Lawsuit against hospital, board dismissed; Medicaid reimbursements cleared

By Rich Flowers News Editor

East Texas Medical Center Athens and the Henderson County Hospital Authority have been reinstated in the Texas Medicaid Rural Upper Payment Limit Program, Dean Davis, the attorney representing ETMC, said earlier this week.

Word of the reinstatement follows a vote by the Hospital Authority Board last Thursday to resume participation in the program that has provided $25 million to the Athens facility since 2002. ETMC will not only receive future funds, but will also recoup all of the money it would have received during the six-months the payments were suspended.

“The six-month interruption in those funds was extremely costly to ETMC,” Davis said. “Henderson County oftentimes was the number one county in the state in receiving funds for indigent care because of the number of people that qualify.”

ETMC was suspended from the program in May after Linea Rose of Athens filed suit against ETMC Athens and the ETMC system. The lawsuit alleged ETMC had violated the False Claims Act by submitting claims to the federal government for over $15 million of federal matching funds. Officials with the Texas Human Services Commission suspended both entities until the questions raised in the suit could be resolved.

“The state wrote a letter suspending the authority from the program because of what Rose alleged. We responded to that and completely answered everything that had been raised in the letter,” Davis said.

In August, U.S. District Judge T. John Ward of the East Texas District Court in Marshall granted the motion for summary judgment, dismissing a lawsuit against the ETMC system.

“After Judge Ward granted summary judgment, we began to try to get the authority and hospital back to where those funds could again be utilized in Henderson County,” Davis said.

Written notification that the reimbursements would resume came Friday, Davis said. The first payment is expected this week.

According to court records, Rose’s suit filed against the defendants argued that ETMC Athens and the Authority Board “devised and implemented a scheme to fraudulently receive additional Medicaid matching funds from the United States by illegally abusing the intergovernmental transfers procedure for the Medicaid Upper Payment Limits Program.”

The program allows states to reimburse public rural hospitals for specific uncompensated care provided under Medicaid.

The funds going to HCHA and then the state, attorneys for Rose said, were taken from the hospital’s general revenue account, which is illegal.

ETMC officials have said the transactions are legal because they are operating a public hospital. Rose attorneys argued the ETMC system was actually a private corporation. The defendants argued that its lease agreement with the Henderson County makes its fall under the county-owned facility operated by a private company.

Before reinstatement to the program, Health and Human Services Commission required ETMC to answer several questions concerning the transactions. The board was required to document the date and amount of each internal transfer from HCHA to the state in support of the Rural Upper Payment Limit Program, from January 2002 through the present.

In addition the board was asked to state whether all funds included in the transfer were hospital authority funds and identify the source of the funds.

Judge Ward did not state in his opinion whether ETMC is a public hospital or whether the funds are prohibited. Ward did state that a “private hospital is defined as ‘owned and operated’ privately, and a public hospital is ‘owned or operated’ by the government.

In addition, Ward ruled that the defendants did not knowingly make a false claim to the government.