What’s at stake?
Tuesday’s motion is the latest development on a three-month-old lawsuit alleging Community Health System, the operator of downtown Fresno’s hospital and Clovis CMC, misused $1 billion in public dollars.
A major hospital operator in Fresno is trying to get a lawsuit thrown out that accuses it of misspending over a billion in public dollars.
Community Health System, operator of Community Regional Medical Center and Clovis Community Medical Center, filed a motion Tuesday to dismiss “with prejudice” a complaint brought forward in August by local nonprofits Cultiva La Salud and Fresno Building Healthy Communities.
The move marks the latest development on the lawsuit filed over three months ago, which alleges Community Health System illegally funneled $1 billion in public dollars meant to offset the cost of care for low-income patients at the downtown Fresno hospital instead toward lavish upgrades to the suburban medical campus in Clovis.
The public dollars in question came from two government programs that reimburse hospitals serving a large share of Medi-Cal patients: the Hospital Quality Assurance Fee Program and the Disproportionate Share Hospital Program.
In the motion for dismissal filed Tuesday, attorneys for Community Health System called the claims in the lawsuit “deficient” and disputed that the hospital system broke the law.
Regarding both of the two Medi-Cal reimbursement programs, attorneys said “there are no authorities that restrict, condition, or direct” how those funds are used after a hospital receives them.
“That Petitioners would prefer Respondents to spend more resources at one hospital instead of another,” attorneys for Community Health System said, “cannot form the basis of a taxpayer claim.”
Attorneys also argued that the petitioners who brought the lawsuit forward aren’t members of a “Protected Class” under California law and inappropriately cited laws related to discrimination in their complaint.
The nonprofits’ lawsuit alleges that Community Health System’s spending served primarily white patients at the Clovis hospital at the expense of the downtown hospital’s predominantly Black and Latino patients.
In a statement to Fresnoland on Thursday, Michelle Von Tersch, Community Health System’s Senior VP of Communications & Legislative Affairs, stressed that the hospital system “strongly denies” it did anything illegal or discriminatory.
“Given our overlapping missions, it is unfortunate that rather than working together to help those most in need, Cultiva La Salud and Fresno Building Healthy Communities have chosen to file this lawsuit,” she added, “which serves only to divert precious time, attention and resources away from the people that we both seek to serve.”
Patience Milrod, an attorney representing Cultiva and Building Healthy Communities, said in a statement to Fresnoland that she and her clients are eager to have their day in court.
“We’re looking forward to moving past the expensive preliminaries in this case,” she said, “and getting to the substance of our claims in court.
“We invite the Hospital corporation to stop fighting with us,” she added, “and instead join with us in working to restore fully equitable access and quality of care to those who rely on our downtown hospital.”
CRMC attorneys say lawsuit could set bad precedent
In Tuesday’s motion, attorneys for Community Health System also laid out concerns that the case could create a precedent “allowing any individual or entity” to sue hospitals whenever they take issue with its spending priorities.
“While Petitioners may disagree with certain [parts] of Respondents’ decisions,” attorneys said in court documents, “such disagreement alone does not mean that Petitioners have a viable legal claim (or that Petitioners may mire Respondents in litigation in an attempt to coerce Respondents to do whatever Petitioners want Respondents to do).
“Indeed, to hold otherwise would allow a private entity (in this case, two nonprofit corporations), completely disassociated from a healthcare organization’s finances, to challenge—and, in effect, potentially dictate—how such organization should spend its limited resources.”
Hospital spending has been a subject of scrutiny in the Fresno area in recent years, not just at Community Health System’s campuses.
Madera Community Hospital’s abrupt closure in December 2022 brought several aspects of its operations under a microscope, including low reimbursement rates from both Medi-Cal and private insurance companies.
Valley Children’s Hospital has also been criticized for how it has invested its profits in recent years that have amounted to over $1 billion.
In March, two members of the Fresno City Council called for a state investigation into executive compensation at the nonprofit children’s hospital after learning its Chief Executive Officer Todd Suntrapak earned roughly $5.1 million in total compensation in 2021.
In May, a Fresnoland investigation of Valley Children’s tax filings found that despite raking in at least $1.1 billion in profits between 2013 and 2022, the hospital spent an average of just $185,899 on charity care per year – to the surprise of some experts.
What’s next for the Community Health System lawsuit?
Attorneys for Cultiva La Salud and Fresno Building Healthy Communities have 14 days from when the dismissal motion was filed to respond.
A hearing on the matter before U.S. District Judge Jennifer L. Thurston will be scheduled no sooner than Dec. 17, according to court documents.
Meanwhile, attorneys are still waiting for a final answer on which court – state or federal – will hear this case.
Community Health System’s attorneys successfully petitioned in September to move the case from Fresno County Superior Court to the U.S. District Court for the Eastern District of California.
The attorneys for Cultiva and Building Healthy Communities subsequently filed a motion to remand the case back to state court.
A hearing on the motion to remand is scheduled to take place Nov. 21 at 10 a.m. before Magistrate Judge Erica P. Grosjean, to whom the hearing was referred due to an “ongoing judicial resource emergency in this District” creating a backlog for the district judge, court documents say.
