The National Law Forum

The Blog of the The National Law Review

Federal Government to Receive a $75 Million Settlement from CHSPSC in Alleged Medicaid Fraud Scheme: Community Health Systems Professional Services Corp.

Tycko & Zavareei LLP

On February 2, 2015, the Department of Justice (DOJ) announced that Community Health Systems Professional Services Corporation (CHSPSC) and three of its CHS affiliated hospitals in New Mexico, agreed to pay the government $75 million to settle allegations that it violated the False Claims Act (FCA) when it manipulated the Medicaid funding program by making illegal donations to New Mexico county governments in order to receive higher federally funded Medicaid payments.  The alleged improper donations from CHS were made to Chaves, Luna and San Miguel counties in the state of New Mexico.

The Sole Community Provider Program (SCP) is a federal and state funded program that is specifically designed to reimburse SCP hospitals for medical expenses incurred by uninsured and indigent patients.  Payments received by SCP hospitals are processed under New Mexico’s federal and state Medicaid Plan.  Under the SCP, the federal government will share 75 percent of patient claims incurred by SCP hospitals contingent on New Mexico’s state and local government’s ability to pay the remaining 25 percent under the matching share of the SCP.  One of the stipulations for receiving the funds is that the state and county government’s 25 percent share has to consist of state or county funds, and not impermissible “donations” from private hospitals.

According to the qui tam lawsuit filed by Robert Baker, a former CHSPSC revenue manager, on behalf of the government, between 2001 and 2010, CHS hospitals in the state of New Mexico filed claims to recover uninsured or indigent medical expenses under the SCP program.  However, the funds used to pay the state and local counties 25 percent share were donated by CHS.  This ongoing alleged illegal practice by CHS violated the FCA, and caused the state of New Mexico to present false claims to the United States for payments made to CHS under the SCP program.  In addition, the government also alleged that CHS concealed the true nature of these donations to avoid detection by federal and state authorities, and as a result of its scheme, received SCP payments which were funded by the United States in the amount of three times CHS’ “donations.”  The whistleblower, Mr. Baker, will receive approximately $18.6 million as his reward for having disclosed the fraud to the government under the False Claims Act.


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