cost $262 million, which CHS said it expects to pay next month. Although CHS stock has been suffering recently, its price didn't make any major moves on news of the settlement.

The allegations that led to these settlements originated in eight whistleblower lawsuits under the False Claims Act. Two of the whistleblowers will receive major payouts of $15 million and $12.4 million, according to the DOJ. (The other whistleblowers' shares have not been determined.)

CHS Subsidiary HMA Reaches $260 Million Settlement Over Billing Practices by HLMedit on Scribd

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


Among other misdeeds, executives pressured physicians to boost ED admission rates to boost revenue.

All of the alleged wrongdoing took place prior to CHS acquiring the chain in 2014.

One of the eight whistleblowers will receive a payout of $15 million from the settlement.

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