Tenet Healthcare Corporation (THC) has opted for a $42.75 million civil settlement with the U.S. Attorney’s Office, Northern District of Georgia and the Departments of Justice and Health and Human Services in connection with over-billing of Medicare. The company was facing allegations that it admitted several Medicare patients to 25 of its inpatient rehabilitation facilities during May 2005–December 2007, even though the patients did not qualify for such treatment.
The allegations were made under the U.S. False Claims Act. As per the U.S. Department of Justice, the payment is the largest in the history of settlements related to inappropriate admission to rehabilitation facilities.
Inpatient rehabilitation units are generally reimbursed at a higher rate than other facilities covered under Medicare plans as such units are for patients who require a high degree of medical supervision and a skilled nursing and medical team. Thus, Tenet received higher Medicare reimbursement from the government for unnecessarily admitting patients in inpatient rehabilitation facilities.
The discrepancy was first discovered in a Georgia hospital by Tenet’s compliance department during an internal review in 2007. The company then reported the same to the Office of Inspector General (OIG), as required under its corporate indemnity agreement with the OIG, as well as OIG’s self-disclosure protocol. Thereafter, the company was involved in several discussions with federal officials, which led to the voluntary settlement deal.
Tenet will make the settlement payment in the second quarter of 2012. However, the company had created a reserve for the same during 2011.
So far, 2012 has been a bad year for Tenet as far as legal cases are involved. Last month, a U.S. district court dismissed a lawsuit filed by Tenet against rival health care company, Community Health Systems Inc. (CYH) with prejudice, as it lacked a proper legal standing. A lawsuit rejected with prejudice prevents the company from re-filing the case in any court.
Tenet was seeking recovery of damages incurred during the failed takeover attempts by Community Health. The company had also made allegations related to over-billing of Medicare against the latter.
Tenet currently carries a Zacks #2 Rank, which translates into a short-term Buy rating. We maintain a long-term Neutral recommendation on the stock.


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