CHS Defends Medicare Admissions Practices

Community Health Systems Inc. defended its admitting practices for Medicare beneficiaries on Thursday with a 109-page rebuttal of allegations raised by rival Tenet Healthcare Corp. in a lawsuit this month.

"We believe that the analysis prepared Tenet Corp. contains contrived statistics that lead to faulty and irresponsible conclusions," Wayne T. Smith, president/CEO/chairman of CHS said in a conference call with the media and financial analysts on Thursday afternoon.

"The analysis and allegations contain unreliable and inaccurate statements and represent a direct attack on the ethics and judgment of our 16,000 physicians and 85,000 employees. At the end of the day the ultimate decision to admit a patient into a hospital is based on a physician's judgment and medical necessity," Smith said. "Be assured we will defend our reputation. We will dedicate whatever resources are required to reach an ultimate resolution to these matters. And we will work tirelessly to restore any erosion of confidence or trust that may have been caused by these accusations."

Smith declined to take questions about the Tenet suit during the nearly two-hour conference call, which also detailed the Franklin, TN-based hospital chain's first quarter earnings.   
Tenet, which is fighting a hostile takeover attempt by CHS, said in a statement that it was not impressed by CHS' defense. "Nothing we heard today from Community Health diminishes our confidence in our analysis or allegations. We plan to vigorously pursue our claims in court," Tenet spokesman Rick Black said in a media release.

Also Thursday, in a filing with the Securities and Exchange Commission, CHS said it saw first quarter 2011 net operating revenues of $3.4 billion, up 9% from the $3.1 billion reported for same three months in 2010. Income from continuing operations increased to $91.1 million for Q1, compared with $86.5 million for 1Q 2010.

And in a separate filing with the SEC on Thursday, CHS released a letter last week from one of its major investors that urged fellow shareholders to vote against the re-election of three board members --- including CFO W. Larry Cash –- for their alleged improper oversight of Medicare billing practices.

William Patterson, executive director of CtW Investment Group, asked fellow shareholders to vote "against" the re-election of board members Cash, James S. Ely III, and John A. Fry, at CHS' annual shareholder meeting on May 17 "given their culpability for the growing scandal surrounding proper oversight of Medicare billing practices, which has precipitated a 25% decline in Community's market value."

Patterson said CHS failed to act on specific complaints that CtW – the owners of about 470,000 shares of CHS common stock -- raised in a Sept. 28, 2010 letter concerning widespread and improper admitting practices.