UPDATE 3-Community Health gets US subpoena in claims probe

Fri Apr 15, 2011 8:31pm EDT

* U.S. gov't requested documents from all its hospitals

* Says is cooperating with government probe

* Shares fall about 14 pct in after hours trading (Recasts; adds background, Tenet no comment; updates share price)

NEW YORK, April 15 (Reuters) - Community Health Systems Inc (CYH.N) was subpoenaed by the U.S. government in connection with an investigation of possible improper claims submitted to Medicare and Medicaid, days after rival Tenet Healthcare Corp (THC.N) accused it of bilking the government and insurers.

The news sent shares of Community Health down about 14 percent after hours.

The subpoena, from the U.S. Department of Health and Human Services and dated March 31, requests documents from all of the company's hospitals and appears to concern emergency department processes and procedures, the company said in a securities filing on Friday.

It also requests information about Community's relationship with emergency department physicians, including financial arrangements.

Community said it does not know if it is related to allegations made in the lawsuit against it by Tenet, a rival rival hospital operator which filed a lawsuit against Community earlier this week accusing it of admitting patients for needless stays. [ID:nN11291765]

A spokesman for Tenet declined to comment on the subpoena.

Tenet in December rejected a $3.3 billion takeover offer from Community Health, saying it undervalued the company. The $6-a-share offer, of which $1 a share would be paid in Community Health stock, represented a 40 percent premium to Tenet's share price at the time.

Fears that Tenet's lawsuit would cause regulators to deepen their scrutiny of the hospital industry have dragged down the entire sector, including HCA Holdings Inc (HCA.N), Health Management Associates HMA.N, and Universal Health Services Inc (UHS.N).

Community Health said it is cooperating fully with the subpoena and is unable to forecast the outcome of the probe.

Community Health shares, which dropped 36 percent after the Tenet lawsuit was announced, fell to $27.51 in after-hours trading from their close on Friday at $31.90 on the New York Stock Exchange. (Reporting by Martinne Geller and Deena Beasley; Editing by Andre Grenon and Richard Chang)