The Department of Justice announced yesterday that Community Health Systems Professional Services Corporation (CHSPSC) and three affiliated New Mexico hospitals (collectively CHS) agreed to pay the United States $75 million to settle allegations that they violated the False Claims Act.  The government alleged that the defendants made illegal donations to county governments that were used to fund the state share of Medicaid payments that went back to the hospitals. 

“Congress expressly intended that states and counties use their own money when seeking federal matching funds in order to encourage them to join the federal government in ensuring that Medicaid funds are spent on the needs of beneficiaries,” said Acting Assistant Attorney General for the Justice Department’s Civil Division Joyce R. Branda.  “When private hospitals violate the rules against hospital donations funding the state share, that important protection of the Medicaid program is destroyed.”

The United States alleged that from Aug. 1, 2000, through Dec. 31, 2010, CHS knowingly caused the state of New Mexico to present false claims to the United States for payments made to CHS under the SCP program by making improper donations to Chaves, Luna and San Miguel counties, which were then used by the counties, and subsequently the state, to obtain federal matching payments.  The government 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 that were funded by the United States in the amount of three times CHS’ “donations.”

This case stems from a whistleblower complaint filed by a former CHSPSC revenue manager pursuant to the qui tam provisions of the False Claims Act, which permit persons to bring a lawsuit on behalf of the government and to share in the proceeds of the suit.  The whistleblower will receive $18,671,561 as his share of the government’s recovery.

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