Tenet Trial Ends With Hung Jury
The trial of Tenet Healthcare Corp. on charges that doctors were bribed to refer patients to its Alvarado Hospital Medical Center in San Diego ended Thursday in a hung jury.
U.S. District Judge James Lorenz declared a mistrial after jurors reported they were deadlocked following five days of deliberations.
U.S. Atty. Carol C. Lam said that she remained confident in the government’s case and that a retrial was likely in light of a poll that showed the jury was leaning toward conviction. She declined to comment further.
“This is clearly not a win for Tenet,” said Sheryl Skolnick, an analyst at Fulcrum Global Partners. “We still have a tremendous amount of uncertainty as long as this is hanging out there.”
At issue are physician relocation agreements between Alvarado and 99 doctors that prosecutors alleged were used to disguise $15 million in kickbacks aimed at boosting patient referrals to the hospital. The defendants charged in the case are Alvarado, its former administrator, Barry Weinbaum, and the Tenet unit that owns the hospital.
Tenet’s general counsel, E. Peter Urbanowicz, said that he was sorry the jury failed to reach a verdict and that he hoped prosecutors would drop the charges.
“The fact that the jury struggled with this case demonstrates how much confusion there is regarding the laws that govern physician relocation agreements,” Urbanowicz said. “It’s time for all of us to devote our full energies to resolving the broader issues.”
The case is being closely watched within the industry because most hospitals recruit doctors with relocation contracts similar to those that Alvarado used.
“If I were in the business, I would still be very worried about these contracts,” said Mark Kleiman, a Los Angeles-based healthcare lawyer.
If a hospital can demonstrate that certain medical specialties are in short supply in its area, state and federal laws allow it to pay some expenses to attract doctors with those skills. Prosecutors charged that Alvarado’s relocation payments were actually bribes aimed at inducing physicians to refer patients to the hospital.
One juror said some panel members doubted the testimony of Mina Nazaryan, Alvarado’s former physician relocation supervisor.
Nazaryan, originally a defendant in the case, struck a plea bargain with prosecutors midway through the trial and took the stand against her former employers.
According to one poll, the jury split 9 to 3 in favor of conviction; that included the vote of a juror who was dismissed this week because of a death in the family.
Tenet, the nation’s second-largest hospital chain, faces fines of less than $1 million in the case. But its significance goes much further. Its outcome is likely to influence prosecutors who are investigating physician deals with Tenet hospitals in at least four other cities.
In addition, Tenet has said the three-month trial hampered its efforts to resolve a raft of government investigations into a range of business and medical practices. Tenet is seeking a broad settlement as part of an effort to restore the company to profitability.
Legal problems have roiled Tenet since an October 2002 FBI raid of a Redding hospital that the company later sold. The company paid $54 million to the government and $395 million to patients, their families and lawyers to settle allegations that doctors at Redding performed unnecessary heart surgeries and other procedures.
If convicted in a retrial, Alvarado could lose its eligibility for Medicare and other government-run health insurance programs.
However, the government could kick Alvarado out regardless of how the criminal case ends. Because such government programs are so lucrative, their loss is commonly described as the “death penalty” and can force a hospital’s sale in lieu of closure.
The mistrial was announced after markets closed. Tenet shares, which rose 11 cents to $10.63 on the New York Stock Exchange, climbed as high as $10.90 in after-hours trading.
Tenet, formerly based in Santa Barbara, moved its headquarters to Dallas in January.
