Tenet Healthcare Corp., Santa Barbara, Calif., announced Tuesday it would pay $55.75 million to resolve civil charges relating to national clinical laboratory billing violations and fraud at two of its hospitals, although the company denied any wrongdoing.
The settlement announcement makes Tenet the third national for-profit chain to settle healthcare fraud allegations in the past two years. In December 2000, HCA, Nashville, paid $840 million to settle civil and criminal fraud charges. In April 2001, Quorum Health Group, Brentwood, Tenn., announced a $95.5 million civil fraud settlement. Triad Hospitals, Dallas, purchased Quorum last year.
Tenet, which owns 115 hospitals in 17 states, will pay $29 million to settle allegations that its 360-bed Palmetto General Hospital, Hialeah, Fla., defrauded Medicare by filing fraudulent cost reports through its home health agency, which it closed in 1998. Tenet purchased Palmetto, ranked as one of the nation?s top 100 hospitals in several different polls, when it bought American Medical International in 1995.
Tenet also will pay $9.75 million to settle cost-reporting fraud allegations at its 244-bed Brotman Medical Center, Culver City, Calif. The Brotman case was triggered by a 1998 whistleblower lawsuit filed in U.S. District Court in Los Angeles by former Brotman Controller William Noll. Noll alleged that between 1991 and 1998 Brotman sought higher reimbursements by shifting costs from its acute-care inpatient units, which were paid on a prospective system, to its rehabilitation units, which were reimbursed on a cost basis. Tenet purchased Brotman in its 1997 acquisition of OrNda Corp.
Tenet also agreed to pay $17 million to resolve issues relating to clinical laboratory unbundling fraud at 139 current and former Tenet facilities. This portion of the settlement is part of a national initiative by HHS? Inspector General and the U.S. Justice Department. Nationally, more than 350 hospitals have paid more than $100 million in the initiative.
While Tenet announced the settlement agreement with a news release, the Justice Department confirmed only two of the three settlements. Neither the U.S. attorney in Miami, the U.S. Justice Department nor HHS? inspector general had copies of the Palmetto settlement, which has not been released and details of which were not publicly available.
In the settlements, Tenet denied wrongdoing.
Christi Sulzbach, Tenet?s executive vice president and general counsel, said in a statement that Tenet cooperated in the investigation. ?We decided to settle them in the best interests of our hospitals and our shareholders,? Sulzbach said.
?Healthcare is such a highly regulated industry and as such is subject to frequent and careful scrutiny by state and federal regulators, as well as qui tam (whistleblower) cases,? she said, noting the company has a rigorous compliance program in place and does not anticipate further compliance obligations resulting from the settlements.
Noll?s whistleblower lawyer, Stephen Meagher of Phillips & Cohen, San Francisco, said the case is ?another example of how providers can game the system from noncost reimbursement to cost reimbursement systems.? Meagher alleged that Brotman defrauded Medicare of more than $5 million through the cost shifting.
Meagher said that Noll repeatedly reported the fraud and filed the whistleblower lawsuit under the federal False Claims Act as a last resort. Noll will receive nearly 20% of the settlement, about $1.93 million, for reporting the alleged fraud.
Tenet previously established a reserve for the settlement amount. Tenet stock was trading up $1.80, or 2.41%, Tuesday afternoon, at $76.50 per share.