Tenet Healthcare will pay $238 million to settle maternity referral kickback allegations

Photo of Tenet Healthcare headquarters from Google.

Tenet Healthcare Corporation has offered to pay $238 million to resolve a False Claims Act lawsuit alleging that it received kickbacks for maternity referrals by four of its Georgia hospitals, the company revealed Monday in its fourth-quarter and full-year financial results reported to the Securities and Exchange Commission.

The allegations stem from a whistleblower lawsuit. The company said in its filing that it had originally set aside $20 million to address the matter, but increased that amount to $238 million after negotiations with the United States Justice Department and the Georgia attorney general's office.

"The $218 million reserve increase lowered net income by approximately $184 million," according to the filing.

Published reports say the Georgia hospitals in question -- Atlanta Medical Center, North Fulton Hospital, Spalding Regional Medical Center and Hilton Head Hospital -- coordinated with a Hispanic Medical Management clinic for prenatal care provided primarily to uninsured patients. Payments that Tenet made to the clinic for translation, marketing and help with Medicaid eligibility determinations amounted to illegal kickbacks for referrals -- at least according to the government's allegations.

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If true, they amount to violations of the False Claims Act.

Tenet has also disclosed that the DOJ is conducting a criminal investigation of some former employees of those hospitals regarding the contracts.

The money set aside for settlement has set Tenet back financially; the company reported "a net loss attributable to common shareholders of $140 million …  in 2015," according to the filing. "During the fourth quarter, Tenet reported a net loss attributable to common shareholders of $97 million. ... These losses include a $218 million increase in litigation reserves."

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Net operating revenue increased, however,  in the fourth quarter compared with the same time period in 2014 -- by 12.4 percent, bringing the total to $5.4 billion. Overall, Tenet's revenue grew 12.3 percent to $20.1 billion for the full year.

"Similar to our results in the third quarter, we experienced pressure on lower acuity inpatient hospital admissions and continued to drive increases in higher-acuity admissions," said Tenet in its report. "Our Conifer Health Solutions and United Surgical Partners subsidiaries performed well, with Conifer meeting our expectations and USPI delivering stronger-than-expected results in the fourth quarter."

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