Community Health System has filed a breach-of-contract lawsuit against Santé Health Foundation and Santé Health System.

The lawsuit seeks to recover nearly $10 million in grant funds from the Fresno-based physician group, alleging that Santé committed several violations of grant guidelines.

Community alleges more than $9.8 million in grant awards to Santé were inappropriately used or distributed, according to a news release.

The lawsuit alleges that Santé:

— Spent outside the scope of the grants

• — Distributed for unincurred expenses
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• — Dispersed more than the amount permitted for expenditures
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• — Dispersed or retained grant money after the grant period expired

 

Santé Health System said in a statement that over the past 25 years, they have proven to be well-respected through their professionalism and physician advocacy, adding that this respect was earned through honest, open hard work in the communities they serve.

“While we are saddened to hear that there are those who would call into question our integrity, we are confident that any review will show who we are and our dedication to improve the quality of care and the accessibility of health services available to our local community,” the statement read.

The lawsuit claims Santé disbursed $6.8 million to medical providers before expenses were incurred to avoid returning the funds to Community following the expiration of the grant period on Aug. 31, 2020.

In 2016, Community and Santé entered a Membership Restructuring Agreement (MRA) in which Community acquired membership interest and certain oversight rights to Santé’s activities, also imposing grant funding be safeguarded through a third-party audit firm.

The claim adds that in 2019, Santé requested Community increase grant funding for management services, leading Community to question aspects of Santé’s structure and operations.

Following engagement with Santé regarding compliance concerns, Community notified the organization that it would terminate the Membership Restructuring Agreement (MRA) and cease awarding grants to Santé on July 7, 2020.

Community hopes to recover the nearly $10 million in the settlement, according to the release, as well as the cost of the suit from Santé. They also request a declaration that their organization did not violate the exclusivity provision of the MRA.