Tenet Healthcare Corp., Dallas, has agreed to pay a $10 million civil penalty to settle 4-year-old charges that it concealed a scheme to meet earnings targets by exploiting a loophole in the Medicare payment system, according to the Securities and Exchange Commission. David Dennis, Tenets former chief financial officer, and Raymond Mathiasen, Tenets former chief accounting officer, also settled with the SEC, agreeing to pay fines of $150,000 and $240,000, respectively. Neither Tenet nor the two individuals admitted or denied any wrongdoing.
The settlements, filed in U.S. District Court in Los Angeles, stem from SEC allegations that Tenet and four former senior executives failed to disclose to investors that the companys strong earnings growth from 1999 to 2002 was driven largely by Medicare outlier payments. Those payments, and similar ones from private insurers known as stop-loss payments, rose rapidly after Tenet hospitals began sharply increasing their list prices in 1999. Once the company revealed its scheme to shareholders and admitted the strategy was not sustainable, the market value of its stock plunged by more than $11 billion, the SEC said.
Charges against the two other executivesTenets former chief operating officer, Thomas Mackey, and former general counsel, Christi Sulzbachare still pending, the SEC said.
Tenet and the Justice Department agreed in June to a related $900 million settlement.
Separately, Tenet completed the previously announced sale of its 181-bed Graduate Hospital, Philadelphia, to University of Pennsylvania Health System. Pre-tax proceeds from the sale, estimated at $16.5 million, will be used for general corporate purposes, Tenet officials said. With the Graduate deal, Tenet has completed the sale of eight out of the 13 hospitals that it had previously earmarked for divestiture. -- by Laura B. Benko