Tenet Healthcare Corp. is in settlement talks with the government over allegations that four of its hospitals paid kickbacks for maternity referrals, the company said in a filing with the Securities and Exchange Commission this past week.
Tenet had already set aside $20 million to go toward a potential settlement of the matter -- but that amount may not cover the final cost, according to the filing.
Tenet said that the liabilities could exceed the reserve they established and could have a material adverse effect on their business, financial condition or cash flows.
Tenet did not return a request for additional comment Sunday. The company is facing a whistle-blower lawsuit and is also the subject of a criminal investigation by the U.S. Department of Justice over the issue.
The hospitals involved in the lawsuit and investigation are Atlanta Medical Center; Hilton Head (S.C.) Hospital; North Fulton Hospital, Roswell, Ga.; and Spalding Regional Medical Center, Griffin, Ga.
The civil complaint alleges that the hospitals paid kickbacks to a company called Hispanic Medical Management to send them pregnant women from the company's prenatal clinics to deliver their babies. Those patients—most of whom, according to the complaint, were in the country illegally—would then be eligible for emergency Medicaid services.
The government also alleged the hospitals included those patients when seeking additional Medicare dollars intended to support hospitals that treat large numbers of low-income patients.
Tenet has argued in court documents that its hospitals' contracts with Hispanic Medical Management were meant to “create a culturally sensitive and attractive prenatal environment for women” who might deliver their babies at the hospitals.
The management company provided translators and community outreach and helped families apply for emergency Medicaid coverage, according to Tenet. The government's allegations “rest on the hospitals' open desire to care for a deserving, but underserved population and the attractive solution they designed to do so,” the company said.
Tenet said in the filing that if it's unable to reach an agreement, “we intend to continue vigorously contest any allegations that we or our four hospital subsidiaries violated the law.”
The company had originally set aside the $20 million to reflect the low end of its potential liability in the civil case, and the amount related to an offer Tenet made to settle the civil case in 2013. That offer, however, was rejected, according to the filing.
As in this case, the Department of Justice has been increasingly interested in pursuing criminal charges in corporate healthcare fraud cases. The Justice Department recently adopted a procedure that ensures that its Civil Division shares all new whistle-blower complaints with its Criminal Division to allow the department to conduct parallel investigations.