Whistleblower suit alleges multi-million dollar Medicaid fraud in New Mexico
According to documents supporting a federal whistleblower suit against Community Health Systems (CHS), CHS and its New Mexico hospitals have since 2000 improperly obtained millions of dollars in federal funds through the New Mexico Sole Community Provider Fund (SCPF) and Sole Community Hospital Supplemental payments (SCHSP) Medicaid programs.

The charges originated from a 2005 suit filed by Robert Baker, a former CHS employee. That suit was initially filed on behalf of the United States by Baker under the qui tam provisions of the False Claims Act, which allows any person having knowledge of a false or fraudulent claim against the country to bring a claim on behalf of the United States and share in any recovery. The United States joined the suit earlier this year and the Department of Justice filed its own complaint at the end of June

Baker and the government allege that CHS and its hospitals made donations to New Mexico counties which they knew would be used by the counties and the state to claim and obtain triple the amount in federal funding that was then paid to the hospitals under the SCPF and SCHSP programs.

The Medicaid Act authorizes federal matching funds to the states for Medicaid programs to provide medical assistance to persons with limited income and resources. In order to ensure that state or local funds are the basis for the federal matching money, the Medicaid Act prohibits federal funding in instances where the state or county has received donations from healthcare providers that are related to the amount of Medicaid reimbursement paid to the provider.

According to the federal complaint, Eastern New Mexico Medical Center, Mimbres Memorial Hospital and Nursing Home, and Alta Vista Regional Medical Center made payments, characterized as donations, to the three counties in which they are located. These counties in turn made contributions to the state of New Mexico for the non-federal share of the SCPF and SCHSP payments to the CHS hospitals.

New Mexico consequently made SCPF and SCHSP payments to CHS in an amount that was four times that of CHS’s donations, including the amount of the donations themselves plus triple the amount in federal funds. According to the complaint, from September 2000 to July 2008 the three hospitals received more than $90 million in total SCPF and SCHSP payments.

The 81-page complaint includes a section describing how the CHS “scheme” began. An email dated Aug. 7, 2000, from CHS’s group vice president to its executive vice president and chief financial officer, relates the company’s “concern over the past few weeks . . . to get $700,000 to the county for them to pay the [sole community provider] program and we receive back $2.6 M ($1.9M net).” The email went on to explain that another CHS executive believed there could be a restriction on hospitals making direct donations to the county and that within each CHS facility alternative strategies were being formulated to make the donations.

A second email between the same two executives was sent the following day in which the CHS group vice president wrote “the last risk I would bring to your attention would be the feds determining, based upon the state reports, that the county participation in the program was funded by a provider donation, i.e., the hospital. Under this scenario, the excess or matching portion of the funds could be withheld from future SCH payments. Moreover, it would be budget neutral in the long-run and we would in effect collect our cash in advance.”

The federal complaint charges that, “Having concluded that the benefit of collecting its ‘cash in advance’ outweighed any risk of the federal government learning CHS was providing non-bona fide donations to the counties, thereby allowing it to improperly obtain federal funds, CHS initiated its scheme to fraudulently inflate the SCPF and SCHSP payments it received from the state of New Mexico.”

According to the original suit filed by Baker, upon becoming CHS’s revenue manager for Eastern New Mexico Medical Center in August 2004, he was told that Eastern received quarterly SCPF payments from New Mexico’s SCPF Fund, and was also made aware that in order to receive those payments the hospital was required to make quarterly donations to Chaves County to defray the county’s cost of the supporting the fund.

Later, when Baker called the state of New Mexico to ask when the hospital could expect a SCPF payment, and when the hospital needed to pay the county, he was told that kind of a payment would violate federal Medicaid regulations.

In a later meeting with CHS officials, Baker told them about his conversation with the state and that CHS’s arrangement with the counties “looked like fraud.” According to the suit, Baker was chastised for calling the state, was told never to call the state again about regulatory issues "until he knew what he was talking about,” and was told the payment to the country was legitimate. Baker was then told “never to use the word ‘fraud’ again, nor was he allowed to say ‘appearance of impropriety’ as it related to any CHS issue.”

Baker resigned from the company in 2005 and filed his whistleblower suit against CHS shortly thereafter.