CHS subpoenaed by SEC and HHS, sued by shareholders

Franklin, Tenn.-based Community Health Services (NYSE: CYH) has been hit with subpoenas from the SEC and HHS Office of Inspector General in Houston, and just learned of two class-action lawsuits against it in Tennessee, according to notifications it filed with the SEC yesterday.

The SEC wants details about the now-failed hostile takeover bid of Tenet Healthcare Corp., including documents about CHS's admission and observation rates, which Tenet has charged were fraudulent and led to massive Medicare overbilling.

The Houston OIG has asked for CHS to send 71 patient medical records from its Shelbyville, Tenn., facility to an assistant U.S. Attorney in Texas handling an OIG investigation into the company's Laredo, Texas, branch. The company indicates it doesn't know what the connection might be between the two facilities "other than they are both affiliated with us."

The class action suits arose from shareholders' complaints that CHS made "misleading statements" to inflate its stock price. The SEC filing doesn't give any details about what statements might be at issue.

CHS officials say they haven't been served in either case--Norfolk County Retirement System v. Community Health Systems, Inc., Wayne T. Smith, and W. Larry Cash, which was filed on May 9, or De Zheng v. Community Health Systems, Inc., Wayne T. Smith, and W. Larry Cash, filed on May 12.

The last tweak to CHS's legal woes: Tenet has amended its existing lawsuit--originally filed over the allegedly fraudulent difference between CHS's observation rates and admission rates--and now is asking for CHS to pay for the time and expense Tenet incurred analyzing CHS's records.

To learn more:
- check out the SEC filing