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Commitments And Contingencies
6 Months Ended
Jun. 30, 2013
Commitments And Contingencies [Abstract]  
Commitments And Contingencies

12.Commitments and Contingencies

Physician and Physician Group Guarantees.  We are committed to providing financial assistance to physicians and physician groups practicing in the communities that our hospitals serve through certain recruiting arrangements and professional services agreements.  At June 30, 2013, we were committed to guarantees of approximately $198.4 million under such arrangements.  The actual amounts advanced will depend on the financial results of each physician’s and physician group’s private practice during the related contractual measurement period, which generally approximates one to two years.  We believe that the recorded liabilities for physician and physician group guarantees of $73.4 million and $89.7 million at June 30, 2013 and December 31, 2012, respectively, are adequate and reasonable; however, there can be no assurances that the ultimate liability will not exceed our estimates. 

Medicare/Medicaid Billing Lawsuit.  On January 11, 2010, Health Management Associates, Inc. (referred to as “Health Management” for the remainder of this Note 12) and one of its subsidiaries were named in a qui tam lawsuit entitled United States of America ex rel. J. Michael Mastej v. Health Management Associates, Inc. et al. in the U.S. District Court for the Middle District of Florida, Tampa Division.  The plaintiff’s complaint alleged that, among other things, the defendants erroneously submitted claims to Medicare and that those claims were falsely certified to be in compliance with Section 1877 of the Social Security Act of 1935 (commonly known as the “Stark law”) and the Anti-Kickback Statute.  The plaintiff’s complaint further alleged that the defendants’ conduct violated the federal False Claims Act of 1863 (the “False Claims Act”).  The plaintiff seeks recovery of all Medicare and Medicaid reimbursement that the defendants received as a result of the alleged false certifications and treble damages under the False Claims Act, as well as a civil penalty for each Medicare and Medicaid claim supported by such alleged false certifications.  On August 18, 2010, the plaintiff filed a first amended complaint that was similar to the original complaint.  On February 23, 2011, the case was transferred to the U.S. District Court for the Middle District of Florida, Fort Myers Division (Case No. 2:11-cv-00089-JES-DNF). On May 5, 2011, the plaintiff filed a second amended complaint, which was similar to the first amended complaint.  On May 17, 2011, the defendants moved to dismiss the second amended complaint for failure to state a claim with the particularity required and failure to state a claim upon which relief can be granted.    On January 26, 2012, the United States gave notice of its decision not to intervene in this lawsuit.  On February 16, 2012, the court granted the defendants’ motion to dismiss, without prejudice.  The court’s order permitted the plaintiff to file an amended complaint.  On March 8, 2012, the plaintiff filed a third amended complaint, which was similar to the first amended complaint and the second amended complaint.  On March 26, 2012, the defendants moved to dismiss the third amended complaint on the same bases set forth in earlier motions to dismiss.  On March 19, 2013, the U.S. District Court for the Middle District of Florida, Tampa Division, dismissed the third amended complaint with prejudice.  On March 28, 2013, the United States of America filed a motion to clarify that the dismissal with prejudice did not relate to the United States. On April 4, 2013, the defendants filed an opposition to the United States’ motion for clarification. The Government’s motion remains pending at this time. On April 16, 2013, the plaintiff filed a motion for relief from judgment and for leave to amend the complaint, and a proposed fourth amended complaint.  On April 18, 2013, the plaintiff filed a notice of appeal.    On May 2, 2013, the defendants filed an opposition to the plaintiff’s motion for relief from judgment and for leave to amend the complaint for the fourth time.  On July 10, 2013, the court denied plaintiff’s motion for relief from judgment and for leave to amend the complaint for the fourth time. We intend to vigorously defend Health Management and its subsidiary against the allegations in this matter.  We do not believe that the final outcome of this matter will be material.

