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Item 1. Legal Proceedings

2021-04-29 compared with 2020-10-28 · 17 added, 63 removed, 80 unchanged (50% of the section changed)

Legal Proceedings

From time to time, we receive inquiries or subpoenas from state regulators, state Medicaid Fraud Control units, fiscal intermediaries, the Centers for Medicare and Medicaid Services, the Department of Justice and other government entities regarding various Medicare and Medicaid issues.

In addition to the matters discussed below, we are currently responding to subpoenas and administrative demands concerning (a) a subpoena related to certain services provided by a formerly-employed physician to Medicaid beneficiaries at one of our New Mexico hospitals, (b) an inquiry regarding certain services performed by one of our affiliated emergency services companies in Pennsylvania, (c) a civil investigative demand related to call coverage services provided by a cardiology group at one of our Tennessee hospitals;

and (d) a civil investigative demand related to charges for certain emergency department services at our four New Mexico hospitals.

From time to time, we receive inquiries or subpoenas from state regulators, state Medicaid Fraud Control units, fiscal intermediaries, the Centers for Medicare & Medicaid Services, the Department of Justice and other government entities regarding various Medicare and Medicaid issues.

In addition to the matters discussed below, we are currently responding to subpoenas and administrative demands concerning (a) an inquiry regarding certain services performed by one of our affiliated emergency services companies in Pennsylvania, (b) a civil investigative demand related to call coverage services provided by a cardiology group at one of our Tennessee hospitals;

(c) a civil investigative demand related to charges for certain emergency department services at our four New Mexico hospitals and (d) a subpoena related to certain critical care procedures performed at one of our Texas hospitals.

In addition, we are subject to other claims and lawsuits arising in the ordinary course of our business including lawsuits and claims related to billing practices and the administration of charity care policies at our hospitals.

6 unchanged sentences

From time to time, we detect issues of non-compliance with Federal healthcare laws pertaining to claims submission and reimbursement practices and/or financial relationships with physicians.

We avail ourselves of various mechanisms to address potential overpayments arising out of these issues, including repayment of claims, rebilling of claims, and participation in voluntary disclosure protocols offered by the Centers for Medicare and Medicaid Services and the Office of the Inspector General.

We avail ourselves of various mechanisms to address potential overpayments arising out of these issues, including repayment of claims, rebilling of claims, and participation in voluntary disclosure protocols offered by the Centers for Medicare & Medicaid Services and the Office of the Inspector General.

Participating in voluntary repayments and voluntary disclosure protocols can have the potential for significant settlement obligations or even enforcement action.

1 unchanged sentence

This discussion does not include claims and lawsuits covered by medical malpractice, general liability or employment practices insurance and risk retention programs, none of which claims or lawsuits would in any event be required to be disclosed in this Part II, Item 1 under SEC rules.

Certain of the matters referenced below are also discussed in Note 13 of the Notes to Consolidated Financial Statements included under Part I, Item 1 of this Form 10-Q.

Shareholder Litigation

23 unchanged sentences

against certain Company officers and directors based on alleged breaches of fiduciary duty, unjust enrichment, and other acts related to certain Company disclosures in 2017 and 2018 regarding the Company’s adoption of Accounting Standards Update 2014-09, which the Company adopted effective January 1, 2018.

All five cases have been stayed by agreement.

The defendants filed a Motion to Stay on October 21, 2020, which is pending.

Other Government Investigations

6 unchanged sentences

Commercial Litigation and Other Lawsuits

Zwick Partners, LP and Aparna Rao, individually and on behalf of all others similarly situated v.

Quorum Health Corporation, Community Health Systems, Inc., Wayne T.

Larry Cash, Thomas D.

Miller, and Michael J.

This purported class action lawsuit previously filed in the United States District Court, Middle District of Tennessee was amended on April 17, 2017 to include Community Health Systems, Inc., Wayne T.

Larry Cash as additional defendants.

The plaintiffs seek to represent a class of Quorum Health Corporation, or QHC, shareholders and allege that the failure to record a goodwill and long-lived asset impairment charge against QHC at the time of the spin-off of QHC violated federal securities laws.

