Agents Raid Tenet Hospital in San Diego

Armed with search warrants, federal agents Thursday raided the executive offices of a Tenet Healthcare Corp. hospital in San Diego, seizing voluminous records as part of a probe into possible violations of laws prohibiting kickbacks to physicians.

Ten agents from the Internal Revenue Service, the U.S. attorney’s office and the Department of Health and Human Services, the agency overseeing Medicare, spent six hours at Alvarado Hospital Medical Center. They carted off boxes of documents and computer records about how physicians were recruited, compensated and paid for relocation, a hospital source said.

The raid was another blow to the nation’s second-largest hospital chain. Tenet, based in Santa Barbara, has come under relentless pressure in the last two months as one government agency after another has launched probes into various aspects of its hospitals’ operations.

After the raid, Tenet issued a statement that the company believes the investigation does not involve patient care or issues involving special Medicare payments.

The company also requested that trading of its stock be halted. Tenet’s shares fell 11 cents Thursday to $17.04 on the New York Stock Exchange before trading stopped.

It was the second recent federal raid at a Tenet hospital. The first, in late October at Redding Medical Center in Northern California, involved 40 FBI and other federal agents and was sparked by allegations that two doctors were performing unnecessary heart surgeries. No charges have been filed in that probe.

Tenet also has been the target of a federal audit concerning its sizable Medicare “outlier” payments made to help cover unusually costly medical care. Since these revelations, Tenet’s stock has lost two-thirds of its value.

Banc of America Securities analyst Gary Taylor said it was difficult to tell if the San Diego raid was an isolated incident or the start of a systematic look at a number of Tenet hospitals. Tenet operates 114 hospitals in 16 states.

“You again come back to a management team that admitted to very aggressive business practices,” Taylor said. “So you can’t preclude the possibility that they may have done something wrong and that there may be some liability here.”

One objective of Thursday’s raid, according to the search warrant, was to gather documents related to federal anti-kickback statutes known as Stark laws.

The laws make it illegal for a hospital to offer doctors payment for referring patients whose care is funded by taxpayers. The aim is to prevent hospitals from providing incentives to doctors to treat more patients.

“You cannot offer financial inducements to get patient referrals, “ Tenet spokesman Harry Anderson said. “We believe we are in full compliance” with the laws.

Tenet said the search warrants were served at the offices, which later were sealed off, of Alvarado Hospital Chief Executive Barry Weinbaum and its director of business development, Mina Nazaryan. Agents also sought admission and referral records involving 10 doctors who were named in the search warrant.

The U.S. attorney’s office in San Diego had no comment on the matter.

Separately Thursday, Tenet CEO Jeffrey C. Barbakow said the company is far from reaching an agreement with the Justice Department over a long-standing dispute involving Medicare payments to its hospitals from 1992 to 1998. Barbakow said Tenet may take the case to court to resolve the matter.

This case is not related to the recent federal investigation into Tenet hospitals over Medicare outlier payments.

On Wednesday, the nation’s biggest for-profit hospital chain, HCA Inc., agreed to pay the Justice Department $631 million to settle allegations of health-care fraud. Whistle-blowers had accused HCA of filing false claims for reimbursement from Medicare and Medicaid and paying kickbacks to doctors so they would refer patients to its hospitals. HCA, which operates 180 hospitals, did not admit any wrongdoing.

Alvarado Hospital, a 311-bed facility near the University of San Diego, is Tenet’s only hospital in the city and specializes in orthopedics and obesity care. In its fiscal year ended June 30, the hospital had pretax net income of $34.1 million, according to state records.

“Basically, the company is getting kicked hard by a lot of constituencies at this point,” said David Peknay, a fixed-income analyst Standard & Poor’s.