Two Georgia hospitals that Tenet sold off earlier this year will plead guilty to receiving kickbacks for Medicaid referrals, an ugly scandal that will cost the Dallas-based company about $514 million to settle.
The Department of Justice announced the deal Monday morning: Tenet will pay $514 million, and the Atlanta Medical Center and North Fulton Medical Center will plead guilty to conspiracy to defraud the Medicaid program. In addition to the pleas, the hospitals will hand over $145 million, which the government estimates is how much the company benefitted.
The agreement settles a longstanding criminal and civil investigation into four hospitals, both in the Atlanta metro area and in South Carolina, that allegedly paid prenatal clinics to refer pregnant, undocumented Hispanic women to the facilities, which then would bill Medicaid for the deliveries. The feds say the women were told that they would only have their pregnancies covered if they did so at a Tenet hospital. Civil complaints were first filed on the matter in 2013, and the criminal investigation launched in 2014.
Tenet sold three of the four hospitals involved last March, and the company says none currently has operating assets.
“The criminal information alleges that as a result of these false and misleading statements and representations, many expectant mothers traveled long distances from their homes to deliver at the Tenet hospitals, placing their health and safety, and that of their newborn babies, at risk,” read a release announcing the deal.
The hospitals include the Atlanta Medical Center Inc., the North Fulton Medical Center Inc, and Spalding Regional Medical Center Inc. The other involved, South Carolina’s Hilton Head Hospital, is still operated by Tenet. Potential profits for the enormous system have been torpedoed in the past two quarters by costs associated with the litigation. First, in May, despite posting increases in revenue and earnings, Tenet recorded a net loss of $59 million. The system set aside $173 million to cover costs association with the investigations and the lawsuits. And that wasn’t enough.
In the last quarter, Tenet posted a $44 million loss and jumped its reserve from $407 million to $516 million, announcing that it had reached a deal in principle with the feds to fork over $514 million to settle the kickback allegations. To show the impact of this financially, the company spent $17 million in the first six months of 2015. In the first half of 2016, it spent $287 million.
“The conduct in this matter was unacceptable and failed to live up to our high expectations for integrity,” read a prepared statement from CEO Trevor Fetter. “The relationships between the four hospitals and Clinica de la Mama violated the explicit requirements of our compliance program and were inconsistent with the strong culture of compliance we’ve worked hard to establish at Tenet. We take seriously our responsibility to operate our business in accordance with the highest ethical standards, every day and in every interaction.”
Tenet also agreed to a three-year non prosecution agreement with the DOJ, which includes a federal compliance official monitoring the company’s referral source arrangements to ensure they are within the law.
The Tenet Healthcare Corp., headquartered in Fountain Place, has 79 general acute care hospitals, 20 short-stay, more than 470 outpatient centers, and 130,000 employees. It also owns the services company Conifer and last year took 50.1 percent ownership of Addison’s USPI network of outpatient centers.