Shareholders of Franklin-based Community Health Systems may get the jury trial they’ve been seeking. They accuse the for-profit hospital chain — which is one of the region’s largest employers — of downplaying its precarious finances and even hiding its troubles through accounting tricks.
These shareholder lawsuits are pretty common when public companies see their stock price collapse, like CHS did. The company was in a massive growth mode, buying hospitals and even acquiring another large-but-troubled hospital chain, HMA, and taking on billions of dollars in debt to do it.
The stock price soared above $50 per share. But when investors started sensing trouble, shares tanked and eventually bottomed out below $2 in 2019. The company was saddled with debt and shareholders say executives painted a rosier picture than they knew was the reality. Shareholders lodge several complaints in the lawsuit, including that the company was counting revenue from uninsured patients in its quarterly earnings reports that executives knew was unlikely to ever materialize.
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Lawyers for CHS had been trying to get the case dismissed before the discovery stage of the case, when the company has to turn over documents about its business. But now a federal judge in Nashville has ruled there’s enough evidence to move toward a jury trial and even combined the class-action case with another similar shareholder suit against CHS executives this week, according to court documents.
“It’s a thorough analysis of the facts and circumstances,” says Darren Robbins, a San Diego attorney who led another shareholder suit against CHS. “These guys have had a lot of trouble with both investors who’ve alleged to have been defrauded and the government over the last decade.”
Robbins’s suit, based on accusations that CHS inflated its stock price by inappropriately steering patients to medically unnecessary inpatient admissions, resulted in a $60 million settlement in 2017. Another shareholder lawsuit was settled by the company in 2021 for $53 million.
A CHS spokesperson tells WPLN News the company does not plan to comment on the pending litigation.
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