Argued: May 3, 2017
from the United States District Court for the Middle District
of Tennessee at Nashville. Nos. 3:11-cv-00433; 3:11-cv-00451;
3:11-cv-00601-Kevin H. Sharp, District Judge.
Barbara J. Hart, LOWEY DANNENBERG COHEN & HART, P.C.,
White Plains, New York, for Appellants.
A. Orseck, ROBBINS, RUSSELL, ENGLERT, ORSECK, UNTEREINER
& SAUBER LLP, Washington, D.C., for Appellees.
Barbara J. Hart, David C. Harrison, Scott V. Papp, LOWEY
DANNENBERG COHEN & HART, P.C., White Plains, New York, W.
Michael Hamilton, PROVOST UMPHREY, LLP, Nashville, Tennessee,
A. Orseck, Michael L. Waldman, Matthew M. Madden, Daniel N.
Lerman, ROBBINS, RUSSELL, ENGLERT, ORSECK, UNTEREINER &
SAUBER LLP, Washington, D.C., Steven A. Riley, Milton S.
McGee III, RILEY, WARNOCK & JACOBSON, PLC, Nashville,
Tennessee, for Appellees.
Before: COLE, Chief Judge; SUTTON and KETHLEDGE, Circuit
KETHLEDGE, CIRCUIT JUDGE.
value of shares in Community Health Systems fell immediately
after a competitor, Tenet Healthcare Corporation, publicly
disclosed expert analyses and other information suggesting
that Community's profits depended largely on Medicare
fraud. The plaintiffs here, who owned Community shares at the
time, allege that the disclosure caused the fall. The
district court found that theory implausible because the
disclosure came in the form of a complaint, which the market
would regard as comprising mere allegations rather than
truth. But whatever the merits of that proposal as a general
rule, the Tenet complaint at least plausibly presents an
exception to it. Moreover, according to the plaintiffs, the
market received similar disclosures from another source:
namely Community itself, whose senior executives-after trying
for several months to lull the market with still more
misrepresentations-eventually corroborated much of what Tenet
had alleged. And when they did, Community's shares fell
once again. The plaintiffs in this case have therefore
plausibly alleged that the value of Community's shares
fell because of a series of revelations about practices that
Community had previously concealed. For that reason and
others, we reverse.
case comes to us at the pleadings stage, so we take the
allegations in the amended complaint as true. See
Kaminski v. Coulter, 865 F.3d 339, 344 (6th Cir. 2017).
runs the largest for-profit hospital system in the country.
In 2011 alone, its 131 hospitals made $13.6 billion in
revenue. That revenue depended in significant part on
Medicare, which reimburses hospitals for treating patients
covered by Medicare. Those reimbursements accounted for about
30% of the revenue made by Community's hospitals from
2006 to 2011.
reimburses hospitals for inpatient and outpatient emergency
services, both of which Community's hospitals offer.
Inpatient services are reserved for patients who need more
than 24 hours of constant care, so Medicare pays hospitals
far more for those patients: in some cases nearly ten times
more. But Medicare will reimburse hospitals only for services
that are "reasonable and necessary." 42 U.S.C.
§ 1395y(a)(1)(A). Hospitals are therefore obliged not to
classify patients as inpatients ...