What changed in this filing

/stocks — the workspaceLOADING

Item 3. Legal Proceedings

2022-02-17 compared with 2021-02-18 · 50 added, 89 removed, 61 unchanged (70% 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 & 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;

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

From time to time, we receive inquiries or subpoenas from state regulators, state Medicaid Fraud Control units, fiscal intermediaries, CMS, the U.S.

Department of Justice and other government entities regarding various Medicare and Medicaid issues.

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.

2 unchanged sentences

Settlements of suits involving Medicare and Medicaid issues routinely require both monetary payments as well as corporate integrity agreements.

Additionally, qui tam or “whistleblower” actions initiated under the civil False Claims Act may be pending but placed under seal by the court to comply with the False Claims Act’s requirements for filing such suits.

In September 2014, the Criminal Division of the United States Department of Justice, or DOJ, announced that all qui tam cases will be shared with their Division to determine if a parallel criminal investigation should be opened.

Additionally, qui tam or “whistleblower” actions initiated under the civil FCA may be pending but placed under seal by the court to comply with the FCA’s requirements for filing such suits.

In September 2014, the Criminal Division of the U.S.

Department of Justice announced that all qui tam cases will be shared with their Division to determine if a parallel criminal investigation should be opened.

The Criminal Division has also frequently stated an intention to pursue corporations in criminal prosecutions.

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 & 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.

The following legal proceedings are described in detail because, although they may not be required to be disclosed in this Part I, Item 3 under SEC rules, due to the nature of the business of the Company, we believe that the following discussion of these matters may provide useful information to security holders.

The following legal proceedings are described in detail because, although certain legal proceedings may not be required to be disclosed in this Part I, Item 3 under SEC rules, due to the nature of the business of the Company, we believe that the following discussion of these matters may provide useful information to security holders.

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 I, Item 3 under SEC rules.

Certain of the matters referenced below are also discussed in Note 15 of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Form 10-K.

Shareholder Litigation

3 unchanged sentences

It seeks class certification on behalf of purchasers of our common stock between February 20, 2017 and February 27, 2018 and alleges misleading statements resulted in artificially inflated prices for our common stock.

November 20, 2019, the District Court appointed Arun Bhattacharya and Michael Gaviria as lead plaintiffs in the case.

On November 20, 2019, the District Court appointed Arun Bhattacharya and Michael Gaviria as lead plaintiffs in the case.

The lead plaintiffs filed a consolidated class complaint on January 21, 2020.

1 unchanged sentence

That motion is pending.

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

We believe this matter is without merit and are vigorously defending this case.

Padilla Derivative Litigation .

Five purported shareholder derivative cases have been filed in two District Courts relating to the factual allegations in the Padilla litigation;

Four purported shareholder derivative cases have been filed in two District Courts relating to the factual allegations in the Padilla litigation;

three of these cases have been consolidated in In re Community Health Systems, Inc.

Shareholder Derivative Litigation and are pending in the United States District Court for the District of Delaware ;

namely, Faisal Hussain v.

Smith, et al, filed August 12, 2019 in the United States District Court for the District of Delaware;

Roger Trombley v.

Smith, et al, filed August 20, 2019 in the United States District Court for the Middle District of Tennessee;

Smith, et al, filed August 12, 2019;

Susheel Tanjavoor v.

Smith, et al., filed August 29, 2019, in the United States District Court for the District of Delaware;

Roofers Local No.

149 Pension Fund v.

Clerico, et al, filed October 30, 2019, in the United States District Court for the District of Delaware;

Smith, et al., filed August 29, 2019;

and Kevin Aronson v.

Smith, et al , filed April 29, 2020 in the United States District Court for the District of Delaware.

All five seek relief derivatively and on behalf of Community Health Systems, Inc.

Smith, et al , filed April 29, 2020.

The fourth case, Roger Trombley v.

Smith, et al, filed August 20, 2019 , is pending in the United States District Court for the Middle District of Tennessee.

All four cases seek relief derivatively and on behalf of Community Health Systems, Inc.

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.

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

Other Government Investigations

Florida LIP Program CIDs – On September 14, 2017, our hospital in St.

Petersburg, Florida received a CID from the United States Department of Justice for information concerning its historic participation in the Florida Low Income Pool Program.

All four cases are stayed by court order until the United States District Court for the Middle District of Tennessee rules on the defendants’ motion to dismiss in the Padilla action.

Qui Tam Litigation

ex rel Larry Bomar v.

Bayfront HMA Medical Center, LLC, et al – On September 14, 2017, our former hospital in St.

Petersburg, Florida received a civil investigative demand, or CID, from the United States Department of Justice for information concerning its historic participation in the Florida Low Income Pool Program.

The Low Income Pool Program, or LIP, is a funding pool to support healthcare providers that provide uncompensated care to Florida residents who are uninsured or underinsured.

