One federal investigation of Tenet Healthcare Corp. has been completed. The Santa Barbara, Calif., company said last week that it will pay the federal government $54 million to settle any civil claims that may arise from the investigation of two physicians at its 188-bed Redding (Calif.) Medical Center.
Federal authorities are probing allegations that the physicians performed medically unnecessary procedures and then falsely billed Medicare and other government health programs for the procedures.Tenet said the company, its subsidiaries and Redding Medical all denied knowingly submitting false claims to government healthcare programs. Tenet did not admit any liability under the settlement.
Still, the Redding Medical settlement doesn't take Tenet off the hook for all potential federal penalties. The U.S. attorney's office in Sacramento, Calif., said it is continuing its investigation to determine whether Tenet and the hospital, or their employees or any physicians, should be excluded from government healthcare programs. Prosecutors will not pursue criminal charges against the company, its subsidiaries or Redding Medical.
The small island of certainty that the settlement brings seems surrounded by a deep sea of uncertainty, on both the legal and financial fronts.
On the financial side, Tenet last week reported a loss of $195 million, or 42 cents per share, for the quarter ended June 30, compared with profits of $242 million, or 48 cents per share, a year ago. The company said the enormous drop in the company's Medicare outlier payments-to $16 million for the quarter, down 92.8% from $223 million a year ago-and charges related to the investigations and Tenet's restructuring were behind the sharp reversal.
Trevor Fetter, Tenet's president and acting chief executive officer, pointed to the company's 2.5% increase in inpatient admissions for the quarter, the Redding Medical settlement and cost-cutting efforts as examples of how his new management team is stabilizing the company. Outpatient visits fell 1.2% for the quarter.
But during a conference call with investors last week, Fetter acknowledged that it's still too early to say how the tempest of the last nine months will affect Tenet in the long term, saying it will be at least a few more quarters before that's apparent.
Tenet's areas of potential liability are multiple. The company still faces potentially hundreds of lawsuits alleging malpractice and fraud filed in Shasta County (Calif.) Superior Court by Redding Medical patients not covered under government health programs. Christi Sulzbach, Tenet's chief corporate officer and general counsel, said the company is fighting to restrict those lawsuits to malpractice claims, which, even if successful, are capped at $250,000 by California law and are covered by insurance. Sulzbach said last week that successful fraud claims would not be covered by insurance.
Doug Mudford, a partner with the Redding law firm of Barr & Mudford, said upwards of 2,000 patients were looking to have their cases reviewed as of three months ago. His firm has filed lawsuits covering 80 to 100 patients whose procedures medical experts have deemed unnecessary. The firm's experts have validated claims for another 40 to 60 patients whose cases haven't been filed yet, he said, and the experts are reviewing 100 other claims.
So far, these are "the strongest cases that either my partner or I have seen since we began practicing law," and they have a combined 47 years of practice, Mudford said. "We are not taking any cases where our experts start out by saying, `This is an opinion' or `This is the doctor's call,' " he said. In some cases, patients had their chests cut open and received multiple-artery bypasses-up to six arteries-where the angiograms show healthy arteries, he said.
Another Redding firm, Reiner, Simpson, Timmons & Slaughter, has filed complaints covering 112 patients and expects to file complaints covering 300 to 400 more patients this week, partner Bob Simpson said. The Redding Medical settlement strengthens the fraud claims of his clients, Simpson said. "They just admitted that the surgeries were unnecessary by paying the settlement," he said. "That's not malpractice, that's fraud."
Tenet spokesman Harry Anderson said the settlement explicitly states that Tenet, its subsidiaries and Redding Medical admit no wrongdoing. As for Mudford's contention that his cases are strong, Anderson said, "It's his opinion. Unlike these lawyers, we're not going to litigate in the press, but we do intend to fully litigate and defend ourselves in court."
Sulzbach also said an element of another federal probe of Tenet is complete. HHS' inspector general's office wrote in a letter to Tenet that it wrapped up its audit of Medicare outlier payments to three unnamed Tenet hospitals a few weeks ago, Sulzbach said. The audit findings were forwarded to the U.S. Justice Department, she said.
The department, acting through the U.S. attorney in Los Angeles, is investigating whether Tenet broke any Medicare laws or regulations in receiving outlier payments that were about four times the average for hospitals as a percentage of inpatient Medicare reimbursements. Sulzbach did not say whether Tenet was informed of the findings.
The Securities and Exchange Commission is investigating the outlier payments and certain stock sales by undisclosed investors, Tenet said last month.
Redding Medical and Medicare outliers are only two of the known federal investigations of Tenet. Tenet's 311-bed Alvarado Hospital Medical Center, San Diego, the subsidiary that owns the hospital and Alvarado's CEO, Barry Weinbaum, all have been indicted on charges that Weinbaum oversaw $10 million in physician relocation payments that broke the federal antikickback law.
The case is being prosecuted by the U.S. attorney in San Diego. HHS' inspector general, the U.S. attorney in Los Angeles and the Florida Medicaid program also have issued civil investigative demands or subpoenas related to physician relocation agreements.