Tenet Settles 2 Federal Inquiries

Times Staff Writer

Tenet Healthcare Corp. said Wednesday that it would pay nearly $31 million to end two federal inquiries, including $22.5 million to resolve allegations of improper financial arrangements with doctors at a Florida hospital.

The Florida settlement is the largest ever over such claims at a single hospital, according to federal officials.

Sheryl Skolnick, an analyst with Fulcrum Global Partners, expressed concern about the size of the Florida payout. She noted that Santa Barbara-based Tenet, which owns 100 hospitals, had reported that “all aspects of its relationships with physicians” were potentially under review for civil or criminal wrongdoing.


Given that, a $20-million-plus settlement “seems really high,” Skolnick said. “I would hope the company would be better negotiating on a volume discount on a package deal than they would on an individual one.”

Tenet is embroiled in myriad government investigations and private lawsuits related to a variety of business practices and to alleged unnecessary heart surgeries performed by doctors at its Redding hospital. Tenet’s legal problems, most of which have surfaced in the last 18 months, have become so numerous that analysts have questioned whether the company would have enough cash to resolve them all.

Executives reassured Wall Street last week that Tenet wasn’t facing a cash crunch and wouldn’t be hit with any sudden legal judgments or fines.

Peter Urbanowitz, Tenet’s general counsel, described the resolution of the Florida case and a smaller, industrywide inquiry over Medicare patient discharges and transfers for $8 million as “an important step forward as Tenet works to rebuild its business and reputation.”

In the Florida case, the Justice Department joined a whistle-blower suit that accused North Ridge Medical Center in Fort Lauderdale of improperly billing Medicare for patients referred by doctors who had financial relationships with the hospital that were prohibited. Federal law bars hospitals from paying doctors for patient referrals and other business.

The hospital had purchased a number of physician practices and placed the doctors on salary in 1993 and 1994. Tenet then bought North Ridge in 1995.


The contracts involved came under scrutiny in 1997, when the manager of Tenet’s physician practices in Florida, Sal Barbera, alleged that the doctors had been paid too much for their practices and that their salaries were inflated. According to the settlement, North Ridge intended for the money to be a reward for the doctors’ steering patients to the hospital.

Barbera, who contended that he was fired after telling his superiors about the potential violations, said Wednesday that he had feared he might be implicated if he did not report his suspicions to federal authorities.

Talks between the Justice Department and Tenet began in late December. Barbera will receive about $5 million from the settlement. The outcome of the case “makes me feel that there was some validity to it, that I’ve been vindicated for what I did,” said Barbera, 54, who is now the vice president of another healthcare firm in Florida.

Tenet, the nation’s second-largest hospital chain, admitted no wrongdoing.

“We believe the prices paid for those practices in south Florida in the early ‘90s were fair given that every hospital in that market was racing to buy physician practices,” said Tenet spokesman Harry Anderson.

At one time, Tenet had more than 1,000 such physician contracts across the country. Most have been eliminated because they proved to be money losers, Anderson said.

He added that it was “overly simplistic” to assume that other government probes into Tenet’s hospital-physician relationships would cost as much to settle as the Florida case.


He said the company believed that those investigations differed from the Florida matter in that they didn’t focus on the acquisition of physician practices.

Tenet shares fell 35 cents Wednesday to $10.28 on the New York Stock Exchange.