1 unchanged sentence

On June 13, 2019, an additional ten of our affiliated hospitals in Florida received CIDs related to the same subject matter, along with two CIDs addressed to our affiliated management company and the parent company.

We are cooperating fully with this investigation.

We cooperated fully with the investigation.

On September 15, 2021, the United States District Court for the Middle District of Florida ordered the unsealing of this qui tam complaint, which contains allegations related to the information sought in the September 14, 2017 CID.

Specifically, the relator claims our former hospital in St.

Petersburg – Bayfront Medical Center St.

Petersburg – along with other, unaffiliated hospitals violated the False Claims Act by allegedly making certain contributions to a non-profit entity for the purpose of receiving supplemental Medicaid funding.

The United States has declined to intervene in the case.

We filed a motion to dismiss on November 23, 2021.

That motion is pending.

We believe this matter is without merit and are vigorously defending this case.

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 defendants have settled with Greenlight Capital, and the District Court granted final approval of the Class settlement on November 30, 2020.

Steadfast Insurance Company, et al v.

10 unchanged sentences

The Steadfast complaint was served on November 30, 2018.

On December 13, 2018, Admiral Insurance Company, Endurance Specialty Insurance Ltd, and Illinois Union Insurance Company moved to intervene in the suit as petitioners.

On December 13, 2018, Admiral Insurance Company, Endurance Specialty Insurance Ltd, and

Illinois Union Insurance Company moved to intervene in the suit as petitioners.

The Company has initiated counterclaims against each insurer in that case, including for bad faith against Steadfast.

3 unchanged sentences

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.

Trial in the Sperling II case is set for January 30, 2022.

The Company will vigorously defend and prosecute those 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.

Retirement Savings Plan v.

Retirement Committee of CHS/Community Health Systems, Inc., John and Jane Does 1-20, Principal Life Insurance Company, Principal Management Corporation, and Principal Global Investors, LLC.

This purported class action was filed in the United States District Court for the Middle District of Tennessee on August 8, 2019.

The plaintiffs seek to represent a class of current and former participants in the CHS/Community Health Systems, Inc.

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 which was preliminarily approved by the District Court on December 8, 2020.

The Final Fairness Hearing for the settlement is set for 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 .

In November 2021, we settled the remaining Steadfast and Community Health Systems cases with the defendant insurance carriers for a total payment of $22 million by the carriers to the Company, and those remaining cases have been dismissed with prejudice.

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

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

3 unchanged sentences

The defendants filed motions to dismiss, which were granted in part and denied in part on September 5, 2019.

Trial of this matter is set for January 3, 2022.

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

We believe these claims are without merit and are vigorously defending this case.

Tower Health, f/k/a Reading Health System, et al v CHS/Community Health Systems, Inc., et al .

3 unchanged sentences

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

Both parties have filed motions for summary judgment, which are pending.

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 on January 5, 2021, the District Court granted the United States’ Motion to Dismiss and ordered all of the plaintiff’s claims dismissed with prejudice save one claim against the hospital for retaliation.

The hospital will have an opportunity to file a new motion to dismiss with respect to the remaining claim.

We believe the retaliation claim 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.

On December 1, 2020, the Sixth Circuit affirmed the District Court’s dismissal of the complaint.

Trial for this matter began May 3, 2021, and closed on October 5, 2021.

The court has not issued a decision.

We believe these claims are without merit and are vigorously defending this case.

Golden, as Litigation Trustee of the QHC Litigation Trust, and Wilmington Savings Fund Society, FSB, solely in its capacity as indenture trustee v Community Health Systems, Inc., et al .

A complaint in this case was filed on October 25, 2021 in the United States Bankruptcy Court for the District of Delaware against various persons, including the Company, certain subsidiaries of the Company, certain former executive officers of the Company and Credit Suisse Securities (USA) LLC.

Plaintiff Daniel H.

Golden is the litigation trustee for a litigation trust which was formed under the plan of reorganization of Quorum Health Corporation, or QHC, and certain affiliated entities confirmed by order of the United States Bankruptcy Court for the District of Delaware wherein QHC and certain affiliated entities contributed various causes of action to such litigation trust.

Plaintiff Wilmington Savings Fund Society is the indenture trustee for certain notes issued by QHC.

The complaint seeks damages and other forms of recovery arising out of certain alleged actions taken by the Company and the other defendants in connection with the spin-off of QHC which was completed on April 29, 2016, and includes claims for unjust enrichment and for avoidance of certain transactions and payments by QHC to the Company connected with the spin-off, including the $1.21 billion special dividend paid by QHC to the Company as part of the spin-off transactions.

We filed a motion to dismiss on January 14, 2022.

We believe these claims are 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.

2 unchanged sentences

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.

Mine Safety Disclosures

1 unchanged sentence

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-K

Item 3. Legal Proceedings