The disclosure that the federal government has joined a whistleblower lawsuit against Quorum Health Group, one of the country's largest for-profit hospital chains, sent the company's stock price plunging last week.
The legal action stems from an ongoing whistleblower lawsuit against the Brentwood, Tenn.-based company. Quorum's share price fell 27% to $15.81 from $21.69 in heavy trading on Sept. 29, the day after the announcement. Shares closed last Friday at $15.06.
Filed in 1993, the lawsuit set in motion a federal investigation that has dogged the hospital chain for five years. The company learned in August that the root of the investigation was the whistleblower suit, said Quorum spokeswoman Shea Davis.
Investigators have declined to tell Quorum where the suit was filed because the complaint has been under seal. It is expected to be unsealed this week.
Officials from HHS' inspector general's office and the U.S. Justice Department told Quorum at a Sept. 24 meeting that the lawsuit would likely be unsealed on or about Oct. 5, said Davis. The company disclosed the imminent unsealing in its latest 10-K filing with the Securities and Exchange Commission, dated Sept. 28.
The Justice Department has joined the lawsuit as a plaintiff. The complaint alleges that Quorum falsified information when it reported its Medicare costs to the federal government. The suit was filed by a former employee of a not-for-profit hospital that had a management contract with Quorum, Davis said.
Quorum disclosed that it was under a companywide investigation four years ago in a 10-K report.
The company has provided information to HHS investigators since June 1993. In January 1995, the Justice Department issued a civil investigative demand for information. The government has also interviewed several current and former Quorum employees.
The government's requests have been broad in scope and not confined to a specific hospital or hospitals, Davis said.
"They've covered a myriad of things. We don't know exactly what they're looking for," she said.
In its latest 10-K report, Quorum said it will continue to cooperate in the investigation, which concerns "the preparation of cost reports for Medicare and other government programs for owned and managed hospitals."
The government's August disclosure of the whistleblower lawsuit followed more than two years of silence between the parties, Quorum said in the recent 10-K filing.
Quorum owns 18 and manages 238 hospitals. It is one of the country's biggest for-profit hospital chains and the nation's largest manager of not-for-profit hospitals.