Tenet Healthcare Reportedly in Discussions To Settle Federal Investigations for More Than $1 Billion

Officials for Santa Barbara-based Tenet Healthcare are in preliminary talks to settle for a total of more than $1 billion most of the federal investigations into the company's business practices and hundreds of claims filed by individuals over allegedly unnecessary heart surgeries, sources familiar with the negotiations said Thursday, the Los Angeles Times reports (Girion, Los Angeles Times, 6/11). Since October 2002, the Senate Finance Committee, the Securities and Exchange Commission, the HHS Office of Inspector General, the Department of Justice and the Federal Trade Commission have launched separate investigations into Tenet related to alleged Medicare fraud and other issues. The company also faces an investigation by the Florida Medicaid Fraud Control Unit. The U.S. attorney's office in Los Angeles has requested documents related to coronary procedures and billing practices at three Los Angeles-area hospitals. The Department of Health Services announced it will audit billing practices at all 40 Tenet-owned hospitals in the state, after finding that Redding Medical Center overcharged state programs by nearly $12 million (California Healthline, 3/16). Most recently, the Los Angeles U.S. attorney's office has opened two new investigations into Tenet. The first concerns a possible kickback scheme involving Tenet's Inglewood-based Centinela Hospital and Allied Homecare Consultants, an independent contractor that refers patients to providers of in-home care services. The second is part of a civil investigation that focuses on coding and billing practices at the comprehensive cancer center at Desert Regional Medical Center in Palm Springs (California Healthline, 4/15).

In August, Tenet officials agreed to pay $54 million to settle federal allegations that two of Redding's physicians performed unnecessary heart surgeries and defrauded Medicare. Tenet still retains all liability for any damages stemming from the lawsuits filed since October 2002 over the allegedly unnecessary surgeries (California Healthline, 4/19). In addition, Tenet has paid $30.7 million this March to settle two federal inquiries into improper financial arrangements with doctors and Medicare beneficiary discharges and transfers (California Healthline, 3/25). The most advanced case, involving alleged kickbacks to physicians at San Diego, Calif.'s Alvarado Hospital Medical Center, is set to go to trial in October.

Tenet officials are reportedly in talks with government representatives and lawyers, as well as plaintiffs' lawyers for the more than 750 Redding patients who have filed lawsuits, the Times reports. Sources close to the talks said that the amount under discussion to settle the Redding lawsuits would "far exceed" the $60 million Tenet expects to receive when it completes the sale of the Redding facility, according to the Times. Tenet spokesperson Harry Anderson said that company officials do not expect to reach any settlements in the near future, adding that because negotiations are in a preliminary stage, any dollar figures are speculative, the Times reports. Anderson said, "Tenet's new management team is attempting to resolve all issues related to its past pricing strategy and other matters." He added, "We believe we have made significant progress in ... our conversations with the government and others. And we hope to reach appropriate settlements." Anderson said that supposition "about the shape and size of any settlements ... is very premature." Lawyers for the federal government and the Redding patients refused to comment on the negotiations, the Times reports. The Times notes that if negotiations fail, Tenet faces the prospect of criminal and civil lawsuits around the country (Los Angeles Times, 6/11).

The Wall Street Journal on Friday examined the "well-established practice" of hospitals funding relocation packages for doctors, which some prosecutors and other government officials contend are given in exchange for the doctors' referral of patients to the hospital. Hospitals are barred from directly paying doctors for referrals under antikickback laws for federal health care programs, but hospitals contend that relocation packages are allowable under the law. However, the practice is threatened by the ongoing debate over increasing health care costs and a recent federal case against San Diego's Alvarado Hospital Medical Center that is "sending shivers through the hospital business," the Journal reports (Rundle, Wall Street Journal, 6/11). A federal grand jury in July issued a 17-count criminal indictment of Alvarado Hospital; its CEO Barry Weinbaum; and its owner Tenet HealthSystem Hospitals, a Tenet Healthcare subsidiary, over allegations that Alvarado paid more than $10 million for more than 100 physician-relocation agreements between 1992 and 2000. The agreements are used to recruit physicians to move to the community served by the hospital. The San Diego U.S. Attorney's Office in September 2003 charged Alvarado administrator Mina Nazaryan with one count of obstruction of justice and one count of tampering with witness testimony (California Healthline, 9/25/03). Hospitals say the relocation agreements "benefit society" because they persuade doctors to establish practices in rural areas, impoverished inner cities or other underserved areas, according to the Journal. But prosecutors say that sometimes the packages "amoun[t] to a bribe," with hospitals hoping to get business in "lucrative fields," such as heart surgery, the Journal reports. The Alvarado case is set to go to trial in October (Wall Street Journal, 6/11).