Tenet pays $54 million in fraud settlement

The Redding, Calif., hospital at the center of the allegations agrees to an outside audit of cardiac procedures.

By Katherine Vogt, amednews staff. Aug. 25, 2003.

Tenet HealthCare Corp. has agreed to pay a record $54 million to settle government allegations that cardiologists at a hospital in Redding, Calif., performed hundreds of unnecessary heart procedures.

Prosecutors say it is the largest settlement ever negotiated with the government in a case alleging medical necessity fraud in which government programs were billed for medical procedures that were not needed.

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The agreement focuses on claims of unnecessary cardiac procedures and surgeries at Redding Medical Center, a Tenet hospital, from 1997-2002.

Patients have alleged in lawsuits that doctors at the hospital performed hundreds of unnecessary invasive heart procedures -- including some that led to death -- to increase profits. Lawyers for some of the nearly 100 patients and relatives who are suing physicians, the hospital and Tenet all did not return phone calls seeking comment.

Under the terms of the settlement, the U.S. Dept. of Justice said it won't pursue further civil or criminal charges against Tenet or the hospital. However, the government's investigation of individuals, including any physicians involved, will continue.

No admission of wrongdoing

Tenet, the troubled hospital chain that has been the focus of several other government inquiries in the last year, did not admit any wrongdoing. Company officials said agreeing to the settlement was a business decision. "We made a strategic business decision to negotiate a reasonable settlement in a spirit of cooperation in order to put this matter behind us," said Trevor Fetter, Tenet's president and acting chief executive officer, in a written statement.

Prosecutors said the settlement was a successful resolution for the government.

The Justice Dept. sued the company in January for allegedly overbilling Medicare.

"We are as pleased by this settlement as we are concerned by the alleged conduct that led to it," said Michael Hirst, who led the prosecution for the U.S. Attorney's Office. "You cannot incarcerate a corporation. With this settlement we have obtained for the Medicare program much more than we could through a criminal prosecution of the corporate entities."

As part of the settlement, Redding Medical Center agreed to implement changes at the hospital. Measures include outside audits of cardiology procedures and hiring of a new compliance and training director. Tenet also agreed to cooperate with the government's ongoing investigation, which was first announced in October 2002.

At that time, the FBI raided the offices of Chae Hyun Moon, MD, director of cardiology at Redding Medical Center, and Fidel Realyvasquez Jr., MD, chair of the hospital's cardiac surgery program. Affidavits showed that investigators were looking into whether unnecessary heart catheterizations, angioplasties and other open-heart surgeries were performed.

Dr. Moon quit practicing in February, according to his attorney. A lawyer for Dr. Realyvasquez said the physician has an office practice in Redding and is fully licensed and insured to practice medicine. Both have maintained their innocence. Their attorneys said the settlement might reflect weakness in the allegations.

"The government typically does not settle criminal cases for mere dollars if they think there's a basis for the allegations," said Malcolm Segal, who represents Dr. Realyvasquez. "We're comfortable and confident that when we have an opportunity to review the case with the government they will agree with us that there is no basis for further inquiry."

Basically a disagreement?

Matthew Jacobs, an attorney for Dr. Moon, said physicians should be especially interested in the outcome of the case because "it's basically premised on a disagreement about medical diagnoses or prognoses."

Meanwhile, Tenet remains under government scrutiny. The Justice Dept. sued the company in January for allegedly overbilling Medicare. The Internal Revenue Service is looking into whether Tenet owes $269 million in back taxes and interest. And the government is investigating Tenet's physician relocation agreements in the wake of charges that a San Diego hospital paid kickbacks to physicians for patient referrals.

Tenet also recently has faced financial hurdles, posting a $195 million loss for the second quarter, which ended June 30. The company said the loss reflected lower revenue from Medicare outlier payments.