legally they cant take patients in if they cant do an adequate job treating them. i wouldnt be surprised if some of their regular staff was busy fixing the medical records. therefore they were probably short on workers and also unable to keep adequate medical records for patients. this is a big no-no in the health care industry.
bottom line is that a hospital may send patients elsewhere if they cannot adequately treat them (ie. overcrowded, don't specialize in the needed area, etc.). They must, however, be sure not to send patients away simply based on that patient's ability to pay - so long as the hospital is eligible for federal funding of any sort (ie. medicaid, medicare). I don't see this as a situation where they are "dumping" patients. Therefore, it's both legal and smart. Failure to correctly treat patients could lead to huge malpractice suits. no one wants that.