By MATT BLOIS
Quorum Health won’t have to pay millions of dollars in disputed payments to Community Health Systems following a determination by an arbitration panel.
CHS spun off Quorum in April 2016, housing nearly 40 of its hospitals in smaller communities under the new company’s umbrella. At the time, the two companies signed agreements that called for CHS to provide billing and collection services, IT support and payroll processing for Quorum after the split.
The arrangement did not go well, though. Quorum claimed that CHS was charging too much for their services. A spokesperson for CHS wrote in an email that the companies disagreed over the meaning of some of the terms in the contract. Quorum started withholding some payments to Community Health Systems for the disputed services.
In August 2017, CHS asked for arbitration to settle the disagreement, seeking payment for their services. Quorum’s leaders asserted that the company didn’t owe CHS the withheld payments.
In addition to the disagreements about payments, a spokesperson for CHS wrote in an email that Quorum’s counterclaims accused CHS of intentionally providing poor service and interfering with its business.
Ten months ago, CHS added to its claims a notice to end the two service agreements by Sept. 30. In an email, a spokesperson for CHS wrote that the company decided to end the agreements because Quorum wasn’t paying enough. An arbitrator denied that move and ordered Quorum to resume paying as was dictated by the original contracts ahead of a final ruling.
On Monday, Quorum said the arbitration panel — which met for a week last June and again in October — determined that CHS has indeed been improperly billing Quorum for back-office services. The ruling says Quorum doesn’t have to pay $9.3 million in contested payments and orders CHS to repay another $2.1 million Quorum has spent on the deal since June.
On the flip side, the arbitrator did also say that CHS billing under the tech services agreement was fair, and that Quorum must fork over about $1.5 million for services provided since June.
Going forward, Quorum will pay the reduced amount for back-office services, but will pay the original amount for IT services.
The arbitration panel rejected Quorum’s claims that CHS had interfered with Quorum’s business, according to a spokesperson for CHS. The panel also rejected claims that CHS breached the service agreements by failing to provide services and that it wrongfully terminated the service agreements.
A CHS spokesperson wrote in an email that the company was pleased with the result of the arbitration.
Shares of both CHS (Ticker: CYH) and Quorum (Ticker: QHC) fared well on an up day for the overall market Monday, climbing 5 percent and 9 percent, respectively. Over the past six months, CHS is up slightly while Quorum is down about 30 percent.