Hospital on the block
HHS agrees to sale of troubled Tenet facility to avoid its exclusion from Medicare and Medicaid
Tenet Healthcare Corp. last week became the first company to announce the sale of a hospital to avoid its exclusion from Medicare and Medicaid.
Tenet announced that it planned to sell its troubled 238-bed Redding (Calif.) Medical Center by mid-2004 as part of an agreement with the HHS inspector general that would preclude the hospital's exclusion from the federal health programs. The hospital has been the subject of multiple civil investigations into unnecessary cardiac procedures and surgeries performed by two physicians there. Tenet or its predecessors have owned the 53-year-old hospital since 1972.
"When hospital quality-review systems break down and unnecessary medical care is provided, we will use our authorities to remedy the problem," Dara Corrigan, the acting principal deputy inspector general, said in a news release. If Tenet divests according to the agreement, details of which have not been disclosed, the hospital will not be excluded. However, HHS may reconsider exclusion or may impose civil monetary penalties if Tenet fails to comply, Corrigan said.
"A new owner will be able to buy the hospital free from the contemplated exclusion," Tenet said in a news release, adding that the sale "would be in the best interests of the hospital's employees, patients and physicians in the Redding community."
Healthcare lawyers said the announcement shows that the inspector general took into consideration the effects Medicare and Medicaid exclusion could have on patient care.
"This action sends a message that the inspector general recognizes how devastating exclusion can be to access to care in a community," said healthcare fraud lawyer Sandy Teplitzky of the firm Ober Kaler. "Exclusion is the economic death penalty."
All things being equal, he said, the inspector general would rather not close down a hospital, but in situations where HHS does not trust the hospital owner, "The sale to avoid exclusion may be a way of ensuring continuity of care in the community while removing the owner."
The inspector general's office announced in September that it would begin proceedings to exclude Redding for alleged quality-of-care violations. One month earlier Tenet had agreed to pay $54 million to settle civil allegations that its cardiology director, Chae Hyun Moon, and its chairman of cardiac surgery, Fidel Realyvasquez Jr., performed unnecessary angioplasties, coronary bypasses and heart catheterizations and later falsely billed Medicare. Tenet settled without admitting wrongdoing.
That settlement and the proposed exclusion stemmed from an Oct. 30, 2002, raid by agents from the FBI, HHS inspector general and Internal Revenue Service on Redding and the offices of the two doctors (Nov. 4, 2002, p. 5). In an FBI agent's affidavit released at the time, witnesses alleged that doctors and patients had complained to the hospital's administrator about the medical necessity of procedures performed at Redding by the two, but the complaints were allegedly ignored. While the civil settlement resolved Tenet's civil and criminal liability, criminal investigations by the U.S. attorney in Sacramento, Calif., and the FBI continue against Realyvasquez and Moon, though neither physician has been charged and neither maintains staff privileges at the hospital anymore. Tenet and Redding face hundreds of medical malpractice lawsuits and investigations by other state and federal agencies.
It's the first time since 1980 that the inspector general has sought an exclusion that was not mandated by a criminal conviction against an operating acute-care hospital, inspector general spokeswoman Judy Holtz said.
In November, the California Department of Health Services announced it would audit the Medicaid billings of all Tenet-owned hospitals in that state, saying it had identified $3 million in overpayments to Redding. Tenet had already repaid nearly $9 million in overpayments fr a two-year period ended May 31, 2001. Tenet disputed the new findings.
In a similar case as part of the negotiated $840 million civil and criminal fraud settlement in 2000 with Columbia/HCA Healthcare Corp., the predecessor of HCA, that for-profit chain agreed to sell its 233-bed Deering Hospital in Miami, but HCA already had planned on selling the hospital (Dec. 18, 2000, p. 3). In addition HCA agreed to exclude its Clearwater (Fla.) Community Hospital, but that hospital had shut its doors in February 1999.
In 2000, nursing home chain Beverly Enterprises paid $175 million to settle civil and criminal fraud charges in U.S. District Court in San Francisco. The agreement, which included a guilty plea, called for Beverly to sell 10 homes that engaged in billing fraud or face exclusion.
David Felsenthal, a principal at Wellspring Valuations, said crosstown rival 204-bed Mercy Medical Center Redding, owned by Catholic Healthcare West, is the likeliest bidder on the Tenet hospital. Joshua Nemzoff, a transactions consultant and president of Nemzoff & Co., said for-profit chains Vanguard Health Systems and HCA also might be interested. "As long as there's a handful of bids, it wouldn't be a fire sale," he said.
-with Vince Galloro
Oct. 31: Tenet discloses the
Aug. 6: Tenet and the
Aug. 22: Tenet names CandaceMarkwith as
Sept. 3: HHS' inspector general's office begins administrative process for excluding
Sept. 5: Dec. 11: Tenet announces that it will sell Source: Modern Healthcare reporting
Dec. 11: Tenet announces that it will sell
Source: Modern Healthcare reporting
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.