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UPDATE: Community Health Systems Reports Resolution of DoJ Probe, Will Pay $88.3M

Community Health Systems, Inc. (NYSE: CYH) announced today that it has resolved the investigation by the U.S. Department of Justice into short stay admissions through emergency departments at certain affiliated hospitals. The parties have entered into a settlement agreement, which concludes the government's review into whether these 119 hospitals billed Medicare, Medicaid and TRICARE for certain inpatient admissions from January 2005 to December 2010 that the government believed should have been billed as outpatient or observation cases.

The settlement agreement reflects the Company's desire to end the investigation, which began in 2011, and to avoid the significant expense and distraction of litigation. Under the terms of the agreement, there is no finding of improper conduct by Community Health Systems or its affiliated hospitals, and the Company has denied any wrongdoing. The Company has agreed to pay $88,257,500 in resolution of all federal government claims, including Medicare, TRICARE and the federal share of the Medicaid claims, and an additional $892,500 to the states for their portions of the Medicaid claims.

As is customary at the conclusion of many government investigations, Community Health Systems has entered into a five-year Corporate Integrity Agreement (CIA) that will be incorporated into the Company's existing and comprehensive compliance program. Community Health Systems established the compliance program on its own initiative in 1997 and has since maintained robust training, reporting and review processes.

The settlement will also result in the unsealing and dismissal of qui tam actions filed in Illinois, Tennessee, North Carolina and Texas, as well as the previously unsealed case in Indiana. Two of these cases also name Health Management Associates (HMA) as defendants and were partially unsealed in December 2013 when the government intervened in those and six other cases pending against HMA. The portion of the settlement that will be paid to the relators, as well as which of the relators will share in the award, has not yet been disclosed by the government. Claims by the relators for attorneys' fees remain to be resolved.

The settlement agreement does not cover current government investigations into certain hospitals formerly affiliated with HMA, which were initiated before Community Health Systems' acquisition of HMA in January 2014. The Company continues to cooperate with the government and is working to bring resolution to these investigations.

The settlement also resolves the government's investigation into a CHS-affiliated hospital in Laredo, Texas. The government's review in Laredo centered on whether the hospital submitted claims for inpatient procedures that should have been billed as outpatient procedures as well as the financial relationship between the hospital and a member of its medical staff. The hospital has agreed to pay $9 million to resolve this investigation. The CIA includes Laredo-specific reviews of physician financial relationships.

The Company previously established a $102 million reserve to cover these settlements and related legal costs.

Commenting on the agreement, Chairman and Chief Executive Officer Wayne T. Smith said, “Our organization is dedicated to high ethical standards as we strive to operate in a complex and ever changing regulatory environment. The question of when a patient should be admitted to a hospital is, and always has been, a matter of medical judgment by the individual physician responsible for a patient's care. Unfortunately, shifting and often ambiguous standards make it extremely difficult for physicians and hospitals to consistently comply with the regulations. We are committed to doing our best, despite these challenges. Because this is an industry-wide issue, we hope the government will work to devise sound and reasonable rules for the important decision about whether to admit an individual for inpatient care, and we appreciate the opportunity to engage in meaningful dialogue with the government over these incredibly complicated issues.”

In closing, Smith added, “I am deeply grateful for the loyalty and patience of our hospital teams as we have worked to resolve this matter. During the course of the investigation, thousands of physicians, employees and hospital administrators demonstrated an unwavering commitment to their primary purpose – delivering quality, safe and effective care for their patients. As we move forward now, I am certain this experience will make us a stronger and even more committed organization.”

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