An investigation of three Florida hospitals owned by Tenet Healthcare Corp. may give HHS its first opportunity to impose civil monetary penalties in a kickback case.
HHS' inspector general's office is looking at whether the hospitals-211-bed Delray Community Hospital in Delray Beach, 267-bed Palms of Pasadena Hospital in St. Petersburg and 391-bed North Ridge Medical Center in Fort Lauderdale-deliberately overpaid for physician practices in exchange for patient referrals.
The investigation began last month when Santa Barbara, Calif.-based Tenet and 24 physicians employed at the hospitals received civil subpoenas requesting information about the way the deals were structured (May 25, p. 3).
Tenet's stock price has slipped since the news hit. Late last week, shares were priced at $35, down nearly $2.
A provision of last year's federal balanced-budget law allows HHS to impose civil monetary penalties for anti-kickback violations. Prior to that, the agency had only the most extreme penalties at hand: expulsion or suspension from Medicare and Medicaid for a civil violation or possible fines and imprisonment for a criminal violation.
"The inspector general may see this case as a means of test driving that civil monetary penalties," said Edward Hopkins, a fraud and abuse attorney with Steel Hector & Davis in West Palm Beach, Fla. "It may not be so egregious to warrant exclusion or a criminal case. But civil penalties could make for a stiff slap on the wrist."
HHS has made it a priority to look at hospital ownership of physician practices, calling for a study of the matter in its 1998 work plan.
It comes as no surprise that the agency started its study in Florida, a mature healthcare market where buyers compete fiercely for practices.
"For a period of three to four years this decade, it was really a sellers' market," Hopkins said. "All the physician practice management companies operate down here, and prices can inflate when people are heatedly bidding for them."
The average price per physician paid for practices in 1997 was $814,595, according to New Canaan, Conn.-based Irving Levin Associates (May 18, p. 22). That's down from the $918,260 per physician paid in 1996.
North Ridge, the focus of the investigation, is no stranger to trouble.
In 1995 the Joint Commission on Accreditation of Healthcare Organizations put the hospital on probation while it reviewed its accreditation status. The move came after a survey team cited the hospital for violations of standards during a surprise visit. The hospital eventually regained accreditation status.
North Ridge also ran into some trouble with the federal government in 1996, when it paid a $23,500 civil monetary penalty to resolve charges that it "dumped" a patient two years earlier. Federal law requires hospitals to provide basic medical screenings to all patients who show up in their emergency departments regardless of ability to pay.
North Ridge did not admit to any wrongdoing as part of that settlement.
Tenet itself survived sweeping federal and state investigations. Then known as National Medical Enterprises, the company in 1994 paid $379 million and pleaded guilty to six counts of paying illegal kickbacks to generate business at its psychiatric hospitals (July 4, 1994, p. 2).