Tenet Facing Fed Audit on Medicare Bills

Wednesday November 6, 10:36 am ET

NEW YORK (Reuters) - Tenet Healthcare Corp. (NYSE:THC - News) said on Wednesday that U.S. regulators plan to audit payments made to the hospital operator to determine whether it improperly billed the federal Medicare program.

The stock lost more than $11 billion in market capitalization last week after federal authorities raided one of Tenet's California hospitals in search of evidence that two doctors may have performed questionable heart procedures and Medicare billing practices.

Shares of the Santa Barbara, California, company rose more than 1 percent after falling more than 4 percent in early trade.

The company said on Wednesday it received an audit request from the Kansas City, Missouri, office of the Office of Audit Services of the U.S. Department of Health and Human Services. Tenet said it doesn't know the scope of the audit, but will cooperate with authorities.

The objective of the audit is to determine whether outlier payments, or reimbursements for patients whose treatment costs exceed ordinary payments for procedures, to Tenet hospitals were paid in accordance with Medicare laws and regulations.

Medicare is the federal health insurance program for the elderly and disabled.

"We welcome the opportunity to demonstrate that our hospitals obey the rules and regulations governing outlier payments," Tenet spokesman Gary Hopkins said. The company is doing its own internal review of such payments, he added.

Hopkins said company officials will discuss the issue in more detail on a conference call on Thursday.

The audit request follows word last week that two physicians at Tenet's Redding, California, hospital are under investigation. That disclosure sent shares of Tenet plunging 26 percent to a 17-month low on Oct. 31.

On Tuesday the company said the Federal Trade Commission had asked for more information about the merger of two of its hospitals in Missouri. Tenet also said a hospital in Palm Beach, Florida, was in danger of losing its Medicare status.

The issue of outlier payments made to Tenet first arose last week, before news of the probe into the two doctors.

Shares of Tenet fell 14 percent on Oct. 28 on concerns that changes in reimbursement from Medicare would cut the amount the company receives for patients whose treatment costs are well above normal levels. UBS Warburg downgraded its investment rating on Tenet that day because of the Medicare issue.

Earlier in the month, Medicare increased its threshold for reimbursing hospitals for outlier patients.

Tenet stock was up 38 cents at $26.60 in morning New York Stock Exchange trade after falling as low as $25.10 earlier in the session.