The District Court denied all defendants’ motions to dismiss on April 20, 2018.

The plaintiffs moved for class certification.

Plaintiffs also amended their complaint on September 14, 2018.

We moved to dismiss the additional claims in the plaintiffs’ September 14, 2018 amended complaint and responded to plaintiffs’ class certification motion.

On March 29, 2019, the court granted our motion to dismiss the additional claims.

The court granted the plaintiffs’ motion for class certification on that same date.

On April 12, 2019, we filed a petition for permission to appeal the court’s order granting class certification with the United States Court of Appeals for the Sixth Circuit, which was denied on July 31, 2019.

On May 17, 2019, the plaintiffs moved to amend their complaint for a third time to add additional claims, which the District Court denied on August 2, 2019.

All parties have now reached a settlement of this case, which was preliminarily approved by the District Court on July 27, 2020.

On September 17, 2020, Greenlight Capital requested exclusion from the Class.

The hearing for final approval of the settlement by the District Court is set for November 30, 2020.

Steadfast Insurance Company, et al v.

15 unchanged sentences

Plaintiffs amended their complaint to add Pecos Valley of New Mexico, LLC as a defendant in that action on May 21, 2020, and Pecos Valley of New Mexico, LLC filed a third party action against certain insurer defendants in the case on July 6, 2020.

The judgment in Sperling I against Pecos Valley of New Mexico, LLC, which was rendered on September 5, 2018, in the First Judicial Court of the State of New Mexico, is currently on appeal to the Court of Appeals of the State of New Mexico.

Consolidated trial of the Steadfast and Community Health Systems, Inc.

cases is set for July 26, 2021.

The Company believes the insurers’ claims in the Steadfast, Community Health Systems, Inc.

and Sperling II litigation are without merit and will vigorously defend and prosecute those cases.

On November 12, 2020, Pecos Valley and one of its insurers reached a settlement with the plaintiffs in Sperling I, and as a result the Sperling I case was dismissed with prejudice on November 19, 2020.

The Steadfast, Community Health Systems, Inc.

and Sperling II cases remain pending.

Trial in the Steadfast and Community Health Systems, Inc.

consolidated cases is set for December 13, 2021.

The Sperling II case is stayed pending the outcome of Steadfast and Community Health Systems, Inc .

The Company will vigorously defend and prosecute these cases.

Becky Kirk, Perry Ayoob, and Dawn Karzenoski, as representatives of a class of similarly situated persons, and on behalf of the CHS/Community Health Systems, Inc.

4 unchanged sentences

Retirement Savings Plan and allege that the defendants breached their fiduciary duties by offering certain investments in the Plan that were more expensive and/or did not perform as well as other marketplace alternatives.

We have reached a tentative, immaterial settlement with the plaintiffs and will be seeking court approval of the settlement.

Center and Statesville HMA, LLC d/b/a Davis Regional Medical Center, Envision Healthcare Corporation f/k/a Emergency Medical Services Corporation, Emcare Holdings, Inc., Emergency Medical Services, LP .

We have reached a tentative, immaterial settlement with the plaintiffs which was preliminarily approved by the District Court on December 8, 2020.

The District Court approved the settlement at a Final Fairness Hearing on April 12, 2021.

Thomas Mason, MD, Steven Folstad, MD and Mid-Atlantic Emergency Medical Associates, PA v Health Management Associates, LLC f/k/a Health Management Associates, Inc., Mooresville Hospital Management Associates d/b/a Lake Norman Regional Medical Center and Statesville HMA, LLC d/b/a Davis Regional Medical Center, Envision Healthcare Corporation f/k/a Emergency Medical Services Corporation, Emcare Holdings, Inc., Emergency Medical Services, LP .

This alleged wrongful retaliation case is filed in the United States District Court for the Western District of North Carolina.

8 unchanged sentences

The plaintiffs allege breaches of an asset purchase agreement in connection with the sale of Pottstown Memorial Medical Center.

The alleged breaches regard plaintiffs’ contention that the defendants failed to disclose certain conditions related to the physical plant of the hospital.

