took a major step to putting a three-year-old investigation into its Medicare practices behind it Thursday, agreeing to a $725 million settlement of charges that it exploited provisions of the government reimbursement program by overcharging for its sickest patients.
The agreement concludes the Justice Department's investigation into Tenet, the hospital operator whose shares tanked in 2002 when allegations of malfeasance surfaced on several fronts, including so-called Medicare "outlier" fraud. Tenet's stock has hovered in the $10-$15 range for three and a half years after trading above $60 before the scandal broke.
Simultaneous with the settlement, Tenet announced a plan Thursday to sell 11 underperforming hospitals and boost capital spending at its 57 remaining facilities. The hospitals earmarked for divestiture posted revenue of $203 million and a loss before interest, taxes, depreciation and amortization of $3 million in the first quarter of 2006.
Tenet said it will pay out the $725 million settlement over four years, starting with a $450 million installment on June 30. In addition to the settlement, Tenet agreed to waive $175 million of Medicare payments for past services. It will take a charge in the second quarter.
"With this settlement, the company acknowledges that Tenet made mistakes in its conduct before 2003," Tenet said. "Health care is a heavily regulated industry. Regulators depend on providers to be trustworthy and to set and abide by their own high ethical standards. Some of this company's past actions did not measure up to the high standards that we have imposed on ourselves since these issues first arose. The government is both our largest customer and most important regulator, and it is vital for Tenet to be recognized for doing the right thing."
"We have made much progress with our reforms in clinical quality, corporate culture, management, transparency, governance, compliance and strategy. The organization was humbled because of what happened, but these challenges galvanized us to make necessary changes. As a result, Tenet is a stronger and better company," it said.
Tenet shares closed at $7.23 Wednesday.