A Medical Device Daily

A three-judge panel of the 11th U.S. Circuit Court of Appeals in Atlanta last week upheld most of the bribery and corruption charges against former Alabama Gov. Don Siegelman and all the charges against former HealthSouth (Birmingham, Alabama) CEO Richard Scrushy.

The panel did strike down two of the seven charges Siegelman was convicted of and ordered a new sentencing hearing. That means the ex-governor's seven-year sentence could be reduced.

But an Associated Press report noted that he won't get off entirely: The court upheld key bribery, conspiracy and obstruction counts against him in what prosecutors described as a scheme that put Scrushy on a state hospital regulatory board when he was at the helm of HealthSouth.

The court upheld all six counts against Scrushy and his sentence of almost seven years.

Siegelman, 63, and Scrushy, 56, were convicted in 2006 by a federal court jury in Montgomery, where Siegelman was a prominent Democrat with a political career dating back three decades.

Siegelman has claimed his prosecution was pushed by Republicans, including former White House adviser Karl Rove, a claim federal prosecutors who handled the case have emphatically denied.

The AP report noted that in making their case, prosecutors argued that Siegelman appointed Scrushy to the influential board in exchange for Scrushy arranging $500,000 in contributions to the governor's campaign for a state lottery in 1999.

The former governor, who was sent to federal prison at his sentencing in June 2007, was freed last year on appeal bond. But the courts ruled that Scrushy, who turned HealthSouth into one of the nation's biggest rehabilitation chains, was a flight risk. Scrushy is serving his sentence in the federal penitentiary in Beaumont, Texas.

Siegelman's attorneys said he would ask the full 11th Circuit to review the case and will appeal to the U.S. Supreme Court if necessary.

In other legalities, the Justice Department reported that it has intervened in a whistleblower suit filed in New Mexico against Community Health Systems (Brentwood, Tennessee) and three of its hospitals in the state: Eastern New Mexico Medical Center (Roswell), Mimbres Memorial Hospital (Deming), and Alta Vista Regional Hospital (Las Vegas). The suit alleges that CHS and its three hospitals violated the False Claims Act (FCA) by knowingly causing to be presented to the US false claims for federal matching Medicaid funds.

Title XIX of the Social Security Act (the Medicaid Act) authorizes federal matching funds to the states for Medicaid programs to provide medical assistance to persons with limited income and resources. In order to ensure that state or local funds are the basis for the federal matching money, the Medicaid Act prohibits federal funding in instances where the state or county has received donations from healthcare providers that are related to the amount of Medicaid reimbursement paid to the provider.

The suit was filed under the qui tam, or whistleblower, provisions of the FCA by Robert Baker, a former revenue manager in CHS' corporate office.

Under those FCA provisions, a private party, known as a relator, can file an action on behalf of the U.S. and receive a portion of the recovery. Under the FCA, the U.S. may recover three times the amount of its losses plus civil penalties.

The relator's complaint alleges that beginning in the summer of 2000, CHS and its three New Mexico hospitals improperly obtained federal funds through the New Mexico Sole Community Provider Fund (SCPF) and Sole Community Hospital Supplemental Payments (SCHSP) Medicaid programs.

In particular, the relator alleges that CHS and its hospitals made donations to New Mexico counties which they knew would be used by the counties and the state to claim and obtain triple that amount in federal funding that was then paid to the hospitals under the SCPF and SCHSP programs.

The relator alleges that CHS' donation arrangement violated the Medicaid Act's prohibition of provider donations that are related to the amount of Medicaid reimbursement paid to the provider.

While the qui tam action contains additional allegations, the U.S. is intervening only in allegations that CHS and its three New Mexico hospitals caused the submission of false claims to the U.S. government.

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