Whistleblower complaint leads to $75M settlement in Medicaid false claims case in New Mexico.

Economic Indicators Associated Press

A Tennessee-based company and three New Mexico hospitals have agreed to pay the federal government $75 million to settle allegations in a Medicaid false-claims case that stemmed from a whistleblower's complaints.

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The U.S. Justice Department announced the settlement Monday in a case that involved Community Health Systems Professional Services Corp., which was accused of making illegal donations to county governments. Those donations were then used by the counties — and subsequently the state — to obtain matching payments under a now-discontinued program that supplemented Medicaid funds to hospitals in rural New Mexico.

U.S. Attorney Damon Martinez said hundreds of thousands of New Mexicans depend on Medicaid.

"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," he said in a statement.

Community Health Systems officials did not return a message seeking comment about the settlement.

The government alleged that from 2000 to 2010, Community Health Systems concealed the true nature of its donations to avoid detection by federal and state authorities.

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Federal prosecutors said the restriction on using private hospital funds to satisfy state Medicaid obligations was enacted by Congress to curb possible abuses and to ensure states have enough incentive to limit rising Medicaid costs.

The three New Mexico hospitals involved in the case 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. The U.S. attorney's office said the settlement also resolved claims against Carlsbad Medical Center and Lea Regional Medical Center in southeastern New Mexico.

The law firm that brought the whistleblower lawsuit on behalf of Robert Baker, a former Community Health Systems employee, described the company's donations as a "very lucrative investment," given that the company received $3 back in Medicaid payments for every $1 it donated to the counties.

"It was not a matter of CHS making the donations out of the goodness of its heart," said Stephen Hasegawa, an attorney with the Phillips & Cohen law firm.

The lawsuit was scheduled for trial this month, but that date was postponed because of the settlement. The agreement will become final once approved by the court.