OrNda to Pay $12.6 Million to Settle Civil Fraud Charges

Tenet Healthcare’s OrNda Healthcorp unit agreed to pay $12.6 million to the U.S. government to settle civil charges that it defrauded the Medicare program by paying illegal kickbacks to doctors in return for patient referrals.

Tenet, which acquired OrNda for $3.2 billion in January, wasn’t accused of any wrongdoing by the Justice Department. The settlement didn’t include any admission of improper conduct.

“Significant monetary sanctions are one of the best deterrents to corporate health-care fraud,” U.S. Atty. Nora Manella said.

Company executives couldn’t be reached for comment.

The suit was originally filed by Dr. James Montagano, formerly chief of surgery at Midway Hospital Center in Los Angeles, now owned by Tenet. As a whistle-blower, Montagano will receive $2.3 million of the settlement.

“Dr. Montagano resigned his various posts at Midway Hospital because he could not tolerate the abuses around him,” Montagano’s attorney, Henry Gradstein, said. “Suffice it to say, he has been vindicated.”

Additional OrNda hospitals involved in the settlement, all in California, are Doctors/Santa Ana Hospital Medical Center in Santa Ana; Whittier Hospital Medical Center in Whittier and St. Luke Medical Center in Pasadena.

In the early 1990s, Santa Barbara-based Tenet, then called National Medical Enterprises, was the focus of the last major federal investigation of a hospital company. It ended with a purge of the company’s founders and chief executive and a $380-million fine.

Tenet shares rose $2.63 to close at $30.13 on the New York Stock Exchange after reports that it is in merger talks with Columbia/HCA Healthcare Corp.