State Audit Finds Overpayment at Tenet Hospital

State officials said Monday that they would audit Medi-Cal billing practices at Tenet Healthcare Corp.’s 40 hospitals in California after finding that the company’s Redding Medical Center was overpaid nearly $12 million in taxpayer money.

Diana Ducay, deputy director of audits and investigations at the California Department of Health Services, said the decision to widen the probe was spurred by “the number and severity of discrepancies found at Redding Medical Center” and concerns that they may reflect a pattern.

“We will refer our audit findings to the state Department of Justice, the FBI and federal Centers for Medicare and Medicaid Services,” she said.

Steven Campanini, a spokesman for Santa Barbara-based Tenet, said the company planned to challenge the state’s audit of Redding Medical Center, the conclusions of which were released Monday.

“We dispute the findings as presented in the California Department of Health Services news release, and we will appeal them,” Campanini said. “Disputes over these types of findings are common in hospital reimbursement practice.”

The state Department of Health Services said it launched its extensive financial review of Redding Medical Center after a routine audit uncovered billing discrepancies.

The review concluded that Redding received $11.9 million in excess reimbursements for Medi-Cal patients, and for the rural poor treated under the County Medical Services Program, for a two-year period ended May 31, 2001.

The excess came from “billing inappropriate codes and for costs that were either not allowable or could not be documented,” according to the state.

The Redding hospital has repaid just under $8.9 million of the money, the state said, and has 60 days to appeal the audit and to repay the remaining $3 million. The payment is due even if an appeal is filed, the state said.

Monday’s announcement was the latest in a string of setbacks for Tenet, the No. 2 for-profit hospital chain in the nation.

In August, Tenet paid $54 million to the U.S. Justice Department to settle charges that it conducted unnecessary cardiac procedures and surgeries on Redding Medical Center patients.

On Friday, it was disclosed that federal prosecutors were investigating whether Tenet conducted needless heart surgeries at three other Tenet hospitals: Daniel Freeman Memorial Hospital in Inglewood; USC University Hospital in Los Angeles; and Centinela Hospital Medical Center in Inglewood, home of the Tommy Lasorda Heart Institute.

Financial analysts said the state’s decision to audit all Tenet hospitals here was not surprising, saying Tenet’s aggressive billing practices had invited the attention.

“They appear to have opened themselves up to scrutiny on a number of fronts,” said Andreas Dirnagl of Harris, Nesbitt, Gerard in New York.

In a statement, California health officials said their review of the Redding hospital’s books revealed “numerous inaccuracies and questionable costs for which Medi-Cal and CMSP [the rural program] should not have paid, including: inflated billing charges; manipulated Medi-Cal billing codes; inappropriate recording of costs and charges; cost report errors consistently favorable to the hospital; undocumented depreciation expenses; unsubstantiated interest expense charges; inflated workers’ compensation costs.”

In another development Monday, Sen. Charles E. Grassley (R-Iowa), chairman of the U.S. Senate Finance Committee, wrote a letter requesting that Blue Cross of California cooperate with the committee’s investigation “of allegations of unnecessary heart operations and procedures” at Tenet hospitals.

The letter cited a report in Friday’s Los Angeles Times that said Blue Cross had data suggesting that doctors at Tenet hospitals in Redding and Modesto performed a high percentage of unneeded coronary bypass operations.

Blue Cross spokesman Michael Chee said the company expected “to comply as best we can.”