When Tenet Healthcare Corp. bought OrNda HealthCorp last week, it also inherited a federal investigation into 12 former OrNda hospitals, according to federal documents filed in connection with the acquisition.
Tenet's acquisition of OrNda was finalized last week following by shareholders and an antitrust settlement with the Federal Trade Commission (See story, p. 4).
In documents filed with the Securities and Exchange Commission, Tenet for the first time publicly disclosed the existence of a civil false claims and kickback investigation of the OrNda facilities.
According to the documents, the federal probe, being conducted by HHS' inspector general's office, initially focused on Midway Hospital Medical Center in Los Angeles and "certain of Midway's compensation arrangements with its physicians."
The anti-kickback provisions of the Medicare and Medicaid fraud-and-abuse statutes bar any form of remuneration to induce patient referrals. Violations can be criminal, punishable by fines and imprisonment, or civil, punishable by suspension or expulsion from Medicare and Medicaid.
"OrNda believes that the OIG investigation continues to be a civil investigation focused primarily on arrangements between physicians and the hospitals that may violate Medicare rules and regulations and not on the hospitals' Medicare or Medicaid billing practices," Tenet said.
OrNda acquired Midway and the 11 other hospitals involved in the probe from Burbank, Calif.-based Summit Health in April 1994 for $370.8 million.
"It's my understanding that this inquiry dates back to pre-OrNda ownership of the old Summit facilities, and will not pose any material threat to either the hospital or the company as a whole," said Christie Sulzbach, Tenet's communications director. "This will be resolved in the near future."
The investigation began in February 1996, when HHS hit Midway with a subpoena seeking documents. Over the past year, the investigation has expanded to include the other facilities.
Until the documents were filed with the SEC, the investigation "was filed under a court-ordered seal that prohibited OrNda from disclosing the action prior to this time," documents said.