Community Health Systems Professional Services Corporation (CHSPSC) and three affiliated New Mexico hospitals (CHS) will pay the United States $75 million to settle allegations that they violated the False Claims Act by making illegal donations to county governments which were used to fund the state share of Medicaid payments to the hospitals.

CHSPSC is based in Franklin, Tennessee, and manages more than 200 affiliated hospitals in 29 states.

The three New Mexico hospitals are Eastern New Mexico Medical Center in Chaves County, Mimbres Memorial Hospital and Nursing Home in Luna County and Alta Vista Regional Medical Center in San Miguel County.

“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 Justice Department Civil Division chief 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 settlement stems from a whistleblower complaint filed by a former CHSPSC revenue manager, Robert Baker, 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 act also permits the government to intervene in and take over the lawsuit, as it did in this case as to some of Baker’s allegations.

The United States did not intervene in Baker’s allegations as to SCP payments made to two other affiliated New Mexico hospitals, Carlsbad Medical Center and Lea Regional Medical Center. Today’s settlement also resolves these other allegations.

Baker will receive $18,671,561 as his share of the government’s recovery.

“The government never would have found out about this alleged quid-pro-quo practice without Robert Baker’s help,” said Peter W Chatfield, an attorney with the whistleblower law firm Phillips & Cohen LLP, which brought the whistleblower lawsuit on behalf of Baker. “For every dollar a CHS hospital donated to the county, it received an amount equivalent to the ‘donation’ plus $3 back in supplemental Medicaid payments – making it a very lucrative investment for CHS and its hospitals.”

New Mexico’s Sole Community Provider (SCP) program, which was discontinued in 2014, provided supplemental Medicaid funds to hospitals in mostly rural communities.

The federal government reimbursed the state of New Mexico for approximately 75 percent of its health care expenditures under the SCP program. Under federal law, New Mexico’s 25 percent “matching” share of SCP program payments had to consist of state or county funds, and not impermissible “donations” from private hospitals.

This restriction on the use of private hospital funds to satisfy state Medicaid obligations was enacted by Congress to curb possible abuses and ensure that states have sufficient incentive to curb rising Medicaid costs.

Federal officials alleged that from August 1, 2000, through December 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 which were funded by the United States in the amount of three times CHS’ “donations.”

“Hundreds of thousands of New Mexicans depend on Medicaid for medical care and other services,” said U.S. Attorney Damon P. Martinez for the District of New Mexico. “This litigation underscores the importance of maintaining the integrity of the Medicaid Program. Those who violate the law in order to profit from the Medicaid Program undercut the financial integrity of the program and can thus put at risk the availability of medical care and other services to those in need. We are committed to protecting the integrity of the Medicaid Program no matter the effort required or the time it may take, even in the face of the most vigorous litigation.”