Governmental Matters.  Several Health Management hospitals received letters during 2009 requesting information in connection with a U.S. Department of Justice (“DOJ”) investigation relating to kyphoplasty procedures.  Kyphoplasty is a minimally invasive spinal procedure used to treat vertebral compression fractures. The DOJ is currently investigating hospitals and hospital operators in multiple states to determine whether certain Medicare claims for kyphoplasty were incorrect when billed as an inpatient service rather than as an outpatient service.  We believe that the DOJ’s investigation originated with a False Claims Act lawsuit against Kyphon, Inc., the company that developed the kyphoplasty procedure.  The requested information has been provided to the DOJ and we are cooperating with the investigation.  To date, the DOJ has not asserted any monetary or other claims against the Health Management hospitals in this matter.  Based on the aggregate billings for inpatient kyphoplasty procedures during the period under review that were performed at the Health Management hospitals subject to the DOJ’s inquiry, we do not believe that the final outcome of this matter will be material.

During September 2010, Health Management received a letter from the DOJ indicating that an investigation was being conducted to determine whether certain Health Management hospitals improperly submitted claims for the implantation of implantable cardioverter defibrillators (“ICDs”).  The DOJ’s investigation covers the period commencing with Medicare’s expansion of coverage for ICDs in 2003 to the present.  The letter from the DOJ further indicates that the claims submitted by Health Management’s hospitals for ICDs and related services need to be reviewed to determine if Medicare coverage and payment was appropriate.  During 2010, the DOJ sent similar letters and other requests to a large number of unrelated hospitals and hospital operators across the country as part of a nation-wide review of ICD billing under the Medicare program.  We are cooperating with the DOJ in its ongoing investigation, which could potentially give rise to claims against Health Management and/or certain of its subsidiary hospitals under the False Claims Act or other statutes, regulations or laws.  Additionally, we are conducting an internal review of hospital medical records related to ICDs that are the subject of the DOJ investigation.  To date, the DOJ has not asserted any monetary or other claims against Health Management or its hospitals in this matter and, at this time, we are unable to determine the potential impact, if any, that will result from the final resolution of the investigation.

The U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”) and the DOJ, including the Civil Division and U.S. Attorney’s Offices in the Eastern District of Pennsylvania, the Middle District of Florida, the Eastern District of Oklahoma, the Middle District of Tennessee, the Western District of North Carolina, the District of South Carolina and the Middle District of Georgia, are currently investigating Health Management and certain of its subsidiaries (HHS-OIG and the DOJ are collectively referred to as “Government Representatives”).  We believe that such investigations relate to the Anti-Kickback Statute, the Stark law and the False Claims Act and are focused on: (i) physician referrals, including financial arrangements with our whole-hospital physician joint ventures; (ii) the medical necessity of emergency room tests and patient admissions, including whether the Pro-Med software that we used led to any medically unnecessary tests or admissions; and (iii) the medical necessity of certain surgical procedures.  We further believe that the investigations may have originated as a result of qui tam lawsuits filed on behalf of the United States.  In connection with the investigations, HHS-OIG has requested certain records through subpoenas, which apply system-wide, that were served on Health Management on May 16, 2011 and July 21, 2011.  On June 10, June 26, and July 11, 2013, Health Management received additional subpoenas, which supplements the July 21, 2011 subpoena, from the HHS-OIG regional office in Atlanta, Georgia.  On June 12, 2013, Health Management received an additional subpoena, which supplements the May 16, 2011 subpoena, from the HHS-OIG regional office in Miami Lakes, Florida. Additionally, Government Representatives have interviewed certain of our current and former employees.  We are conducting internal investigations and have met with Government Representatives on numerous occasions to respond to their inquiries.  We intend to cooperate with the Government Representatives during their investigations.  At this time, we are unable to determine the potential impact, if any, that will result from the final resolution of these investigations.

