Florida Sues Over Tenet Billing
Florida’s attorney general opened a new front in Tenet Healthcare Corp.’s legal battles Wednesday, accusing the hospital chain in a lawsuit of scheming to obtain better than $1 billion in improper payments from a Medicare fund.
The lawsuit, filed in federal court in Miami, alleges that the nation’s second-largest hospital company inflated charges at its 15 Florida facilities from 2000 to 2003 to squeeze more money than it was due from the fund.
“They filed phony bills. They fudged the numbers,” Florida Atty. Gen. Charlie Crist said in a telephone interview. “It’s called cheating, stealing, lying. It’s wrong, and we won’t tolerate it.”
The suit was filed on behalf of Florida’s public hospitals, which rely on the Medicare Outlier Pool, a fund for reimbursements for expensive procedures for seriously ill patients. Tenet’s scheme prevented public hospitals from receiving millions of dollars in Medicare payments that they were owed, the suit claims.
In a statement, Tenet general counsel E. Peter Urbanowicz called the allegations “unwarranted.” He said Tenet was surprised the suit was brought more than two years after the company voluntarily dropped its aggressive outlier pricing strategy and adopted “stringent new policies.”
Federal authorities began investigating Tenet’s Medicare billing practices, which analysts have estimated resulted in as much as $1.9 billion in overpayments, in the fall of 2002. The authorities have been in settlement talks with Tenet, which moved its headquarters from Santa Barbara to Dallas this year.
Florida government officials and hospital executives may have grown frustrated “with the very slow pace of the federal negotiations, said Mark Kleiman, a Los Angeles healthcare lawyer not involved in the case.
Tenet’s share price and its finances worsened in the wake of the Medicare billing probe disclosure and almost simultaneous allegations that doctors at a Redding hospital then owned by the company performed unnecessary open-heart surgeries.
As part of a corporate turnaround plan, Tenet has sought to reach a broad legal settlement with the federal government over Medicare billing and to end a raft of other investigations and lawsuits. Criminal charges that accused a San Diego Tenet hospital of bribing doctors to recruit patients threw a chill over those negotiations, Urbanowicz has said. A trial in that case ended in a hung jury in February. A second trial is scheduled to begin later this month.
Analysts and lawyers said the Florida suit could further complicate Tenet’s efforts to reach a global settlement with the federal government.
The Florida case “is the first legal theory put forth asserting [Tenet did] something wrong with the outliers,” said Fulcrum Global Partners analyst Sheryl Skolnick. Jeff Villwock, managing partner with Atlanta-based Caymus Partners and an advisor to a Tenet shareholder committee, said the Medicare billing disputes could be the costliest of Tenet’s legal problems.
The Florida suit was filed under the state’s racketeering law, which allows any damages to be tripled. In addition, the suit invokes the state’s unfair trade practices law, which could be used to force the company to disgorge any unjust payments.
Crist suggested that other states could make similar claims against Tenet. The company owns 27 hospitals in California, more than in any other state.
Tom Dresslar, a spokesman for California Atty. Gen. Bill Lockyer, declined to say whether the office was investigating outlier payments. “The office is looking into several issues involving Tenet,” he said.
Tenet shares closed Wednesday at $11.43, up 16 cents, on the New York Stock Exchange.
