Tenet Healthcare Corp. (NYSE: THC), which operates 50 hospitals, over 100 free-standing outpatient centers and Conifer Health Solutions, announced that it has entered into an agreement as part of a settlement agreement with the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) which will result in approximate net cash proceeds to Tenet of what it said is a total of $84 million.
The settlement corrects underpayments from the Medicare inpatient prospective payment system during a number of prior years.
On April 5, the CMS said it entered into three settlement agreements, each of which involved several hundreds of hospitals as parties to resolve potential liability associated with an alleged error in calculating inpatient hospital rates under the inpatient prospective payment system.
In Cape Cod v. Sebelius (D.C. Cir. 2011), several hospitals alleged that the CMS had incorrectly applied the budget neutrality requirement to a provision of the Medicare statute which sets a state’s rural wage index as a floor for all hospitals in that state. After the D.C. Circuit decided in favor of the plaintiffs, Cape Cod and several other lawsuits brought by numerous hospitals raising the same issue were remanded back to CMS.
These settlements resolve most of the lawsuits as well as a number of administrative appeals before the agency by agreeing upon a methodology for calculating payments due to hospitals for deflated rates between fiscal years 2007 and 2011. They also resolve a potential liability for timely appealed claims that the rates were deflated between fical years 1999 and 2006 by agreeing upon a methodology for making discounted payments.
Of that amount, $77 million is expected to relate to continuing operations. The cash proceeds related to this settlement are expected to be received on or about June 30, 2012.
However, Tenet announced at the beginning of the week that it had entered into a voluntary civil settlement with the U.S. Attorney’s Office, Northern District of Georgia, the U.S. Department of Justice and HHS for a total of $42.75 million that it must pay. That settlement relates to a inpatient rehabilitation admissions at 25 Tenet inpatient rehabilitation units from 2005 to 2007.