HHS Office of Inspector General Will Audit Medicare Outlier Payments at Tenet Hospitals Nationwide

Officials from Santa Barbara-based Tenet Healthcare, the nation's second-largest for-profit hospital chain, announced yesterday that HHS Office of Inspector General is preparing to audit the company's hospitals nationwide in an attempt to determine whether Tenet properly billed Medicare for certain services, the Los Angeles Times reports. HHS officials said the audits would focus on outlier payments, special Medicare reimbursements that cover "unusually costly procedures." According to the Times, Tenet hospitals have been receiving an "extraordinarily high share." Ken Weakley, an analyst for UBS Warburg, estimated that approximately 23% of Tenet's Medicare reimbursements come from outlier payments, compared to 6% on average for other comparable hospitals (Lee, Los Angeles Times, 11/7). Last week, UBS Warburg downgraded Tenet's stock because of concerns about the company's high rate of Medicare outlier payments (California Healthline, 11/4). According to Judy Holtz, a spokesperson for the OIG, the probe stems from concerns raised in mid-October by an insurance company that handles Medicare payments for Tenet hospitals (Abelson, New York Times, 11/7). The inquiry -- which is being classified as an audit, not an investigation -- is expected to take up to nine months. It will concentrate on certain aspects of the formula used to calculate outlier payments, the Wall Street Journal reports. Government officials said that HHS had planned to review outlier payments to all hospitals nationwide as part of its "routine work plan" for 2003. Tenet Chair and CEO Jeffrey Barbakow said he is "confident" that the audit "will demonstrate that our hospitals did, in fact, obey the rules."

Tenet officials said yesterday that they believe the audit was spurred by "all the fallout" from recent events concerning Tenet hospitals (Rundle/Wilde Mathews, Wall Street Journal, 11/7). Last week, federal agents searched Tenet's Redding, Calif.-based Redding Medical Center seeking information for an investigation of two physicians who may have performed "unnecessary surgeries" and potentially defrauded Medicare (California Healthline, 11/1). The Los Angeles Times reports that the California attorney general's office said yesterday that at the request of the state medical board it would seek a court order to prevent the two doctors from practicing until the investigation is resolved (Los Angeles Times, 11/7). The Wall Street Journal today profiled Dr. Chae Hyun Moon, one of the two physicians from Redding Medical Center under investigation (Rundle, Wall Street Journal, 11/7). Meanwhile, Tenet officials yesterday announced that the Federal Trade Commission has requested information about the 1999 merger of two of its hospitals in Missouri as part of the agency's "broad inquiry" into hospital mergers nationwide (California Healthline, 11/6).