U.S. Files Suit Against Tenet Over Billings
Adding to a series of problems that have battered Tenet Healthcare Corp., the Justice Department on Thursday sued the company for up to $323 million in damages, claiming the nation’s No. 2 hospital chain falsified patient diagnoses on Medicare claims from 1992 through 1998 to inflate its revenue.
The lawsuit, filed in federal court in Los Angeles, came a day after settlement negotiations between the two sides broke down. The dispute dates back to alleged violations at various hospitals when Tenet was known as National Medical Enterprises.
In a statement, Santa Barbara-based Tenet expressed regret that it was unable to reach an amicable resolution. “We are not within hollering distance of a settlement,” Tenet spokesman Harry Anderson said. “We will fully litigate this and we expect to prevail.”
The case is separate from a recent federal investigation launched into billing practices at Tenet involving special Medicare reimbursements known as “outlier” payments, or supplemental revenue to hospitals for complicated cases.
Indeed, analysts said Thursday’s lawsuit poses another headache for the company.
“The Justice Department wants to build a case against Tenet on a number of fronts,” said Darren Lehrich, a health-care analyst for SunTrust Robinson Humphreys. “We could see Tenet being motivated to move faster toward a kind of a global settlement with the government on all of these issues.”
Sheryl Skolnick of Fulcrum Global Partners said that any time the Justice Department sues a hospital company over billing issues, “you have to say it’s serious.”
In court papers, the Justice Department accused Tenet employees of substituting their judgment for that of physicians and assigning false diagnostic codes in order to boost Medicare payments. Tenet is alleged to have manipulated codes for pneumonia, septicemia and other illnesses.
The government is seeking triple the amount of alleged overpayments, and the damages could rise to $323 million, the suit said.
In June, Tenet agreed to pay $17 million to resolve accusations of incorrect laboratory billing in a similar Justice Department probe of its practices.
The federal government also has pursued other medical companies for their Medicare billing practices. Last month HCA Inc., the nation’s largest for-profit hospital chain, agreed to pay the Justice Department $631 million to settle allegations of health-care fraud, ending nearly a decade of federal investigations into among other things, filing false claims for Medicare and Medicaid. HCA did not admit to any wrongdoing.
Tenet’s troubles have mounted since October, when questions about the company’s unusually large Medicare outlier payments first surfaced. Medicare regulators are auditing Tenet’s outlier reimbursements, and the company said last week that it received a subpoena from the Justice Department demanding information from Tenet and 19 of its hospitals, 15 of them in California. In that probe, Justice officials are focusing on outlier payments made from 1997 to the present.
In addition, there have been allegations that two cardiac doctors at a Tenet hospital in Redding, Calif., performed unnecessary heart surgeries and that a Tenet hospital in San Diego may have illegally paid doctors to recruit patients. No charges have been filed in those two cases.
In the last three months, the company’s shares have nose dived about 70%. Tenet’s chief executive, Jeffrey Barbakow, instituted a management shake-up and other policy reforms. Barbakow has been Tenet’s CEO since 1993, when the company was known as National Medical Enterprises. In 1995, NME merged with American Medical Holdings and became Tenet Healthcare. The company now runs 114 hospitals nationwide, including 40 in California.
Tenet’s shares rose 5 cents to close at $16.95 on the New York Stock Exchange.
