Tenet Feels the Heat From the Feds

Young, who aided the DoJ in another big Medicare fraud case, said he's unable to share details about his current discussions with the DoJ about Tenet. But he pointed to the DoJ's own manual for sweeping health care fraud probes as a roadmap for the current Tenet investigation. And he speculated that Tenet could soon face an investigation that's "national in scope," with penalties approaching the $1.3 billion HCA paid to settle its own Medicare fraud charges.

Michael Ruggio, a Washington, D.C., attorney who helped defend HCA against the government, believes Tenet could face a penalty even worse than HCA's record-breaking fine. But he still tends to doubt that Tenet is guilty of a corporatewide conspiracy to defraud the government.

Investigators "see shadows that don't really exist," Ruggio said. "But they're going to pursue those shadows. And there is some stuff there -- there's no question about it."

Ruggio said Tenet could be forced to pay triple damages for Medicare violations. For now, he said, Tenet's exposure is "incalculable."

But Prudential analyst David Shove has warned of a potentially devastating backlash.

"A companywide investigation may be in its genesis," wrote Shove, who recommends selling Tenet shares. "Should such an investigation gather steam, it could potentially jeopardize Tenet's participation in federal health plans such as Medicare and Medicaid.

"Overall, these investigations raise some serious questions regarding Tenet's oversight of its local hospitals."

20/20 Vision

For his part, Young believes that Tenet keeps a close eye on its individual hospitals -- and stands culpable for any local wrongdoing as a result.

"In the Alvarado instance," he said, "there will be a sizable paper trail of millions of dollars of book entries to the physicians, all of which would have needed to be approved at the corporate-level finance department."

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