CtW Investment Group Calls For Board Accountability Re: Community Health Systems Billing Practices

Absent Action, CtW Urges VOTE NO on Audit Committee Directors and CFO

WASHINGTON, April 18, 2011 /PRNewswire/ -- The CtW Investment Group sent a letter to the Community Health Systems' (NYSE: CYH) board of directors on Friday threatening a Vote No campaign against directors seeking re-election at Community's May 17 shareholder meeting unless the board immediately provides a compelling response to concerns regarding Community's aggressive Medicare billing practices.  The Investment Group's concerns were reinforced by the announcement on Friday that Community also received a subpoena from the U.S. Department of Health and Human Services' OIG on April 8th in connection with an investigation into Community's billing practices.  These practices were also the subject of a lawsuit filed by Tenet Healthcare on April 11, 2011, the announcement of which precipitated a 36% one day drop in Community's share price.

CtW's analysis of Community's billing practices reveal:

  • More than half of Community's hospitals are at the 80th percentile nationally in billing for one-day-stays, the level which has been identified by the HHS OIG as a red flag.
  • Community's hospitals exhibit higher than average one-day-stay rates for patients admitted through its emergency departments. These rates greatly exceed the expected rate for Community hospitals, taking into account patient mixes and hospital locations.
  • Hospitals acquired by Community go from being 10% below average nationally in emergency department admission one-day-stay rates to 20% above average in their first full year being operated by Community.
  • These excessive billing practices added 30% to Community Health's net income in 2008, the last Federal Fiscal Year for which complete data is available.

CtW first raised concerns regarding questionable Medicare billing practices – originally identified in studies by the Center for Medicare & Medicaid Services and the Office of the Inspector General (OIG) – in a letter to the board dated September 28, 2010, to which the Community board failed to respond.  In its April 15 letter, Mr. Patterson warned that should the board fail to provide a compelling response, CtW will recommend that fellow shareholders oppose the reelection of directors, saying "Management's troubling disregard for the looming compliance crisis facing Community Health shareholders only reinforces the importance of proactive board supervision and engagement with concerned shareholders. Lacking that, shareholders have no option but to hold Audit and Compliance committee directors accountable." CtW indicated that directors James S. Ely and John A. Fry, who serve on the Audit and Compliance Committee, as well as CFO Larry Cash, will face opposition if the board cannot persuade shareholders that it has been fully engaged in overseeing management of compliance risk.

The CtW Investment Group's September 28, 2010 and April 15, 2011 letters to the Community Health Systems board are available at: http://ctwinvestmentgroup.com/.  

SOURCE CtW Investment Group