Tenet Healthcare Corp., Dallas, filed a federal lawsuit alleging that Community Health Systems systematically overbilled Medicare for patients who did not need to be admitted to the hospital.
CHS derided the move as a "scorched-earth" defense.
In a statement, CHS said Tenet's claims are without merit and the company will defend itself “against these unfounded and irresponsible claims.” Tenet is trying to distract its shareholders from the value of Community's offer to buy Tenet, according to the statement. “Its actions today prove that Tenet has adopted a ‘scorched-earth' defense without regard for the best interest of shareholders,” according to the statement.
CHS said it remains committed to its bid for Tenet. Credit Suisse and Goldman, Sachs & Co. reaffirmed their confidence that the transaction could win financing, according to the statement from CHS.
The lawsuit, filed in U.S. District Court in Dallas, claims CHS, based in Franklin, Tenn., admitted patients who should have been classified as outpatient observation patients, which led to overstated growth, revenue and profit for CHS.