Tenet Healthcare Stands Its Ground as Justice Department Files Suit

NEW YORK ( TheStreet) -- After a banner year for Tenet Healthcare ( THC) stock, the Justice Department charged the company and competitor Health Management Associates, with paying kickbacks for patient referrals. Health Management Associates was purchased in January by Franklin, Tenn.-based Community Health Systems ( CYH).

If you are an investor, you'd think these accusations would affect Tenet's shares.On Friday, two days after the Justice Dept. announced the lawsuit, Tenet shares closed 1.63% higher on heavier than normal volume. On Monday, shares have continued rising, up 2.5% to $48. In fact, for the year to date, shares are up 14% compared with 4.9% for the Standard & Poor's 500.

The company reports earnings after the market close Monday.

Tenet Healthcare, Dallas, owns and operates acute care hospitals and ambulatory surgery centers, among others, throughout the United States. Tenet has grown through acquisitions, including the recent purchase of Vanguard Health Systems at the end of 2013.

Tenet and Health Management face allegations hospitals paid kickbacks to obstetric clinics serving primarily undocumented  Hispanic women in return for referral of those patients for labor and delivery at the hospitals.

In its lawsuit, filed under the whistle-blower provisions of the False Claims Act, the Justice Department claims the hospitals billed the Medicaid programs in Georgia and South Carolina for the services provided to the referred patients and, in some instances, also obtained additional Medicare reimbursement based on the increased numbers of low-income patients.

Steven Campanini, a spokesman for Tenet, said in a statement to the news media the company will defend itself against the lawsuit. Neither Community Health nor its subsidiary have commented on the lawsuit as yet.

Let's look at a five-year price chart to see how far the stock has risen and highlight a key financial metric that has contributed.

THC Chart
THC
data by YCharts

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