Community Health Systems 2015 Annual Report Download - page 68

settled; U.S. ex rel. Sandra Simmons v. Health Management Associates, Inc. et al. (Eastern District Oklahoma)
(“Simmons”) which alleges unnecessary surgery by an employed physician and which was settled as to all
allegations except alleged wrongful termination; and U.S. ex rel. David Napoliello, M.D. v. Health Management
Associates, Inc. (Middle District Florida) (“Napoliello”) which alleges inappropriate admissions. On April 3,
2014, the Multi District Litigation Panel ordered the transfer and consolidation for pretrial proceedings of the
eight intervened cases, plus the Napoliello matter, to the District of the District of Columbia under the name In
Re: Health Management Associates, Inc. Qui Tam Litigation. On June 2, 2014, the court entered a stay of this
matter until October 6, 2014, which was subsequently extended until February 27, 2015, May 27,
2015, September 25, 2015, January 25, 2016, and now until May 25, 2016. We intend to defend against the
allegations in these matters, but have also been cooperating with the government in the ongoing investigation of
these allegations. We have been in discussions with the Civil Division of the DOJ regarding the resolution of
these matters. During the first quarter of 2015, we were informed the Criminal Division continues to investigate
former executive-level employees of HMA and continues to consider whether any HMA entities should be held
criminally liable for the acts of the former HMA employees. We are voluntarily cooperating with these inquiries
and have not been served with any subpoenas or other legal process.
Securities and Exchange Commission Investigations
On April 25, 2013, HMA received a subpoena from the SEC, issued pursuant to an investigation, requesting
documents related to accounts receivable, billing write-downs, contractual adjustments, reserves for doubtful
accounts, and accounts receivable aging, and revenue from Medicare, Medicaid and from privately insured or
uninsured patients. On June 5, 2013, HMA received a supplemental subpoena from the SEC which requests
additional financial reports. Subsequent subpoenas have been directed to us, our accountants, the former
accountants for HMA and certain individuals. On July 17, 2014, we received an additional subpoena from the
SEC seeking numerous categories of documents relating to the financial statement adjustments taken in the
fourth quarter of 2013 in the areas described above. This investigation is ongoing and we are unable to determine
the potential impact, if any, of this investigation.
Class Action Lawsuits
On April 30, 2012, two class action lawsuits that were brought against HMA and certain of its then executive
officers, one of whom was at that time also a director, were consolidated in the United States District Court for
the Middle District of Florida under the caption In Re: Health Management Associates, Inc., et al. and three
pension fund plaintiffs were appointed as lead plaintiffs. On July 30, 2012, the lead plaintiffs filed an amended
consolidated complaint purportedly on behalf of stockholders who purchased HMA’s common stock during the
period from July 27, 2009, through January 9, 2012. The amended consolidated complaint (i) alleges that HMA
made false and misleading statements in certain public disclosures regarding its business and financial results and
(ii) asserts claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended.
Among other things, the plaintiffs claim that HMA inflated its earnings by engaging in fraudulent Medicare
billing practices that entailed admitting patients to observation status when they should not have been admitted at
all and to inpatient status when they should have been admitted to observation status. The plaintiffs seek
unspecified monetary damages. On October 22, 2012, the defendants moved to dismiss the plaintiffs’ amended
consolidated complaint for failure to state a claim or plead facts required by the Private Securities Litigation
Reform Act. The plaintiffs filed an unopposed stipulation and proposed order to suspend briefing on the
defendants’ motion to dismiss because they intended to seek leave of court to file a proposed second amended
consolidated complaint. On December 15, 2012, the court entered an order approving the stipulation and
providing a schedule for briefing with respect to the proposed amended pleadings. On February 25, 2013, the
plaintiffs filed a second amended consolidated complaint, which asserted substantially the same claims as the
amended consolidated complaint. As of August 15, 2013, the defendants’ motion to dismiss the second amended
complaint for failure to state a claim and plead facts required by the Private Securities Litigation Reform Act was
fully briefed and awaiting the Court’s decision. On May 22, 2014, the court granted the motion to dismiss and on
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