News in brief - March 14, 2005

Retrial scheduled in Tenet case - HealthSouth board member resigns

Retrial scheduled in Tenet case

Tenet Healthcare Corp. is likely headed back to court as prosecutors try for a second time to prove that one of the company's California hospitals paid illegal kickbacks to physicians to boost patient referrals.

U.S. District Judge M. James Lorenz tentatively scheduled a retrial of the kickback case involving Alvarado Hospital Medical Center to begin March 29 in federal court in San Diego.

A mistrial was declared in the original case on Feb. 17 after jurors were unable to reach a verdict following nearly four months of testimony.

In a prepared statement, E. Peter Urbanowicz, Tenet's general counsel, said retrying the case would be expensive and a waste of time.

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

Tenet has denied wrongdoing.

HealthSouth board member resigns

One of HealthSouth's directors has resigned from the board of the outpatient services giant after becoming embroiled in an accounting controversy at another company.

HealthSouth announced on Feb. 18 that Lee S. Hillman, president of Liberation Investment Advisory Group, had voluntarily resigned from the board, where he had served as chair of the audit committee.

No reason was cited for his departure. However, just a couple weeks earlier, Bally Total Fitness stopped severance payments to Hillman, who resigned as chief executive officer in 2002.

The health club chain is restating four years worth of earnings, and is the subject of a criminal probe. Hillman has made no comment on the matter.

Hillman joined HealthSouth's board in 2003, as part of a plan to replace directors with ties to ousted company founder Richard Scrushy. Scrushy is on trial on charges related to his alleged involvement in a plan to overstate earnings by nearly $2.7 billion over several years in a scheme to meet Wall Street expectations. At least 18 former HealthSouth executives have faced criminal charges in the scandal.

Though Hillman was recommended by an outside committee, he had past ties to Scrushy. Hillman was CEO when HealthSouth unsuccessfully tried to buy Bally in 2001 and 2002. The Birmingham (Ala.) News also reported that Scrushy convinced Hillman to have Bally sponsor the America's Junior Miss pageant in 2002.

A company spokesman told the News that HealthSouth knew of Hillman's past ties, and that its board was determining how to respond to the new allegations against him.