Tenet Healthcare Corp.'s latest legal headache-a racketeering charge brought by Florida's attorney general-may mushroom into another raft of potentially costly lawsuits against the company should other states follow suit.
"If this case has any success at all, that's the significance," said Gabriel Imperato, a lawyer and chairman of the white-collar crime and civil fraud group for the firm Broad and Cassel. "Other attorneys general will be watching it closely."
Others may watch and wait, but Tenet reacted quickly. "It's an issue right now," said E. Peter Urbanowicz, the Dallas-based hospital chain's general counsel, in an interview. "We're taking this seriously."
Florida Attorney General Charlie Crist and the state's 13 public hospitals sued Tenet last week, alleging the for-profit hospital chain illegally inflated its Medicare bills and gained $1 billion in extra payments earmarked for extremely ill patients at the expense of Florida's public hospitals, among others.
The complaint, filed March 2 in U.S. District Court in Miami, said Tenet's overblown bills pushed Medicare's yearly spending for its sickest enrollees over budget from 2000 to 2002.
In response, Medicare made it harder for all U.S. hospitals to receive extra reimbursement, known as outlier payments, for complicated, costly patients. That left Florida's public hospitals unable to offset costs that would have otherwise been covered by Medicare, the lawsuit said. Tenet's gains caused "direct, foreseeable and substantial economic harm" to the state's public hospitals, according to the complaint.
Crist's lawsuit alleges Tenet broke federal and state racketeering laws and seeks unspecified damages, demanding that Tenet disgorge revenue from "unfair competition or unconscionable, unfair or deceptive acts."
Urbanowicz called the lawsuit's allegation's "unwarranted" and Crist's decision to bring charges on racketeering "novel." Medicare officials control outlier spending criteria, said Urbanowicz, who argued the federal budget for outliers is not a fixed figure, but rather a range that serves as a target for expenses.
"Frankly, we are surprised that the plaintiffs would bring this suit, more than two years after Tenet voluntarily reduced the amount of outlier payments we received from the Medicare program and adopted stringent new policies governing such payments well before federal regulators promulgated such policies for the entire hospital industry," Urbanowicz said in a news release.
Urbanowicz also questioned why only Tenet hospitals were named in Crist's suit when a number of U.S. hospitals have been singled out for high outlier payments (July 14, 2003, p. 4).
Since late 2002, Tenet has been dogged by investigations into its business practices, including an inquiry into its high Medicare outlier payments by HHS' inspector general, which has turned into to an ongoing probe by the U.S. Justice Department.
Tenet owns or operates 15 hospitals in Florida, but the lawsuit cited Tenet hospitals in Alabama, California, Georgia, South Carolina and Texas for allegedly manipulating Medicare to boost outlier payments.
Bert Fish Medical Center is among the Florida public hospitals crying foul. Jim Heekin, an attorney with the firm Lowndes Drosdick Doster Kantor & Reed, which represents Bert Fish, said the 116-bed hospital in New Smyrna Beach joined the lawsuit to recoup local tax dollars spent to cover patients' bills that would have been covered by Medicare were it not for Tenet's high outlier payments.
In California, where Tenet owns 26 hospitals and leases 11 more, Attorney General Bill Lockyer is looking into several issues regarding Tenet, said Tom Dresslar, a Lockyer spokesman. He declined to be more specific or comment on the Florida lawsuit.
That suit may, however, present a threat to Tenet beyond its possible imitation in other states, Imperato said. Crist's lawsuit alleges racketeering, which could triple any damages, Imperato noted. "It's kind of a hammer," he said.