Written by Mark Taylor

Feds raid Tenet hospital

Story posted October 31, 2002 5:00 PM ET

Trading of Tenet Healthcare Corp. stock was halted today after it plunged 18% to $32 per share from $38.97 per share on news of a federal raid at Tenet's 188-bed Redding (Calif.) Medical Center.

Search warrants were executed on the hospital and the offices of its director of cardiology and director of cardiac surgery. The raid was carried out by some 40 agents and inspectors from the FBI, HHS, the IRS and the U.S. attorney's office in Sacramento.

According to affidavits filed in U.S. District Court in Sacramento, investigators were seeking evidence of false billings and unnecessary angioplasties, coronary bypasses and heart catheterizations. Government agents reportedly carted away hundreds of boxes of evidence from quality assurance, medical records, cardiology, catheterization laboratories and the hospital's storage center.

Cardiology Director Chae Hyun Moon, M.D., 55, and Fidel Realyvasquez Jr., M.D., 53, chairman of the cardiac surgery program, have not been charged in the case. FBI Special Agent Michael Skeen said he is conducting the investigation of allegations that the two men conspired to commit healthcare fraud, committed healthcare fraud and made false statements. The physicians could not be reached for comment.

"There is reason to believe that many known and unknown patients have been victims of a scheme to cause patients to undergo unnecessary invasive coronary procedures," according to an affidavit filed by Skeen. The affidavit said most of the procedures had been performed at the Redding hospital since 1995.

"Based on the investigation to date, I expect to find that patient records, tests and other documentation will show that many patients did not suffer from any significant coronary artery disease which required immediate invasive coronary procedures and that these procedures were performed unnecessarily," Skeen's affidavit said.

A Medicare Part B carrier probed Moon's billing in 2001 partly because Moon's billing exceeded that of his peers by three to five times, the affidavit said. Moon repaid Medicare more than $12,000.

According to government witnesses, hospital medical staff members were concerned about the high volume of procedures and told hospital administrators they believed many were unnecessary and put patients at risk. One witness interviewed by government agents reported that the hospital's CEO seemed unsettled by the news but initiated no review, Skeen said.

In a written statement, the hospital confirmed that the raid occurred and said, "We believe that the hospital has in all instances acted appropriately and continues to be dedicated to providing quality patient care. We have no further comment at this time."

As its stock price fell, Tenet issued a written statement in which officials said they were deeply concerned about the allegations but have no reason to believe they are true. Tenet said it would conduct its own investigation and is cooperating with the U.S. attorney's office.

In its statement, Tenet emphasized that the decision to perform surgery is the doctor's and not the hospital's.

The precipitous drop in Tenet's stock value to a 52-week low was likely triggered by multiple factors. Earlier this week an analyst questioned whether Tenet's earnings were sustainable and said the company has benefited from an unusually high volume of outlier cases. Tenet responded that it expected to continue to grow despite reduced outlier payments in the future.