Tenet Doctor Probe Widens

When Tenet last month announced another federal investigation of its business practices, it hardly seemed like news.

After all, the latest probe centers on the hospital operator's financial arrangements with physicians at a single, relatively small facility in Northern California. And Tenet had long warned that investigators seemed interested in its relationships with physicians companywide.

But the stakes could prove higher this time around. Until now, federal authorities have primarily focused on Tenet's "relocation agreements" with newly recruited physicians. Now, however, they are starting to question medical directorships -- often filled by powerful, established doctors -- at the company's San Ramon Regional Medical Center as well.

Some health care analysts and attorneys view the physician-related probes as the biggest threat to the company. They believe the mounting scrutiny from regulators has already hurt patient referrals, and they fully expect the pain to intensify.

Mark Kleiman, a Los Angeles attorney who focuses on health care fraud, says medical directors can be big patient admitters who generate substantial revenue. But much of that cash could be at risk, he says, if the government proves that the directors have been improperly rewarded for their patient referrals.

Kleiman says that prosecutors can force hospitals to return any Medicare funds they have collected as a result of referrals by physicians who pocketed illegal kickbacks.

"This should be alarming from an investor's standpoint," Kleiman says. "I would be very nervous."

Tenet itself seems less concerned. Indeed, the company portrays the latest investigation at San Ramon as little different from other reviews previously disclosed to investors. And the company's current legal counsel -- once a high-level attorney for the government -- has pledged to resolve the probes in the end.

Tenet refused to answer questions about its medical directors for this story. The company's stock, once a $50 highflier, slipped a dime Tuesday to $11.09.

Side Effects

Even before news of the latest probe, the San Ramon facility was no stranger to trouble.