On February 22, 2012 and February 24, 2012, HHS-OIG served subpoenas on certain Health Management hospitals relating to those hospitals’ relationships with Allegiance Health Management, Inc. (“Allegiance”).  Allegiance, which is unrelated to Health Management, is a post acute health care management company that provides intensive outpatient psychiatric (“IOP”) services to patients.  The Health Management hospitals that were served subpoenas were: (i) Central Mississippi Medical Center in Jackson, Mississippi; (ii) Crossgates River Oaks Hospital in Brandon, Mississippi; (iii) Davis Regional Medical Center in Statesville, North Carolina; (iv) Lake Norman Regional Medical Center in Mooresville, North Carolina; (v) the Medical Center of Southeastern Oklahoma in Durant, Oklahoma; and (vi) Natchez Community Hospital in Natchez, Mississippi.  Each of those hospitals has or had a contract with Allegiance.  Among other things, the subpoenas seek: (i) documents related to the hospitals’ financial relationships with Allegiance; (ii) documents related to patients who received IOP services from Allegiance at the Health Management hospitals, including their patient medical records; (iii) documents relating to complaints or concerns regarding Allegiance’s IOP services at the Health Management hospitals; (iv) documents relating to employees, physicians and therapists who were involved with the IOP services provided by Allegiance at the Health Management hospitals; and (v) other documents related to Allegiance, including leases, contracts, policies and procedures, training documents, budgets and financial analyses.  The period of time covered by the subpoenas is January 1, 2008 through the date of subpoena compliance.  We believe that HHS-OIG has served similar subpoenas on other non-Health Management hospitals that had contracts with Allegiance.  We intend to cooperate with the investigations.  At this time, we are unable to determine the potential impact that will result from the final resolution of these investigations.

On April 25, 2013, Health Management 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, Health Management received a supplemental subpoena from the SEC which requests additional financial reports.  We are cooperating with the SEC’s investigation.  We are unable to determine the potential course or impact, if any, of this investigation.

In addition to the abovementioned subpoenas and investigations, certain of our hospitals have received other requests for information from state and federal agencies.  We are cooperating with all of the ongoing investigations by collecting and producing the requested materials.  Because a large portion of our government investigations are in their early stages, we are unable to evaluate the outcome of such matters or determine the potential impact, if any, that could result from their final resolution.

Class Action and Derivative Action Lawsuits.  On April 30, 2012, two class action lawsuits that were brought against Health Management and certain of its executive officers, one of whom was at that time a director, were consolidated in the U.S. District Court for the Middle District of Florida under the caption In Re: Health Management Associates, Inc. et al. (Case No. 2:12-cv-00046-JES-DNF) and three pension fund plaintiffs were appointed as lead plaintiffs.  On July 30, 2012, the plaintiffs filed an amended consolidated complaint purportedly on behalf of stockholders who purchased our common stock during the period from July 27, 2009 through January 9, 2012.  The amended consolidated complaint (i) alleges that Health Management 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.  Among other things, the plaintiffs claim that Health Management 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 11, 2013, the defendants were served with the second amended consolidated complaint, which asserts the same claims as the amended consolidated complaint.  On May 3, 2013, the defendants moved to dismiss the second amended complaint for failure to state a claim and plead facts required by the Private Securities Litigation Reform Act.  We intend to vigorously defend against the allegations in this lawsuit.  Because this lawsuit is in its early stages, we are unable to predict the outcome or determine the potential impact, if any, that could result from its final resolution.On January 22, 2013, a putative shareholder derivative action entitled The City of Haverhill Retirement System v. Dauten et al. (Case No. 8:13-cv-00213) was filed in the U.S. District Court for the Middle District of Florida, Tampa Division, purportedly on behalf of Health Management against its directors.  Health Management was also named as a nominal defendant.  The complaint alleges that, among other things, the defendants breached their fiduciary duties to Health Management and its stockholders by supposedly causing Health Management to undertake a scheme to defraud Medicare by improperly admitting certain emergency room patients as “inpatients” in violation of the False Claims Act and then issuing false and misleading public statements about Health Management’s financial outlook and compliance with laws and regulations.  The complaint also alleges that the defendants breached their fiduciary duties by exposing Health Management to potentially significant civil and criminal penalties as a result of the aforementioned investigations by HHS-OIG and the DOJ as well as the stockholder class action and other ongoing litigation.  The complaint seeks monetary damages from the defendants, other than Health Management. On February 8, 2013, the case was transferred to the U.S. District Court for the Middle District of Florida, Fort Myers Division (Case No. 2:13-cv-00092). On April 10, 2013 the plaintiffs filed an amended complaint which asserts the same claims as its prior complaint, but also names two of the Company’s executives as defendants.  On May 15, 2013, the defendants moved to dismiss the amended complaint for threshold lack of derivative standing, for failure to make a demand on the Board, and for failure to state a claim. We intend to vigorously defend against the allegations in this lawsuit.  Because this lawsuit is in its early stages, we are unable to predict the outcome or determine the potential impact, if any, that could result from its final resolution. 

