Tenet, feds reach settlement on Medicare billing issues

Tenet Healthcare Corp. has agreed to forfeit $900 million to resolve investigations into its billing and coding practices and physician relationships.

Under the terms of the June 29 settlement with the U.S. Dept. of Justice and several federal agencies, Tenet said it would pay $725 million plus interest over four years as restitution to Medicare for outlier payments and other "billing issues." The hospital chain also agreed to waive its right to seek $175 million in past Medicare payments.

The Dallas-based firm, which has been under fire for Medicare billing practices since late 2002, said the settlement would conclude federal investigations into its billing practices as well as civil litigation about Medicare coding and investigations by several U.S. attorneys into its financial relationships with physicians.

Tenet said the settlement would conclude the matters without any finding that the company had behaved illegally. In a written statement, however, Tenet's president and chief executive, Trevor Fetter, acknowledged that Tenet had "made mistakes in its conduct" before 2003.

Fetter noted that the company has adopted significant reforms affecting corporate culture, management, transparency, governance and compliance since the investigations began. Among those, Tenet changed its Medicare billing policy in 2003 and revamped its physician relationship policies in 2004.

"The organization was humbled because of what happened, but these challenges galvanized us to make necessary changes. As a result, Tenet is a stronger and better company," Fetter said.

Justice Dept. officials said the settlement, based on Tenet's ability to pay, would send a strong message about abuses of the Medicare program.

Separately, Tenet also announced plans to divest 11 hospitals to expand capital investments in its remaining hospitals and help fund the settlement. The divestitures will include four of five Tenet hospitals in the New Orleans area and three of its five hospitals in the Philadelphia area, as well as facilities in Florida and the Alvarado Hospital Medical Center in San Diego, which Tenet recently agreed to sell as part of a deal to settle allegations of paying physicians illegally for referrals.

After the divestitures are completed, Tenet will operate 57 hospitals in 12 states.