MCS sues CHS for breach of contract

Managed Care Solutions (MCS) had signed an exclusive three-year deal in 2003 to manage and collect payments for all Franklin, Tenn.-based Community Health Systems (CHS) hospitals, which then numbered 111, for a 22 percent cut of collections. However, now CHS, which operates 122 hospitals with approximately 18,000 licensed beds in 29 states, is being sued by Managed Care Solutions (MCS) Inc. for breach of contract. The Hollywood, Fla.-based collections agency claims it was fired by the hospital chain on the pretext of the alleged arrest of a third-party employee.

It also charges that CHS didn’t provide adequate paperwork for 109 of the hospitals and claims that it has already more than $1.2 million in collections software to provide services to CHS.

In its lawsuit, MCS alleges that CHS was already trying to find a way out of the deal when it learned that an MCS employee had been arrested for identity theft for stealing patients’ confidential information at a New Jersey hospital. CHS then canceled the contract, citing a material breach.

In its defense, MCS argues that the employee actually worked for a third-party staffing firm and that it has no proof the employee either stole patient information or was arrested. MCS also says that the employee shouldn’t have had access to such information, holding CHS accountable and suggesting potential HIPAA violations.