Community Health Systems 2015 Annual Report Download - page 64

The following legal proceedings are described in detail because, although they may not be required to be
disclosed in this Part I, Item 3 under SEC rules, due to the nature of the business of the Company, we believe that
the following discussion of these matters may provide useful information to security holders. This discussion
does not include claims and lawsuits covered by medical malpractice, general liability or employment practices
insurance and risk retention programs, none of which claims or lawsuits would in any event be required to be
disclosed in this Part I, Item 3 under SEC rules. Certain of the matters referenced below are also discussed in the
Notes to Consolidated Financial Statements at Part II, Item 8 under Note 17 “Commitments and Contingencies.”
Community Health Systems, Inc. Legal Proceedings
Shareholder Litigation
Class Action Shareholder Federal Securities Cases. Three purported class action cases have been filed in the
United States District Court for the Middle District of Tennessee; namely, Norfolk County Retirement System v.
Community Health Systems, Inc., et al., filed May 9, 2011; De Zheng v. Community Health Systems, Inc., et al.,
filed May 12, 2011; and Minneapolis Firefighters Relief Association v. Community Health Systems, Inc., et al.,
filed June 21, 2011. All three seek class certification on behalf of purchasers of our common stock between
July 27, 2006 and April 11, 2011 and allege that misleading statements resulted in artificially inflated prices for
our common stock. In December 2011, the cases were consolidated for pretrial purposes and NYC Funds and its
counsel were selected as lead plaintiffs/lead plaintiffs’ counsel. In lieu of ruling on our motion to dismiss, the
court permitted the plaintiffs to file a first amended consolidated class action complaint which was filed on
October 5, 2015. Our motion to dismiss was filed on November 4, 2015 and is scheduled for oral argument on
April 11, 2016. The court also lifted the discovery stay and discovery is underway. We believe this consolidated
matter is without merit and will vigorously defend this case.
Shareholder Derivative Actions. Three purported shareholder derivative actions have also been filed in the
United States District Court for the Middle District of Tennessee; Plumbers and Pipefitters Local Union No. 630
Pension Annuity Trust Fund v. Wayne T. Smith, et al., filed May 24, 2011; Roofers Local No. 149 Pension Fund
v. Wayne T. Smith, et al., filed June 21, 2011; and Lambert Sweat v. Wayne T. Smith, et al., filed October 5,
2011. These three cases allege breach of fiduciary duty arising out of allegedly improper inpatient admission
practices, mismanagement, waste and unjust enrichment. These cases have been consolidated into a single,
consolidated action. The plaintiffs filed an operative amended derivative complaint in these three consolidated
actions on March 15, 2012. Our motion to dismiss was argued on June 13, 2013. On September 27, 2013, the
court issued an order granting in part and denying in part our motion to dismiss. An initial case management
order was entered on November 11, 2014, but no trial date has been set. Discovery is continuing. We believe all
of the plaintiffs’ claims are without merit and will vigorously defend them.
Other Government Investigations
Dothan, Alabama – Independent Lab Billing. On February 12, 2015, our hospital in Dothan, Alabama
received a Civil Investigative Demand, or CID, from the United States Department of Justice for information
concerning its status as a “covered hospital” under certain lab billing regulations. These regulations discuss
permissible billing of the technical component of lab tests performed for hospital patients by an independent
laboratory. The CID seeks documentation and explanation whether the hospital qualifies as a covered hospital for
billing purposes under the applicable regulations. We are cooperating fully with this investigation.
Blue Island, Illinois – Patient Status. On October 9, 2015, our hospital in Blue Island, Illinois received a
CID from the Office of the United States Attorney in Chicago, Illinois concerning allegations of upcoding
observation and other outpatient services and improperly falsifying inpatient admission orders. The CID requests
medical records and documentation concerning status change, from observation to inpatient. We are fully
cooperating with this investigation.
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