On July 23, 2013, an action entitled Town of Davie Police Officers’ Pension Plan v. Dauten et al. (C.A. No. 8742) was filed in the Court of Chancery of the State of Delaware.  This action purportedly was brought as a class action on behalf of all of Health Management’s stockholders, as well as derivatively on behalf of Health Management against Health Management’s directors and Wells Fargo Bank, National Association, Wells Fargo Securities, LLC, and Deutsche Bank Securities, Inc.   The complaint alleges, among other things, that our directors breached their fiduciary duties (i) by approving a credit agreement in 2011 that contains a change of control covenant which plaintiff contends will coerce shareholders into supporting the re-election of Health Management’s incumbent board of directors and (ii) by not approving Glenview Capital Management, LLC (“Glenview’s”) nominees for election to Health Management’s Board of Directors for purposes of seeking a waiver of the change of control covenant. The complaint further alleges that the Wells Fargo and Deutsche Bank defendants aided and abetted such breaches.  The complaint seeks declaratory and injunctive relief, including (i) a declaration that our directors breached their fiduciary duties by entering into the credit agreement and  (ii) an order permanently enjoining the board of directors from invoking or enforcing the change of control covenant in the credit agreement. Plaintiff also seeks unspecified damages from the directors and an award of attorneys’ fees and costs. We intend to defend this action.

On August 1, 2013, Health Management and the members of its Board of Directors, as well as CHS and FWCT-2 Acquisition Corporation, were named as defendants in a putative class action filed in the Circuit Court of the Twentieth Judicial Circuit in and for Collier County, Florida, by a  Health Management stockholder in connection with CHS's proposed acquisition of Health Management, which was announced on July 30, 2013 (Aliaga v. Health Mgmt. Assocs., Inc. et al., Civ. No. 13-2288-CA).   The complaint in this action alleges that Health Management's directors breached their fiduciary duties to Health Management's stockholders by, among other things, allowing Health Management to enter into a merger agreement containing: (i) what plaintiffs characterize as a no-solicitation clause that prevents Health Management from actively soliciting competing takeover bids; (ii) what plaintiffs characterize as a matching rights provision that allows CHS to review and match any unsolicited competing bids for Health Management; and (iii) a $109 million termination fee payable by Health Management to CHS in the event CHS's proposed acquisition of Health Management is canceled in favor of a superior bid.  The complaint also alleges that Health Management and CHS aided and abetted such purported breaches of fiduciary duty.  The action seeks, among other things, equitable relief enjoining the proposed transaction and an award of attorney's fees

On August 5, 2013, another putative class action was filed in the Delaware Court of Chancery by two Health Management stockholders (Margolis et al. v. Schoen et al., C.A. No. 8774-CS).  This action asserts substantially the same claims as the Florida action. We intend to defend both of these actions. 

 

Other.  We are also a party to various other legal actions arising out of the normal course of our business.  Due to the inherent uncertainties of litigation and dispute resolution, we are unable to estimate the ultimate losses, if any, relating to each of our outstanding legal actions and other loss contingencies.  Should an unfavorable outcome occur in some or all of our legal and other related matters, there could be a material adverse effect on our financial position, results of operations and liquidity.