Quorum Health does not have to pay $9 million to its former parent company, Community Health Systems, for certain services while it transitioned to an independent company, arbitrators ruled.
But the American Arbitration Association panel ruled that Quorum is still on the hook for $1.5 million in disputed CHS payments and denied Quorum’s claims for damages it said it suffered from certain agreements it made with CHS. Quorum split from CHS in 2016.
Arbitrators also ruled that Franklin, Tenn.-based CHS must repay $2.1 million in disputed payments to Quorum.
The payments in question stem from two agreements the companies entered when CHS, the nation’s second-largest investor-owned hospital chain by revenue, spun off 38 hospitals in April 2016, creating Quorum Health.
At the time, CHS had agreed to provide transition services to Quorum for five years, including services related to computer and data processing as well as human resources functions, patient eligibility screening, billing and collections. But Quorum began withholding payments for these services, claiming that CHS did not bill properly for them. Quorum also said CHS charged too much for services and intentionally performed poorly under the agreements.
In August 2017, CHS sent Quorum a demand for arbitration seeking $9 million in payments for transition services. Quorum in turn brought counterclaims for “substantial damages” it said it suffered from the agreements and other CHS actions. CHS sought to end the transition services agreements altogether in March 2018, but an interim ruling in June of that year by the arbitrators prevented CHS from doing so and also required Quorum to resume making payments to CHS pending a final ruling.
Under the final ruling issued Jan. 3, arbitrators said Quorum appropriately withheld payments under one of the agreements, but wrongfully withheld them under the other. The arbitration panel also denied the counterclaims Quorum made against CHS.
In a statement, CHS said it “is extremely pleased” with the result of the arbitration. “With regard to Quorum’s claims against Community Health Systems, Quorum lost on every single claim. The panel awarded Quorum zero damages, finding that Community Health Systems committed no wrongdoing in the spin-off of Quorum or in our performance on behalf of Quorum under the (transition services agreements).”
Because of the interim ruling that required Quorum to pay CHS for services under the agreement pending the final decision, CHS said the net effect is it will reimburse Quorum for about $223,000.