Tenet Could Pay $1 Billion to Settle Claims
Tenet Healthcare Corp. is in talks that could result in it paying more than $1 billion to settle hundreds of claims of unnecessary heart surgeries and to end most of the federal investigations into the hospital chain’s business practices, sources familiar with the talks said Thursday.
The discussions are preliminary. If negotiations fail, the Santa Barbara-based company faces the prospect of civil and criminal trials around the country.
The nation’s second-largest hospital chain has been rocked with bad news since late 2002, when it was revealed that Tenet used a questionable scheme to boost Medicare billings for its sickest patients. About the same time, allegations of unnecessary heart surgeries at Tenet’s hospital in Redding came to light. The company also faces federal probes into its doctor recruiting practices and corporate disclosures as well as related civil suits.
The most advanced case -- involving criminal charges of doctor kickbacks at Tenet’s Alvarado Hospital in San Diego -- is set for trial in October. And a group of Redding Medical Center patients that sued Tenet over the disputed heart surgeries has a January trial date.
Settlement talks with government representatives and lawyers for more than 750 Redding patients are moving along parallel tracks. Sources said the amount under discussion to settle the Redding litigation would far exceed the $60 million Tenet expects to collect when it completes the sale of the hospital.
Lawyers for the Redding patients declined to comment, as did representatives of the U.S. attorneys in Los Angeles and San Diego, where most of the cases are being pursued.
Tenet spokesman Harry Anderson said the company did not expect to reach any settlements in the near future. Negotiations are at a preliminary stage, he said, characterizing any dollar figures as speculation.
“Tenet’s new management team is attempting to resolve all issues related to its past pricing strategy and other matters,” Anderson said. “We believe we have made significant progress in ... our conversations with the government and others. And we hope to reach appropriate settlements. Speculation about the shape and size of any settlements, however, is very premature.”
The company’s finances have soured since the first of the scandals hit 18 months ago.
In December, after a management shake-up, Tenet hired Peter Urbanowicz, a former deputy general counsel of the U.S. Department of Health and Human Services, to spearhead efforts to resolve its legal problems.
Chief Executive Trevor Fetter told investors in March that Tenet hoped to achieve a global resolution to its legal cases but would not agree to any settlement that exceeded the company’s borrowing capacity.
To cut costs, Tenet is selling about one-third of its hospitals. The company said the sale of 27 hospitals should generate about $600 million, half of it in cash and the rest in tax benefits.
And in March, Tenet renegotiated credit agreements with most of its banks. The new credit agreement reduced the money available under the loan agreement to $800 million, from $1.2 billion.
Tenet’s legal problems include a probe into whether its hospitals broke the law -- or merely gamed the Medicare system -- by extracting extraordinary charges for very sick patients, known as outliers.
In addition, the U.S. attorney’s office in Los Angeles alleges that Tenet hospitals submitted Medicare bills with false diagnoses to boost reimbursements.
The U.S. attorney also is probing whether doctors at three Tenet hospitals on Los Angeles’ Westside, including Centinela, performed unnecessary cardiac procedures.
This year, Tenet agreed to pay nearly $31 million to end two federal inquiries, including $22.5 million to resolve allegations of improper financial arrangements with doctors at a Florida hospital.
Tenet’s shares closed Thursday at $12.63, up 3 cents, on the New York Stock Exchange.
