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Tenet Holders Take Heart at Settlement

Tenet (THC - Get Report) is taking its medicine.

The nation's second-largest hospital chain has agreed to pay a "record-setting" fine in order to put some nasty charges behind it. In exchange for $54 million, the company will end its exposure to any criminal penalties stemming from suspicious heart surgeries performed at its hospital in Redding, Calif.

The Justice Department celebrated the civil settlement as "the largest ever ... in a case alleging lack of medical necessity" and a step forward in the multipronged investigation into the Tenet healthcare chain. Tenet has admitted no wrongdoing and has agreed to cooperate with the government in its ongoing probe.

And the company is already feeling better. Tenet shares, halted Wednesday afternoon for news of the settlement, surged 9% to $14.35 in the after-hours session.

"We made a strategic business decision to negotiate a reasonable settlement in a spirit of cooperation in order to put this matter behind us," said acting CEO Trevor Fetter. "Tenet's new leadership team is pleased that we were able to work cooperatively with federal and state authorities to bring closure to one of the most serious matters facing the company."

Prior to Wednesday's news, some had predicted that Tenet would pay huge sums -- as much as $6 billion -- for aggressively billing Medicare for risky procedures at Redding and other hospitals. But the $54 million payment will effectively end Tenet's own exposure to government fines at Redding and shift the burden to individual doctors or practices who helped carry out the alleged "medical necessity fraud" scheme.

The U.S. attorney in the case said the settlement covers unnecessary heart procedures allegedly performed at Redding Medical Center between 1997 and 2002 that were billed to Medicare, Medicaid and the military's Tricare program.

The probe began when FBI agents raided the offices of the two doctors last fall. Chae Hyun Moon, who was director of cardiology at Redding, and Fidel Realyvasquez Jr., who was chief of cardiac surgery, suspended their practices in February.

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