After an attempted hostile takeover bid by Community Health Systems, Tenet Healthcare Corp. is alleging that its rival in the hospital operating business has been systematically overbilling Medicare for years. Tenet, which is smaller than Community and has 49 hospitals in 11 states, says it uncovered the overbilling while researching Community’s offer and has decided to reject it.

The charge against Community involves that company’s practice of formally admitting for care thousands of patients who ought to have been kept for less-expensive observation only. Tenet claims that due to this practice Community receives an average of $3,300 more per patient and has filed a complaint with regulators charging Community with improperly billing Medicare between $280 and $377 million for the three years beginning in 2006.

Community has strongly refuted the charge, dismissing it as a tactic designed to draw attention away from its takeover bid. “[Tenet's] actions today prove that Tenet has adopted a ‘scorched earth’ defense without regard for the best interests of shareholders,” according to Community.

Tenet claims that Community holds patients for observation at a rate less than half the national average and admits the remainder, claiming “no legitimate explanation for the difference.” For its part, Community says it runs its 130 hospitals in 29 states with “utmost integrity and adheres to the highest business practice standards.”

The complaint by Tenet could result in closer scrutiny of Community’s reimbursement submissions by Medicare, Medicaid and private insurers.

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