Tenet in $900 Million Settlement
Published June 30, 2006
DALLAS, June 29 (AP) -- The Tenet Healthcare Corporation, the hospital operator, has reached a $900 million settlement with federal officials to end investigations into accusations of overbilling Medicare. In addition, the company plans to sell about a dozen hospitals in an effort to regain its financial footing.
The settlement -- valued at about one-fourth of Tenet's stock market value -- will be paid over four years and ends all federal investigations by the Department of Justice and several United States attorneys, Tenet said.
The deal means that there will be no finding that Tenet broke the law, but the company's chief executive, Trevor Fetter, said Tenet "made mistakes" before 2003, when the company came under investigation.
The settlement ends investigations by federal prosecutors in Los Angeles, San Francisco, St. Louis, New Orleans, Memphis and El Paso.
Tenet will pay $725 million plus interest to settle accusations that it overbilled Medicare for the most costly cases, made illegal kickbacks to doctors to refer Medicare patients to its hospitals and used improper billing codes to bilk the program.
The company said it would pay $450 million plus $20 million interest immediately and pay off the balance by mid-2010. The company also agreed not to seek an additional $175 million that it argued it was owed by Medicare.
Some analysts had expected Tenet to pay even more -- estimates ran as high as $1.5 billion. Prosecutors said the final amount was based on Tenet's ability to pay.
Mr. Fetter, who became chief executive in 2003, said, "Some of this company's past actions did not measure up to the high standards that we have imposed on ourselves."
Tenet executives had hoped that with a settlement, the company would put behind it a series of investigations and lawsuits that have alienated doctors and sent Tenet's stock price plunging. They even raised their outlook for 2006 operating profit by $25 million, saying the results would range from a pretax loss of $75 million to a pretax gain of $25 million.
Investors responded tepidly to the deal. Tenet shares fell 13 cents, to $7.10, on a day when the Dow Jones industrial average rose more than 200 points.
The settlement did not end a Securities and Exchange Commission investigation into the company's disclosure of Medicare and managed care payments.
Kemp Dolliver, an analyst with Cowen & Company, said investors might have reacted negatively to the news that Tenet will sell more hospitals and that its profit outlook is not as rosy as same forecasters had hoped.
Tenet said it would sell about a dozen hospitals by mid-2007. Four are in New Orleans, including Memorial Medical Center, where more than 40 bodies were discovered after Hurricane Katrina last year.
Click here to return to our homepage