Tenet Feels the Heat From the Feds

The DoJ is currently asking Tenet to explain both its general policy on physician relocation payments and its specific relocation contracts at the Southern California hospitals now under fire. For its part, Tenet has fiercely defended its relocation agreements as "entirely appropriate under the law" and essential to quality health care in underserved communities. Despite skepticism from critics, Tenet also insists that Alvarado's home base of San Diego struggles to attract doctors because of poor reimbursement levels and high business and housing costs.

"Although San Diego is often thought of as a desirable place to live," Tenet said, "it is facing a severe shortage of physicians."

But prosecutors have accused Alvarado of rewarding established doctors and medical practices -- instead of just incoming ones -- with the relocation agreements. Since 1992, the government claims, Alvarado has paid San Diego physicians millions of dollars for referring patients instead of covering legitimate relocation contracts.

"Kickbacks to doctors can wear many disguises, including sham relocation agreements," said Carol Lam, the U.S. attorney in San Diego. "They are still kickbacks. They are still illegal. And they threaten the integrity of our medical system."

Funny Money

Tenet has settled federal kickback charges before. In documents obtained by TheStreet.com, a California physician illustrated how one of the old arrangements worked.

"Garfield Medical Center always ... will be the only referring hospital in my private practice," the doctor wrote to Patrick Petre, acting CEO of the Southern California hospital, in 1991. "I will be using the following equipment and instruments. Anything you can do in setting and/or helping me in purchasing those instruments will be highly appreciated."

A week later, the top administrator of the Tenet-owned hospital sent the doctor a letter showing that Garfield had purchased $25,000 worth of equipment for the doctor's office. By this time, the doctor had already been referring patients to Garfield for five years. But he was allegedly promised rewards for referring patients from a new office where he was expanding. And he signed a so-called relocation agreement to secure the bonus payments.