Tenet Claims CHS Overbilled Medicare $377M

John Commins, April 12, 2011

Tenet Healthcare Corp., embroiled in a hostile takeover attempt by Community Health Systems Inc., has filed a federal complaint alleging that its bitter rival overbilled Medicare by as much as $377 million using medically unnecessary admissions that improved its bottom line and appeal to investors.

Franklin, TN-based CHS fire back that: "Tenet's allegations are completely without merit and we intend to vigorously defend ourselves against these unfounded and irresponsible claims."  

The allegations by Dallas-based Tenet are the latest chapter in a very public bare-knuckle brawl between the two for-profit hospital chains, who have exchanged charges and countercharges since November, when Tenet rejected what it said was CHS' "grossly undervalued" $6-a-share buyout offer

 "We filed this complaint because our due diligence revealed that Community Health has been systematically overbilling Medicare and likely other payers by causing patients to be admitted to its hospitals when industry practice is to treat them in outpatient observation status," Tenet spokesman Rick Black said in a statement. "We believe this unsustainable strategy has resulted in Community Health overstating its inpatient admissions, revenues and profits and has created substantial financial and legal liability. We are seeking to provide Tenet stockholders with the information they need to make an informed decision by asking the court to compel Community Health to correct its false and misleading statements and omissions."

According to the 70-page complaint filed Monday morning in U.S. District Court in Dallas, Tenet claimed that "CHS has for many years systematically billed cases as higher-paying inpatient admissions that would have been billed as lower-paying outpatient observations in most U.S. hospitals."

John Commins

John Commins is a senior editor at HealthLeaders Media.

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