Tenet Healthcare Corp. may be forced to close or sell its Alvarado Hospital Medical Center, San Diego, in the wake of last week's proposed exclusion of the for-profit hospital from federal health insurance programs by HHS' Inspector General Daniel Levinson for alleged violations of the federal anti-kickback law.
After Levinson's May 8 announcement, Tenet said it viewed the proposed exclusion as "a death sentence" that could close the 151-bed hospital, while industry legal experts predicted the nation's second largest hospital chain could be forced to sell the hospital before any threatened exclusion.
Levinson notified Dallas-based Tenet that he proposed to exclude Alvarado from Medicare and Medicaid, the financial kiss of death to a hospital that depends on government health insurance programs for more than half its total charges. Levinson said his office would use its exclusion authority under the anti-kickback law based on inspector general allegations that the hospital paid kickbacks to induce physician referrals from 1992-2003.
Alvarado has 30 days to challenge the proposed exclusion and the right to an HHS administrative hearing.
In 2003, the U.S. attorney in San Diego charged Tenet; Alvarado CEO Barry Weinbaum; and the hospital's former director of physician relations, Mina Nazaryan with paying more than $10 million in kickbacks to recruit about 100 physicians to Alvarado in an alleged scheme to refer patients. According to the government's complaint, Alvarado allegedly disguised the kickbacks as physician relocation agreements to reward existing physician practices (June 9, 2003, p. 3). Two juries failed to reach verdicts in two lengthy criminal trials -- most recently in April, a federal judge declared a mistrial.
"This signals to me that there probably won't be a third trial," said former Justice Department official Stuart Gerson, an attorney with the Washington office of Epstein, Becker & Green. "It looks as if the individual defendants will be spared exclusion, assuming they're not tried criminally. And it also means that Alvarado will probably be sold."
However a spokeswoman for the U.S. attorney in San Diego, Carol Lam, declined comment and pointed out that the government opposed a Tenet motion for acquittal, leaving open the possibility of another trial. The move to exclude would be the second for Tenet in less than three years. In 2003, when Tenet was faced with the threat of exclusion for its troubled Redding (Calif.) Medical Center, it agreed to sell the hospital (Sept. 8, 2003, p. 8).
In a letter to Tenet, Levinson cited physician relocation agreements and said the newly recruited physicians did not benefit from the practice, but the existing physician groups did. The inspector general's office "contends these often-excessive payments actually were used to buy referrals," Levinson wrote. In addition to the threatened Redding exclusion, in December 2005, the inspector general excluded 155-bed South Beach Community Hospital in Miami Beach, Fla., but that facility already ceased operations (Dec. 12, 2005, p. 8).
In its quarterly earnings call last week, Tenet General Counsel E. Peter Urbanowicz said Tenet would continue to pursue a global settlement of its legal troubles in negotiations with the U.S. Justice Department despite the exclusion notice. "Just the notion of putting an exclusion notice out there is something of a death sentence for the hospital and really unwarranted given the factual circumstances out there," he said.
-- with Vince Galloro