Metropolitan News-Enterprise


Friday, June 30, 2006


Page 1


Tenet Healthcare to Pay Record Whistleblower Settlement


From Staff and Wire Service Reports


Tenet Healthcare Corp., the nation’s second-largest hospital operator, will pay $900 million to settle allegations it overbilled Medicare, company and Department of Justice officials said yesterday

The settlement — valued at about one-fourth of Tenet’s stock-market value — will be paid over four years and ends all federal investigations by the Department of Justice and six U.S. attorneys, including Debra W. Yang of the Central District of California, the parties said.

“The Medicare program currently faces great challenges, and can ill afford attempts by hospitals to manipulate and cheat the system,” Yang declared in a statement. “This settlement demonstrates our strong commitment to recovering taxpayer funds from health care companies that break the rules in pursuit of higher profits.”Official said it was the largest amount paid by a single defendant in the 150-year history of the False Claims Act. Up to 25 percent of the settlement will be paid to whistleblowers who brought private actions—known as qui tam suits—based on inside information.

The deal means that there will be no finding that Tenet broke the law, but President and Chief Executive Trevor Fetter said the Dallas-based company “made mistakes” before 2003, when the company came under investigation.

Tenet will pay $725 million plus interest to settle allegations that it overbilled Medicare for the most costly cases, made illegal kickbacks to doctors to refer Medicare patients to its hospitals, and used improper billing codes to bilk the health care program.

The “upcoding” allegations were raised in three suits filed by Yang in 2003. Assistant U.S. Attorneys Gary Plessman, chief of the Civil Fraud Section, and  Cathy J. Ostiller worked on the cases.

Department of Health and Human Services investigators, based in Santa Ana, Kansas City, and Omaha were involved in the probe, as was the FBI.

Tenet said it would pay $450 million plus $20 million interest immediately and pay off the balance by mid-2010. The company also agreed not to seek an additional $175 million that it argued it was owed by Medicare.

Some analysts had expected Tenet to pay even more — estimates ran as high as $1.5 billion. Government attorneys said the final amount was based on the company’s ability to pay.

“Today’s settlement reflects our continued resolve to hold responsible those who engage in health care fraud in any form,” Assistant Attorney General Peter D. Keisler, head of the Justice Department’s Civil Division, said.

The agreement follows a $21 million settlement last month in which Tenet also agreed to sell a San Diego hospital as part of a charges that it made illegal kickbacks to doctors. Fetter, who became CEO in 2003, said “some of this company’s past actions did not measure up to the high standards that we have imposed on ourselves.”

Tenet officials had hoped that with a settlement of the Medicare suit, the company would put behind it a series of investigations and lawsuits that have alienated doctors and sent Tenet’s stock price plunging. They even raised their outlook for 2006 operating profits by $25 million, to between a pretax loss of $75 million to a pretax gain of $25 million.

But investors responded tepidly to the deal. Tenet shares fell 13 cents, or 1.8 percent, to close at $7.10 on the New York Stock Exchange. They have crashed from more than $50 in late 2002 to a range of $6.77 to $13.06 in the past year.

The settlement did not end a Securities and Exchange Commission investigation into the company’s disclosure of Medicare and managed-care payments.


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