Community Health Systems, Franklin, Tenn., revealed correspondence between the company and a union-affiliated investment adviser in which the adviser urged Community's board of directors to set up a special committee to investigate the adviser's claim that Community's hospitals were too aggressively billing Medicare for one-day stays, according to a securities filing.
Adviser urged CHS to examine admissions
The federal lawsuit filed last week against 125-hospital Community by Tenet Healthcare Corp. hinges on Tenet's claim that Community's admissions guidelines wrongly encourage physicians at Community's hospitals to admit patients who should be given observational status, which would draw lower Medicare reimbursements than an inpatient admission.
The adviser, CtW Investment Group, works with pension plans associated with the union umbrella group Change to Win, which is backed by four major unions: the Service Employees International Union, the Teamsters, United Farm Workers, and the United Food and Commercial Workers International Union. In a Sept. 28, 2010 letter, CtW laid out its case that many of Community's hospitals had rates of one-day stays well above the national average and contended that hospitals acquired by the company tend to increase their rate of one-day stays. The letter also was sent to HHS' inspector general's office.
Community responded in a letter dated Oct. 12, 2010, in which it replied that because of the SEIU's connection to CtW Investment Group, and the union's activities at current and potential future Community hospitals, any interaction with CtW would fall under the National Labor Relations Act. The company invited CtW officials to schedule a meeting for officials from the affiliated pension funds with Community executives.
In a letter last week, after Tenet's lawsuit was filed, CtW again urged the board to make a public response to reassure shareholders. Absent such action, CtW urged shareholders to vote against the re-election of three directors on the company's audit and compliance committee as well as against Larry Cash, executive vice president and chief financial officer. CtW made that call in the April 15 letter and a news release issued today.
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