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Is Community’s Hostile Bid for Tenet Worth the Price?

Philip Betbeze, for HealthLeaders Media, April 15, 2011

Speaking of which, in the allegations, edited lightly for style and brevity, Tenet claims that:

  • CHS systematically bills cases as higher-paying inpatient admissions that would have been billed as lower-paying outpatient observations in most U.S. hospitals. Tenet claims this is part of Community's strategy.
  • When patients present themselves to hospitals, they are seen and discharged; placed in outpatient observation status; or admitted as inpatients. Doctors make the treatment decision, with input from hospital employees. More than 75% of U.S. hospitals use one of two objective systems as the basis for these determinations. CHS uses its own set of "Admissions Justifications" called the "Blue Book."
  • The difference in Medicare payments between an outpatient observation stay and an inpatient admission is substantial. Medicaid and managed care generally pay more for inpatient admissions than for observations, but actual rates depend on contracts. Only Medicare fee-for-service data is publicly available.
  • CHS' use of observation status is less than half the national average rate for U.S. hospitals. There is no legitimate explanation for the difference.
  • No other publicly traded hospital company follows a similar practice.

Again, these are Tenet's claims, and Community has yet to respond to them systematically, which they certainly will. But they are potentially explosive—and expensive to deal with.

Maybe this lawsuit is a sign of desperation from Tenet. After all, if its management team were confident that shareholders view the takeover attempt as a severe undervaluation of Tenet, taking this fight to Defcon 1 would not be necessary.

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1 comments on "Is Community’s Hostile Bid for Tenet Worth the Price?"


Brian (4/18/2011 at 4:06 PM)
I chuckle as I read this article, remembering back to a "New Hire Ethics In-Service" I received less than ten years ago at a formerly owned by Tenet Healthcare facility... I made the fatal mistake of asking the presenter why was it Tenet corporate was so vigorously emphasizing this topic to us working stiffs when it was the Tenet management that got the company in trouble with Medicare and several other state & federal regulators. Funny how would the tipsters at Tenet know where to direct the fed's about Community unless they had used the same business model in the past??? hummmmmm