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Tenet says hospitals target of criminal probe over kickbacks

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(Bloomberg) — Four Tenet Healthcare Corp. (NYSE:THC) hospitals are the target of a federal criminal probe into allegations executives paid kickbacks to obstetric clinics for patient referrals, the company said in securities filings.

The investigation arose from a 2009 whistleblower lawsuit accusing Tenet’s hospitals of paying local clinics to send pregnant, undocumented Hispanic women to their facilities for deliveries covered by Medicaid, officials of the Dallas-based hospital chain said in a May 4 filing.

Federal prosecutors told Tenet last month the hospitals, located in Georgia and South Carolina, were “designated as targets of the government’s criminal investigation,” the chain said in the U.S. Securities and Exchange Commission (SEC) filing.

Tenet, the third-largest publicly traded hospital chain, has been dogged by fraud allegations over the years and agreed to a $900 million settlement with the government in 2006 to resolve claims it cheated Medicare through overbilling.

Donn Walker, a Tenet spokesman, said the company had “disclosed this investigation in our public filings for some time” and declined to comment further on the hospitals’ target status.

Whistleblower cases

The probe is part of a U.S. Justice Department crackdown on health care fraud that has recovered more than $13 billion through whistleblower cases, prosecutors said last year. The government decided to join a suit targeting the Tenet hospitals’ referral payments to the clinics in February 2014.

The suit also focuses on referral kickbacks allegedly made by Health Management Associates Inc. (HMA), another hospital chain, to the same clinics. The company has denied the allegations.

Last year, the Justice Department joined eight whistleblower cases against HMA accusing the Naples, Fla.-based company of billing federal health care programs for unnecessary admissions from hospital emergency departments.

Franklin, Tenn.-based Community Health Systems Inc. (NYSE:CYA) acquired HMA last year for $3.9 billion after U.S. antitrust regulators cleared the deal.

In the Tenet case, hospital officials allegedly paid kickbacks disguised as legitimate payments to a chain of obstetric clinics known as Clinica de la Mama in return for patient referrals. The chain was owned by Hispanic Medical Management, a Georgia company hired by Tenet and HMA to provide translation services, marketing and evaluations of Medicare eligibility, according to court documents and Tenet’s SEC filing.

The clinics primarily served undocumented Hispanic women. The hospitals then falsely billed Medicare for reimbursements for procedures, according to court filings.

Repeated probes

Ralph Williams, a former HMA executive, filed the whistleblower suit in federal court in Athens, Ga., after he was fired for objecting to the referral payments, according to court records. Williams said the kickbacks went on for more than a decade.

See also: Revenge of the compliance nerds: The SEC’s whistleblower program

Tenet operates 80 hospitals in 14 states, 214 outpatient centers and six health plans, according to its website.

Tenet has faced repeated government probes into its billing practices. Prosecutors alleged the chain falsely inflated prices in the 1990s to obtain higher reimbursements. Under the 2006 settlement, Tenet agreed to pay $725 million in cash and give up $175 million in fees.

The chain paid another $42.8 million to the government in 2012 to resolve claims it overbilled Medicare at 25 facilities from 2005 to 2007 in connection with treatment at inpatient rehabilitation facilities.

See also: Tenet Underpayments and Overpayments Yield Settlements with HHS, DOJ

Tenet officials also paid $5 million in 2013 to resolve claims it paid kickbacks to Florida doctors by allowing them to lease offices at below-market rates in exchange for patient referrals.

The case is U.S. vs. Health Management Associates Inc., 09-00130, U.S. District Court, Middle District of Georgia (Athens).

—With assistance from David Voreacos in federal court in Newark, New Jersey, and David McLaughlin in Washington


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