BUSINESS

The hospital chain defends its policy on physician relocation agreements.

By Katherine Vogt, AMNews staff. Aug. 4, 2003.

Two subsidiaries of Tenet Healthcare Corp. have been indicted on charges of paying illegal kickbacks to doctors who referred patients to a San Diego hospital, and the federal government has expanded its inquiry into the company's physician relocation agreements.

The indictment alleges that Alvarado Hospital Medical Center and Tenet Health System Hospitals Inc. paid more than $10 million to fund more than 100 physician relocation agreements between 1992 and 2002 to recruit medical services to the Alvarado service area. But the indictment said a "substantial portion" of the money went to established doctors to induce them to make referrals to Alvarado.

"Kickbacks to doctors can wear many disguises, including sham relocation agreements. They are still kickbacks, they are still illegal and they threaten the integrity of our medical system," said U.S. Attorney Carol Lam.

Trevor Fetter, Tenet's president and acting chief executive officer, said the indictment was a broad attack on "a well-established, lawful and common means by which U.S. hospitals attract needed physicians to their communities. We are confident that our corporate policy on physician relocation agreements is entirely appropriate under the law, and we intend to defend ourselves vigorously."

Alvarado's chief executive officer, Barry Weinbaum, was indicted in June on charges of making illegal payments to doctors to induce patient referrals. He pleaded innocent and Tenet said it expected him to be vindicated.

The latest indictment, from a federal grand jury July 17, came on the heels of an announcement by Tenet that the federal government had expanded its inquiry into the hospital chain's doctor recruitment deals.

The Santa Barbara, Calif.-based company said July 15 that it had received subpoenas from the U.S. Attorney's Office for information about doctor relocation agreements since 1995 related to seven Tenet hospitals in Southern California, as well as summary information about those agreements at all of Tenet's hospital subsidiaries. A Tenet spokesman said there were no plans to suspend such dealings while the probe continues.

Under a typical physician relocation agreement, a hospital pays some moving costs for a physician to relocate to a community as well as an income guarantee in exchange for a commitment from the physician to practice in the community for a minimum period of time.

Of the 42,000 physicians with admitting privileges at Tenet's 114 hospitals, fewer than 2.5% have relocation agreements, the company said.

The investigation and indictment are the latest blows for Tenet, which has been accused in a federal lawsuit of overbilling Medicare. The FBI also is investigating claims that two physicians at a Redding, Calif., Tenet hospital performed unnecessary heart operations.

In addition, the Internal Revenue Service is looking into whether the company owes $269 million in back taxes and interest. And the company's CEO recently resigned.

Copyright 2003 American Medical Association. All rights reserved.