The Securities and Exchange Commission has subpoenaed Tenet Healthcare Corp. for patient-billing records dating back to 1997, Tenet said. The subpoena indicates the SEC has elevated its 8-month-old probe of Tenet into a formal investigation. The SEC began an informal inquiry last November, shortly after Tenet's relatively high Medicare outlier payments were revealed.
The subpoena demands billing documents dating back to May 31, 1997, and covers documents related to stop-loss payments as well as outlier payments. Like Medicare outlier payments, stop-loss payments made by private health plans are meant to compensate providers for extraordinarily costly cases.
The SEC also asked for documents related to increases in Tenet's gross charges, which the company has said helped fuel higher outlier payments. Santa Barbara, Calif.-based Tenet said in November that the SEC was informally investigating the outlier payments, high trading volume in Tenet stock and whether the company knew of suspicious trading activity by parties outside Tenet.
On Oct. 4, 2002, just weeks before the outlier revelations were made in a stock analyst's report, former Chief Operating Officer Thomas Mackey exercised options to acquire 277,500 shares for $15.75 each and immediately sold the shares for $51.50 each, netting $9.9 million. Mackey exercised the options on the first day he was eligible to do so, Tenet spokesman Harry Anderson said. Tenet can't comment on the SEC's probe beyond its news release, Anderson said.
The stepped-up SEC probe is the latest in a laundry list of pending federal investigations of Tenet since the outlier revelations. HHS' inspector general's office is auditing Tenet's outlier payments. The chief executive officer of Tenet's 311-bed Alvarado Hospital Medical Center, San Diego, was indicted last month on charges that he authorized illegal kickbacks. Prosecutors also are investigating allegations that two nonemployed physicians at Tenet's 188-bed Redding (Calif.) Medical Center performed medically unnecessary surgeries and falsely billed Medicare for them.