According to media reports of the settlement and the Department of Justice’s own press release, the defendants–three New Mexico hospitals and Tennessee-based Community Health Systems–have agreed to pay $75 million to settle the claims against them. As explained in earlier posts, the defendants were accused of causing the state of New Mexico to misreport funds to Medicaid that the defendants had provided to the state, which allegedly resulted in more Medicaid funds flowing to the defendants. According to the relator’s allegations, for every misreported dollar the defendants provided to the state, they received 3 dollars in Medicaid funds in return.
CHS manages more than 200 hospitals in 29 states. The three New Mexico hospitals involved served rural communities in the state under the now-discontinued Sole Community Provider (SCP) program.
The settlement highlights the significant disincentives that defendants in False Claims Act cases have to take cases all the way to trial. Following the trial court’s denial of the defendants’ summary judgment motions (or large parts of them at least), which we reported on previously, the case was headed to trial. Defendants in such circumstances are often faced with bet-the-company jury trials, since adverse verdicts will often result in the defendants becoming ineligible to participate in government programs. Given the risks of a jury trial, defendants in these cases often have no choice but to settle since the risks of submitting the case to a jury are just too great.