Tenet settles case on referral kickbacks

Tenet Healthcare Corp. has agreed to sell or close Alvarado Hospital Medical Center and pay $21 million to settle a complaint alleging that it paid kickbacks to physicians for referrals to the San Diego hospital.

The settlement, announced May 17, came just nine days after federal regulators threatened to exclude the 311-bed hospital from Medicare because of the kickback allegations. It also followed two mistrials that each ended with a deadlocked jury. Tenet said it agreed to settle the case "to avert a third criminal trial as well as potential civil liabilities that could still result."

Prosecutors had alleged that Alvarado and another Tenet subsidiary paid more than $10 million for physician relocation agreements between 1992 and 2002, with a "substantial portion" of the money going to established doctors to induce them to make referrals to Alvarado.

Tenet did not admit any wrongdoing, and throughout the case the Dallas-based hospital chain said it stood by its physician recruitment policies. However, in a statement announcing the settlement, Tenet said it was "distressed to learn that certain host physicians had obtained excessive payments by representing that they needed money to make tenant improvements to accommodate new physicians when, in fact, they never made improvements." Tenet did not identify those physicians.

Steven Campanini, a company spokesman, said Tenet was "troubled" by a lack of oversight in the physician recruitment at Alvarado. But he said the company's recruiting policies would stand.

U.S. Attorney Carol C. Lam said in a statement that the settlement would ensure that the "egregious pattern of kickbacks" would come to an end and that the government would not re-try the case against Alvarado's former chief executive, Barry Weinbaum, who was also named as a defendant.

The Office of the Inspector General of the Dept. of Health and Human Services, which had notified Tenet on May 8 that it was considering excluding Alvarado from Medicare and other government programs, said the agreement resolved its concerns.