CHS wrongly wiggled out of contract, Managed Care Solutions says in lawsuit

A Florida-based collections agency is suing Community Health Systems Inc. for breach of contract, claiming the hospital giant used the alleged arrest of a third-party employee as an excuse to fire the company.

Managed Care Solutions Inc. of Hollywood, Fla., says that in 2003 it signed a three-year, exclusive agreement with Brentwood-based CHS to manage and collect payments for all of CHS’ hospitals — 111 at that time.

Managed Care Solutions collects money from patients whose accounts have an outstanding balance, usually when an insurance company refuses to reimburse a hospital for part or all of a bill. The company takes a cut of the amount it collects, 22 percent in CHS’ case.

But in a lawsuit filed Thursday in U.S. District Court in Florida, Managed Care Solutions claims CHS never provided the company with the necessary paperwork for 109 of the 111 hospitals. In the meantime, Managed Care Solutions says it spent more than $1.2 million implementing collections software in order to serve CHS’s account.

Managed Care Solutions says in the suit that CHS was “attempting to find whatever way possible” to terminate its agreement with the company. As proof, Managed Care Solutions points to a 2004 email sent by the chief financial officer at CHS’ Pennsylvania hospital to corporate headquarters stating that “we should find a way to terminate this contract and cease business relationships with MCS.”

CHS did just that in February 2005 after learning that a Managed Care Solutions employee named Nichole Scott had been arrested for identity theft. In a letter to Managed Care Solutions included in court filings, CHS Senior Group Counsel Jennifer Peters said police said Nichole Scott used patients’ confidential information at a New Jersey hospital to obtain credit cards and make purchases.

“The actions of Nichole Scott constitute MCS’ material breach of the above-referenced agreement, which cannot be cured. The hospital and its patients have been irreparably harmed,” Peters wrote.

Managed Care Solutions counters that Scott was never employed its company and actually worked for a third-party staffing firm called Kforce Inc., which Managed Care Solutions contracted to perform claim services on CHS’ behalf.

Furthermore, Managed Care Solutions says it has no proof that Scott was ever arrested, much less that she stole patients’ information. The company also says that there was no reason that Scott should have had access to that type of information, unless CHS provided it.

Managed Care Solutions says it’s unsure whether such access was “out of the scope of her role or rather if this was the result of a constructive effort by CHS or of CHS personnel gross negligence under HIPPA guidelines and regulations.”

Tomi Galin, vice president of corporate communications for CHS, said the company had not received a copy of the lawsuit and could not comment. A call to Managed Care Solutions’ attorney has not yet been returned.

Managed Care Solutions is asking the court to order CHS to hand over information related to each and every account that should have been directed to the company under its three-year contract, as well as award attorneys’ fees and any other relief the court deems appropriate.

CHS ranks No. 1 on Nashville Business Journal’s list of largest public companies in Middle Tennessee with revenue of $10.8 billion in 2008.

via feeds.bizjournals.com

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