Tenet Faces 2 New Federal Investigations

Tenet Healthcare Corp., which is trying to reach a settlement over myriad federal investigations into its hospital operations, said Wednesday that federal prosecutors had opened two new probes involving two Tenet hospitals in Southern California.

The new investigations are expected to strengthen the government’s position in the settlement talks, analysts said. The Santa Barbara-based company, the nation’s second-largest hospital chain, already faces federal probes into its Medicare billing, doctor recruiting practices and corporate disclosures, as well as related civil lawsuits.

“The more these investigations pop up, the less likely you are to have some grand final settlement,” said Andreas Dirnagl, an analyst with Harris Nesbitt Gerard. “The more fronts that the federal government can open, the more power they gain in the negotiation process.”

One of the new probes, which could result in criminal charges, involves Tenet’s Centinela Hospital Medical Center in Inglewood.

Tenet said the U.S. attorney’s office in Los Angeles was looking at the relationship between Centinela and Allied Homecare Consultants Inc., an independent contractor that refers patients to providers of in-home care. The investigation involves a possible kickback scheme, a source said.

An Allied representative declined to comment.

Centinela is one of three Tenet facilities that has been under investigation for performing possibly unnecessary cardiac procedures. Last year, Tenet paid $54 million to resolve a government probe into the company’s role in hundreds of allegedly unnecessary heart operations performed by surgeons at its Redding, Calif., hospital.

The second investigation revealed by Tenet on Wednesday is civil and focuses on billing practices at the Comprehensive Cancer Center at Tenet’s Desert Regional Medical Center in Palm Springs. Prosecutors have asked Tenet to supply documents and other information for the last 11 years at the hospital, as well as records on 353 patients, the company said.

The cancer center is operated by Los Angeles-based Salick Health Care Inc. under a contract with Tenet. A spokeswoman for Salick said it had learned of the investigation from Tenet and hadn’t been asked by prosecutors for information.

The U.S. attorney’s office declined to comment on either probe. Tenet spokesman Steven Campanini declined to comment on how the latest investigations would affect the company’s efforts to negotiate settlements. Tenet was complying with the requests for information, he said.

“These are two new, separate, unrelated inquiries,” Campanini said. “Tenet is under the microscope. And we continue to work and cooperate with the federal government in its review, ongoing, of Tenet and its hospitals.”

Government agencies have so many investigations involving Tenet that two more registered little concern on Wall Street.

“My initial reaction was ‘Not again,’ ” said Fulcrum Global Partners analyst Sheryl Skolnick. “Then, it was like ‘OK, so what else is new?’ This company is under investigation 17 ways from Sunday. If these are not systemic” the financial damage from the new investigations “is limited.”

Skolnick said that the type of inquiries suggested they were triggered by informants. “I’m not surprised that there are ... additional issues that are popping up,” she said.

Most of Tenet’s legal problems have surfaced in the last 18 months, starting with the allegations of unnecessary heart surgeries at Redding, along with Tenet’s aggressive Medicare billing policy that the company has since dropped. The investigations have become so numerous that some analysts have questioned whether the company would have enough cash to resolve them all.

One of the most significant investigations centers on Tenet’s Medicare billings.

Under the policy, Tenet raised hospital charges so high that it was able to profit from its care for the sickest Medicare patients from so-called outlier payments.

The U.S. attorney’s office in Los Angeles is investigating the Medicare outlier payments Tenet received, which have been estimated to be as high as $1.5 billion.

Some industry experts, however, believe that though Tenet’s billing methods may have taken advantage of the Medicare system they did not break the law.

Tenet reported a $954-million loss for the fourth quarter. To try to turn things around, the company is selling 26 weaker hospitals, including Centinela, to focus on 69 more profitable facilities.

Desert Regional, one of the company’s stronger hospitals, is not up for sale.

Tenet shares closed at $10.86 on Wednesday, down 12 cents, on the New York Stock Exchange.