Not the first time Erlanger accused of fraud in federal court
Erlanger Medical Center, its administration and board of directors are experienced in rebutting allegations of fraud in federal court.
Chattanooga-based Erlanger currently is embroiled in a lawsuit with Hutcheson Medical Center and The Hospital Authority of Walker, Dade and Catoosa counties.
Erlanger claims it provided more than $20 million in loans to Hutcheson as part of a 2011 management agreement whereby Erlanger would oversee operations of the northwest Georgia hospital. When Hutcheson terminated the management arrangement in 2013 Erlanger called its loans and sued for their repayment.
During the months since the lawsuit was filed, both parties have made motions and offered responses in the U.S. District Court for the Northern District of Georgia. Concurrently, Hutcheson has filed for Chapter 11 protection in the U.S. Bankruptcy Court.
In its most recent action, attorneys for Hutcheson have claimed one of its attorneys defrauded his client by sharing privileged and confidential information with Erlanger at a time when the 2011 management agreement was being negotiated during Jim Brexler’s tenure as Erlanger CEO.
This current case is similar to others in that it involves disputes about money and the delivery of contracted services.
The mission of the United States Attorney’s Office for the Eastern District of Tennessee, as stated on its official website, is “to enforce the law and defend the interests of the United States according to the law; to ensure public safety against threats foreign and domestic; to provide federal leadership in preventing and controlling crime; to ensure the fair and impartial administration of justice for the people of East Tennessee; and, to serve as effective financial stewards for the American people, by defending the financial interests of, and collecting debts owed to, the United States.”
A federal Health Care Fraud Task Force began investigating Erlanger early in 2003 concerning claims the hospital for years had inappropriately and illegally billed Medicare and TennCare.
From a U.S. Attorney’s Office s news release:
“The settlement agreement alleges that beginning as early as January 1995, Erlanger entered into a series of financial arrangements with certain physician groups through which it paid money and other compensation, directly or indirectly, to certain physicians who were affiliated with those groups. These financial arrangements were intended to induce physicians to refer patients to its facilities and, as such, were in violation of federal laws known as the Ethics in Patients Referrals Act (or the Stark law) and the AntiKickback Statute.”
Federal officials contended they had $120 million in “valid claims” against Erlanger.
Though it vigorously denied claims of fraud, its board of trustees in 2005 said they agreed to pay $40 million after an investigation by a federal Health Care Fraud Task Force “to avoid the delay, uncertainty, inconvenience and expense of protracted litigation of the above claims.”
Again, from the U.S. Attorney’s Office:
“Erlanger Medical Center in Chattanooga entered into a five-year Corporate Integrity Agreement as a result of allegations that it had violated the Ethics in Patients Referrals Act (the Stark law) and the Anti-Kickback Statute for its role in a patient referral scheme. These laws are designed to protect the integrity of the government-funded health care benefit programs. Erlanger agreed to pay $37 million dollars to the United States and $3 million to the State of Tennessee.”
In February 2015, the federal 6th Circuit Court of Appeals reversed the dismissal of a whistleblower lawsuit that had been brought against Erlanger regarding similar violations of the False Claims Act that were discovered in 2006.
Court documents note that Robert Whipple was an Erlanger employee for about six months during 2006, first as a revenue cycle consultant on assignment from ACS Healthcare Solutions and then as interim director of care management for Erlanger.
It was during his time at Erlanger that Whipple discovered the hospital was doing what he considered as “submitting false or fraudulent claims for reimbursement to federally funded healthcare programs.”
The Court of Appeals 13-page opinion remanding Whipple’s case to the Middle District of Tennessee, states that, “unbeknownst to Mr. Whipple, the government conducted an audit into concerns about Erlanger billing to Medicare. That ended with Erlanger making a $477,140.42 refund to the government in September 2009.”
Complicating matters regarding the Erlanger versus Hutcheson lawsuits is a shifting in Erlanger administration during the time it pledged to soundly manage Hutcheson.
Jim Brexler was CEO of Erlanger when the management agreement was signed on May 26, 2011.
But on Dec. 31, 2011, Brexler, whose salary as CEO was $550,000 annually, resigned his position and was awarded a severance package that continued paying him through March 2013.
Hospital Authority Board chairman Ron Loving, in an internal memo sent to Erlanger employees, said, “Today’s vote, which was 5-4 for approval of the package, reflects those differences of opinion (among board members).”
Following Brexler’s ouster, an interim CEO was appointed by the trustees.
“It’s important to note that the board is unified in its support of Charlesetta Woodard-Thompson as Erlanger’s president and CEO, and of her plans going forward to improve the hospital’s operational and financial status,” Loving said when the interim position was announced.
Support seemed short-lived as within a year Woodard-Thompson was without a job and Kevin Spiegel was handed the reins to Erlanger in February 2013.
Woodard-Thompson’s response was to file a $25 million wrongful dismissal lawsuit against Erlanger. That case is pending.
Attorneys with the firm Miller & Martin are representing Erlanger in both the Hutcheson and Woodard-Thompson cases.