Community Health System sued in Fresno over alleged misuse of Medi-Cal money

Two nonprofit groups have sued Fresno’s primary hospital system alleging it diverted state and federal public funding earmarked for its downtown hospital to fund a new hospital project in the wealthier nearby city of Clovis.

On Wednesday, nonprofit organizations Cultiva La Salud and Fresno Building Healthy Communities filed a lawsuit in Fresno County Superior Court against Community Health System, its affiliated organizations and board of trustees claiming the healthcare system violated Medi-Cal rules, as well as state civil rights laws.

Community Health System — formerly Community Medical Centers — is a private nonprofit that operates downtown Fresno’s CRMC, Clovis Community Medical Center and several other healthcare sites. Based in Fresno, CHS is the Central Valley’s largest health system.

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The lawsuit also says the healthcare group neglected to make critical repairs in its downtown safety net hospital, Community Regional Medical Center, which could put the hospital’s future in jeopardy.

The organizations filed this lawsuit “to protect the interests of everyday Fresnans and to make sure that public dollars are used for public goods and that folks in Fresno have easy access to health care services in the neighborhoods and in the communities where they live,” said Sandra Celedon, president of Fresno BHC, in an interview on Wednesday. “And right now, that’s not the case.”

Among its requests, the lawsuit asks the judge to order CHS to cease its unlawful practices and order CHS to use Medi-Cal funds as they are intended. They’re also asking the judge to order CHS to track and annually report to the California Department of Health Care Access information how and where the system is spending its Medi-Cal and related public funding.

According to the lawsuit, “at least 70% of Respondents’ revenue comes from public sources, including Medi-Cal, Medicare, and DSH grants.”

In August 2022, The Fresno Bee published a four-part investigation, “Care and Conflict,” which found that, for years, Community Medical Centers took state and federal money intended to offset the cost of providing care for indigent patients, primarily in downtown Fresno, and used it to help fund a $1 billion hospital expansion in affluent Clovis, which primarily serves Fresno’s wealthy mostly-white suburbs.

The lawsuit echoes The Bee’s reporting and alleges CHS operates in a way to “further developer interests.”

“Continuing a trend begun in 2009, of the fourteen current members of CHS’s Board of Trustees, six are or were land developers or bankers with close ties to prominent developer Granville Homes, and/or with projects or holdings in the vicinity of Clovis CMC,” it said.

Critics, including current and former Fresno city council members, said the hospital should have focused on investing that funding into the downtown campus’ aging buildings, some of which are out of compliance with state seismic requirements that now threaten the hospital’s license if they don’t complete major retrofitting by 2030.

Celedon called the system’s decision not to invest into seismic upgrades, despite knowing of such requirements since the mid-1990s, ”one of the egregious examples of how Community Health System is failing the community of Fresno County.”

Facilities that are out of seismic compliance would be forced to stop providing services, which could mean the loss of 700 hospital beds at downtown CRMC, home to the only Level 1 Trauma Center between Los Angeles and Sacramento, Celedon said.

Complaint for Declaratory & Injunctive Relief--Cultiva La Salud & Fresno BHC v. Community Health System by Melissa Montalvo on Scribd

In an email statement to The Bee, Michelle Von Tersch, senior vice president of communications and legislative affairs for Community Health System said: “We just learned of this complaint this morning, so it’s difficult to comment, as it would be for any pending litigation.

“Community Health System is deeply committed to serving Central Valley patients, particularly those insured by Medi-Cal, so it’s safe to say we are extremely disappointed in this baseless lawsuit. Addressing inaccurate claims only serves to take time and resources away from our non-profit healthcare mission.”

What does the lawsuit say?

The lawsuit alleges the hospital system is not complying with various state laws related to how Medi-Cal funding should be spent.

The lawsuit alleges CHS used the public dollars they’re generating at the downtown safety net hospital such as Medi-Cal to build out the facility in Clovis instead of using these funds to ensure the downtown’s CRMC was earthquake-ready.

“Rather than invest in Fresno CRMC ... respondents targeted their limited resources to an extravagant building program on its suburban Clovis campus and, more recently, on Community Health Partners, a new provider network whose sites are located far from downtown Fresno’s healthcare desert,” the lawsuit states.

The suit also alleges the hospital system’s disinvestment in Fresno CRMC and investments into Clovis as well as Madera County have exacerbated a growing gap in healthcare access and quality for Black and Latino patients within the Community Health System, potentially violating state civil rights.

“The decisions that have been made at Community Health Systems at the board-level have not centered the patients that they’re supposed to serve and are only serving the interest of a smaller population,” Celedon said.

These decisions, she said, “go against the very nature of nonprofit hospitals and what they’re intended to do.”

While her efforts are focused on the lawsuit, Celedon said the state and legislature could do more to improve nonprofit hospital transparency and accountability.