Hospital Chain Pays Heavy Price for Being Too Clever

Finding that Community Hospital Systems had been “too clever by half” in negotiating a global settlement agreement for seven whistleblower suits, a federal judge ordered the chain to pay the attorneys’ fees of all the whistleblowers—not just the first to file.  That’s on top of the $97 million Community paid to settle the cases.

The seven cases covered two broad claims: (1) charging Medicare, Medicaid, and Tricare for medically unnecessary treatment and (2) Stark Law violations.  Following the settlement, Community paid the attorneys’ fees of two whistleblowers: one for each of the two claims.

When all the other whistleblowers asked for their attorney’ fees, Community refused, pointing to the settlement agreement provision preserving its right “to challenge or object to Relators’ claims for attorneys’ fees … pursuant to 31 U.S.C. 3730(d)” of the FCA.  In court, Community noted that the FCA expressly bars actions by a plaintiff who is not the first to file and actions brought after public disclosure of the alleged wrongdoing.

That’s when the judge called Community too clever by half.  As he saw it, Community had intended all along to refuse to pay the fees of all but the two first-filers, but instead of saying so, had intended to invoke the sec. 3730(d) reference once the agreement was signed.

Why too clever by half?  Because sec. 3730(d)(1) doesn’t say anything about the first-to-file or public-disclosure bars.  Those matters are in other sections of the FCA–sections the settlement agreement never mentions. The only right Community preserved under 3730(d) is the right to require that fees be reasonable and necessary.

The case is U.S. ex rel. Reuille v. Community Health Systems, No. 3:11-cv-00442 (M.D.Tenn. Aug. 6, 2015).

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