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Memorial Hospital is one of three major downtown hospitals.

Carmen M. Shreane vs. Memorial Healthcare System


A former Memorial Health Care System employee says she was fired after reporting fraud allegations to federal authorities months before Memorial executives say they self-reported possible violations.

Carmen Fletcher-Schreane filed the whistleblower complaint in January 2009, but it was sealed until June this year while federal authorities conducted an investigation. Fletcher-Schreane served as the hospital's manager of contract and compliance from December 2007 to December 2008, when she was fired.

The complaint states Fletcher-Schreane first reported alleged violations to her boss and other Memorial administrators in June 2008. When Memorial did not do anything to correct the violations and penalized Fletcher-Schreane by changing her duties, she gave the information to the FBI and the Department of Health and Human Services in November and December, the complaint states.

In a settlement reached with the federal government last week, Memorial agreed to pay $1.3 million over claims that it allowed doctors to use space at the hospital without paying adequate rent and provided space and services at a price lower than market share.

"They say they self-reported the violations. I told them long before that, but they did nothing," Fletcher-Schreane, 43, said.

In a news release about the settlement, Memorial executives said they disclosed lease agreements that may have been out of compliance with the federal laws.

"We found a problem, we quickly self-disclosed to the appropriate authorities, we corrected the situation and we cooperated fully with the subsequent U.S. attorney's inquiry," Memorial President and CEO James Hobson said in the news release.

Memorial declined to answer specific questions about the complaint, citing pending litigation, but said they will contest Fletcher-Schreane's allegations. At the time, Debra Moore served as Memorial's interim CEO, with current CEO James Hobson taking the job in November 2008.

"If Ms. Fletcher-Schreane decides to pursue that lawsuit on her own, Memorial will contest those allegations in court," Memorial spokeswoman Lisa McCluskey said in an email.

The arrangements, which violated the Ethics in Patients Referrals Act -- known as the Stark law -- and the Anti-Kickback Statute, resulted in the submission of false claims to the Medicare system, the settlement alleges.

Memorial, a nonprofit owned by Catholic Health Initiatives, did not admit to any wrongdoing in the settlement.

The federal settlement with Memorial states government investigators found the hospital entered into a series of financial arrangements with certain physicians and physician groups -- from January 2003 to 2009 -- that were inconsistent with fair market value and intended in part to induce physicians to refer patients to Memorial facilities.

Officials with the U.S attorney's office have said they will not intervene in Fletcher-Schreane's complaint, which means she must move forward with the lawsuit on her own. She said she plans to do so, as well as pursuing a wrongful termination lawsuit filed in Hamilton County Circuit Court.

Officials with the U.S. attorney's office declined to comment on why they did not intervene in the complaint.

But Stephen Kohn, executive director for National Whistleblowers Center, said federal officials intervene in only about 20 percent of such complaints. The center is a nonprofit advocacy group for whistleblowers.

"Employees are the No. 1 source in fraud detection, but unfortunately the government does not intervene in the majority of cases," Kohn said.

Fletcher-Schreane's complaint identifies at least one of the doctors named in the settlement, as well as numerous additional doctors and physician groups. It says the hospital provided doctors with leases below market value, gave doctors construction allowances and paid money to vendors who did not have required contracts with Memorial.

Allegations in the complaint include:

• Physicians at the Memorial North Park Professional Office Building had leases below market value for close to 20 years.

• The Chattanooga Heart Institute, with more than 20 physicians and performing about 400 surgeries a year at Memorial, was given leases below market value for about 10 years.

• Several physicians were given $100,000 to $200,000 as renovation and construction allowances in exchange for referrals to the hospital.

In a recent interview, Fletcher-Schreane said that, when Memorial executives fired her in December 2008, they said she violated her confidentiality agreement when she reported alleged fraud.

Fletcher-Schreane said she sometimes wonders what would have happened if she had said nothing.

When the news about her action spread through Chattanooga, job interviews dried up, she said. She lost her home to foreclosure and now works at a call center for $10 an hour. Government regulators, who began their investigation in early 2009, asked her to wait to proceed with her complaint and lawsuit until their investigation was complete, she said. That left her in limbo for nearly four years.

"It's terrible to be a whistleblower," Fletcher-Schreane said as she described events that led up to her deciding to report her audit findings. "Most of us have worked hard for our careers -- and to lose it all. I've often thought maybe I should have done nothing."

Kohn said such federal laws have increased the chances that the government and whistleblowers will recover money, but it has not, for the most part, changed the treatment of whistleblowers.

Under federal law, if defendants are found liable, they will pay three times the amount they defrauded the government, with up to 30 percent of that going to the person who filed the complaint and the remainder going to the government.

With that arrangement, the government still recovers money even if it doesn't pursue the claims, Kohn said.

"Employers don't want to hear the bad news -- it costs them money -- and often it is cheaper to fire the whistleblower than to fix the problem," Kohn said. "There is almost no shift in the culture of the way companies deal with whistleblowers. Employees raise concerns at their own risk."