Tenet Healthcare Corp. barely had time to recover from one public relations challenge last week when federal agents raided one of its California hospitals searching for evidence of false billings and unnecessary heart procedures. The raid started a chain reaction that jolted the investor community and caused the company's stock to plunge, putting its executives on the defensive.
On Oct. 30, agents and investigators from the FBI, the Internal Revenue Service, the U.S. attorney's office in Sacramento, and the San Francisco regional office of HHS' inspector general raided Tenet's 188-bed Redding (Calif.) Medical Center. It is unclear what degree of civil or criminal liability the 113-hospital chain, based in Santa Barbara, Calif., faces.
Government investigators executed search warrants at Redding and the offices of two of its leading physicians. Affidavits seemed to focus on the practices of the two nonemployed physicians practicing there. The investigators were seeking to learn whether Chae Hyun Moon, M.D., 55, Redding's cardiology director, and Fidel Realyvasquez Jr., M.D., 53, chairman of cardiac surgery, performed unnecessary angioplasties, coronary bypasses and heart catheterizations and later falsely billed Medicare. In affidavits filed in U.S. District Court in Sacramento, FBI Special Agent Michael Skeen said he is investigating allegations that the two men conspired to commit healthcare fraud, committed healthcare fraud and made false statements. The physicians did not respond to Modern Healthcare's requests for comment.
Government agents carted away hundreds of boxes of evidence from quality assurance, medical records, cardiology, catheterization laboratories and the hospital's storage center.
Moon and Realyvasquez have not been charged in the case.
"Based on the investigation to date, I expect to find that patient records, tests and other documentation will show that many patients did not suffer from any significant coronary artery disease which required immediate invasive coronary procedures and that these procedures were performed unnecessarily," Skeen's affidavit said, noting the doctors are the highest Medicare cardiology billers in Northern California.
Skeen estimated that one-quarter to one-half of the patients underwent unnecessary cardiac procedures and 167 died.
After news of the raid publicly appeared Oct. 31, investors responded by selling Tenet shares; prices fell to a 52-week low of $28.75 per share, down $10.22 per share, or 26%, in a matter of hours. The New York Stock Exchange halted trading of Tenet stock, which already had suffered a hit earlier in the week (See related story, p. 8). The following day a lawsuit was filed in U.S. District Court in New York on behalf of shareholders who bought Tenet stock on Oct. 31. The suit, filed by law firm Wolf Popper in New York, alleged the company knew of the raid Oct. 30 and did not disclose it.
Both Tenet and HCA, the nation's largest for-profit hospital chain, have suffered legal troubles that affected their stock prices. The raid on Tenet's Redding Medical Center, in fact, resembles one conducted by federal authorities at an HCA hospital in Fort Pierce, Fla., in April 2001. In that case, government investigators hauled off truckloads of documents relating to billing records for two pathologists at Lawnwood Regional Medical Center. The two allegedly charged Florida's Medicaid program for unnecessary procedures they performed. Earlier this year, Leonard Walker, M.D., and John Minarcik, M.D., both pleaded guilty to Medicaid fraud. Each faces up to 10 years in prison and $250,000 in criminal fines as well as restitution. HCA spokesman Jeffrey Prescott said the two doctors no longer practice at Lawnwood. The hospital was never charged in the case.
But Tenet's plummeting stock value last week sparked a feeding frenzy and a spate of rumors that put the company's executives on the defensive.
As its stock price fell, Tenet issued a written statement in which officials said they were deeply concerned about the allegations but had no reason to believe they are true. Tenet said it would conduct its own investigation and is cooperating with the U.S. attorney's office.
In its statement, Tenet emphasized that the decision to perform surgery is the doctor's and not the hospital's.
According to unnamed government witnesses cited by the FBI in the affidavit, hospital medical staff members were concerned about the high volume of procedures and told hospital administrators they believed many were unnecessary and put patients at risk. A physician witness interviewed by government agents reported that the hospital's chief executive officer seemed unsettled by the news but initiated no review, Skeen said.
Redding's CEO's knowledge of the events may interest government prosecutors, although Laura Swartz, assistant U.S. attorney in Sacramento, said the current focus of the investigation is on the two physicians.
Healthcare defense lawyer Sandy Teplitzsky of Ober Kaler Grimes & Shriver in Baltimore said Tenet signed one of the first corporate integrity agreements establishing a corporate compliance program and as such may face additional government scrutiny if the allegations prove true. Teplitzsky, who has no connection to the case, said government prosecutors take a dim view of healthcare organizations whose compliance programs don't work.
"What should happen is that the CEO should ensure the issue is addressed through the compliance process," he said. "If that's not done, it could cause problems. The government's view is it's almost worse to have no compliance program at all than to have one that is ineffective. That gives the perception that the provider doesn't care and that compliance is not a priority."
In a written statement, the hospital confirmed that the raid occurred and said, "We believe that the hospital has in all instances acted appropriately and continues to be dedicated to providing quality patient care. We have no further comment at this time."
Though Tenet spokesman Harry Anderson would not comment on specific allegations, he vowed that the company would launch its own internal investigation and hire outside consultants and cardiologists to examine the records and advise the company of any failings in the internal process.
"Our initial review found no failings," Anderson said. "We're taking this very seriously. But we want to emphasize that hospitals have to rely on the professional judgment of their doctors, since they make all the necessary medical decisions, not us."