The alleged breaches regard plaintiffs’ contention that the defendants failed to disclose certain conditions related to the physical plant of the hospital, along with various other alleged breaches of the asset purchase agreement.

The plaintiffs filed an amended complaint on July 22, 2019.

Trial for this matter is set for March 8, 2021.

Trial for this matter is set for May 3, 2021.

We believe these claims are without merit and will vigorously defend the case.

Qui Tam Matters Where the Government Declined Intervention

and the State of Mississippi ex rel.

Blake Vanderlan, M.D.

Jackson HMA, LLC d/b/a Central Mississippi Medical Center and Merit Health Central.

By order filed on August 31, 2017, the United States District Court for the Southern District of Mississippi ordered the unsealing of this qui tam suit.

The unsealing revealed that on August 31, 2017 the United States had declined to intervene in the allegations that certain alleged EMTALA violations at the hospital resulted in a violation of the False Claims Act.

Both the hospital and the United States have filed motions to dismiss the litigation, and those motions are pending.

We believe this matter is without merit and will vigorously defend this case.

Elie Hage-Korban, M.D., Delta Clinics, PLC d/b/a The Heart and Vascular Center of West Tennessee.

Community Health Systems, Inc., Knoxville HMA Holdings, LLC d/b/a/ Tennova Healthcare, Jackson Hospital Corporation d/b/a/ Regional Jackson, and Dyersburg Hospital Company, LLC, d/b/ Dyersburg Regional Medical Center .

By order filed on April 30, 2019, the United States District Court for the Western District of Tennessee ordered the unsealing of this qui tam lawsuit.

The order revealed that the United States had declined to intervene in the action.

The complaint alleges the defendants violated the False Claims Act by submitting claims for payment related to certain cardiac procedures performed by defendant Dr.

Elie Hage-Korban at two hospitals formerly affiliated with the Company.

Hage-Korban was not employed by either hospital or their affiliates.

The plaintiff amended his complaint on July 24, 2019.

We filed a motion to dismiss the complaint on September 30, 2019, which the District Court granted on February 25, 2020.

On March 18, 2020, the plaintiff filed a Notice of Appeal to the United States Court of Appeals for the Sixth Circuit of all claims except those related to defendant Community Health Systems, Inc.

That appeal is pending.

We believe this matter is without merit and will vigorously defend this case.

Management of Significant Legal Proceedings

In accordance with our governance documents, including our Governance Guidelines and the charter of the Audit and Compliance Committee, our management of significant legal proceedings is overseen by the independent members of the Board of Directors and, in particular, the Audit and Compliance Committee.

The Audit and Compliance Committee is charged with oversight of compliance, regulatory and litigation matters, and enterprise risk management.

Management has been instructed to refer all significant legal proceedings and allegations of financial statement fraud, error, or misstatement to the Audit and Compliance Committee for its oversight and evaluation.

Consistent with New York Stock Exchange and Sarbanes-Oxley independence requirements, the Audit and Compliance Committee is comprised entirely of individuals who are independent of our management, and all four members of the Audit and Compliance Committee are “audit committee financial experts” as defined in the Securities Exchange Act of 1934, as amended.

In addition, the Audit and Compliance Committee and the other independent members of the Board of Directors oversee the functions of the voluntary compliance program, including its auditing and monitoring functions and confidential disclosure program.

In recent years, the voluntary compliance program has addressed the potential for a variety of billing errors that might be the subject of audits and payment denials by the CMS Recovery Audit Contractors’ permanent project, including MS-DRG coding, outpatient hospital and physician coding and billing, and medical necessity for services (including a focus on hospital stays of very short duration).

Efforts by management, through the voluntary compliance program, to identify and limit risk from these government audits have included significant policy and guidance revisions, training and education, and auditing.

The Board of Directors now oversees and reviews periodic reports of our compliance with the Corporate Integrity Agreement, or CIA, that we entered into with the United States Department of Health and Human Services Office of the Inspector General during 2014 and which was amended and extended in September 2018.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Legal Proceedings