Tennessee-based Community Health Systems Inc. (CHS), the owner of Lake Norman Regional Medical Center in Mooresville and Davis Regional Medical Center in Statesville, agreed this week to pay $98.15 million to the U.S. Department of Justice to resolve seven different whistleblower lawsuits.
The lawsuits alleged that the company committed fraud, including one filed by the former emergency room physician at Lake Norman Regional, Dr. Thomas Mason.
One lawsuit, which was filed when the Iredell County for-profit hospitals were owned by Florida-based Health Management Associates (HMA), accused the hospitals of offering doctors kickbacks to cooperate with a system that knowingly billed inpatients, mostly those on Medicare and Medicaid, for unnecessary services in an effort to drive up corporate profits.
HMA, before being bought by CHS in this year's first quarter, was alleged to have claimed at least $600 million in illegal inpatient charges per year, and was being sued under the North Carolina False Claims Act, the federal Anti-Kickback Statute and the Anti-Retaliation Provisions of the Federal False Claims Act.
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"Charging the government for higher cost inpatient services that patients do not need wastes the country's health care resources," Assistant Attorney General Stuart Delery of the Justice Department's Civil Division said in a statement. "In addition, providing physicians with financial incentives to refer patients compromises medical judgment and risks depriving patients of the most appropriate health care available."
In the lawsuits, the Department of Justice alleged that CHS' profit-driven schemes were part of an overall strategy from 2005 to 2010. The DOJ said that the settlement does not include hospitals acquired from HMA in January 2014, although the lawsuit filed by Mason against CHS was resolved as part of the agreement. No determination of liability was decided. The HMA lawsuit is still active, according to James Wyatt, Mason's attorney in Charlotte.
In the lawsuit filed against Davis Regional and Lake Norman Regional, Mason and Dr. Steven Folstad, medical director for Davis Regional's emergency department from 2000 to 2008, claimed they fought the supposed shady practices for years. The two blew the whistle in 2010, after the contracting doctor association they were working for — Mid-Atlantic Medical Associates (MEMA) — was terminated by Davis Regional and Lake Norman Regional. The two doctors said that MEMA's contract was ended because of refusals to cooperate with the alleged illegal practices.
Among others, former Davis Regional CEO Karen Metz and former Lake Norman Regional CEO Greg Lowe were both named in the lawsuit as allegedly offering what were essentially bribes to doctors, in the form of an extra $2,000 or $3,000 per quarter.
As part of the settlement with the federal government, whose investigation began in 2011, CHS has entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services. There will be significant oversight for the next five years.
"Health care providers should make treatment decisions based on patients' medical needs, not profit margins," U.S. Attorney Anne Tompkins of the N.C. Western District said in a statement. "We will not allow this type of misconduct to compromise the integrity of our health care system."
CHS is based in Brentwood, Tenn. It is the country's largest operator of acute care hospitals, with 206 in 29 states.