As a possible prelude to a merger with Columbia/HCA Healthcare Corp., Tenet Healthcare Corp. cleared the books on a fraud investigation of its own stemming from its January acquisition of OrNda HealthCorp.
That may be the latest example of a company settling major fraud charges just before announcing a large merger or acquisition (July 14, p. 14).
Spokesmen for both Tenet and the U.S. attorney's office in Los Angeles said the timing of the fraud settlement is coincidental.
"It's got nothing to do with that," said Thom Mrozek, a spokesman for the U.S. attorney's office.
"When you acquire something, you get the assets and the liabilities," said Lance Ignon, a Tenet spokesman.
HHS' inspector general's office signed off on the settlement June 11. The U.S. Justice Department's civil division did so two weeks later, June 25. But the U.S. attorney's office and Tenet announced it publicly after the stock market closed on July 23-the day unconfirmed reports arose of merger talks between Tenet and Columbia.
Under the settlement, Tenet agreed to pay a civil monetary penalty of nearly $13 million to settle charges that several hospitals it inherited from OrNda paid illegal kickbacks to physicians for patient referrals.
The anti-kickback provisions of the Medicare and Medicaid fraud and abuse statutes bar any form of remuneration to induce patient referrals.
The settlement resolves a 1995 "whistleblower" lawsuit brought by the former chief of surgery at Midway Hospital Medical Center, Los Angeles. The government had intervened in the case. The doctor who filed the original lawsuit will receive more than $2.3 million.
While the settlement names 11 hospitals, the U.S. attorney's office said four hospitals primarily were involved in the case. In addition to Midway, they are Doctors/Santa Ana (Calif.) Hospital Medical Center; St. Luke Medical Center in Pasadena, Calif.; and Whittier (Calif.) Hospital Medical Center.
According to the settlement, from 1992 to 1996 the hospitals had compensation arrangements and other contractual ties with physicians that essentially disguised kickbacks for patient referrals.
Because of that, the government also accused the hospitals of violating the federal False Claims Act by submitting bills to Medicare for services connected to the alleged kickbacks. The settlement doesn't reveal how many claims were filed or their value.
The companies have denied the allegations, and the settlement isn't an admission of wrongdoing. Also, the settlement didn't require a compliance plan because all former OrNda hospitals are subject to Tenet's existing corporate integrity plan.