Live

Watch CBSN Live

Hospital Giant Sued By Feds

The U.S. Justice Department sued Tenet Healthcare for up to $323 million Tuesday, accusing the nation's second-largest hospital chain of overcharging Medicare for certain procedures to inflate its revenue.

The Justice lawsuit said Tenet improperly assigned diagnosis codes for hospital stays so it would receive higher reimbursements than it was entitled to between 1992 and 1998.

The lawsuit, filed in Los Angeles against the Santa Barbara-based company, said the alleged violations took place while Tenet was operating under a "corporate integrity agreement" with the Department of Health and Human Services. The suit claims Tenet falsely certified it was in compliance with Medicare regulations and the terms of the agreement.

The government is seeking three times the amount of the alleged overpayments, which could run as high as $323 million.

Calls to Tenet representatives were not immediately returned.

The alleged violations occurred at hospitals that were owned by corporations now owned by Tenet, including National Medical Enterprises and American Medical Holdings. In 1995, National Medical merged with American Medical and became Tenet Healthcare.

After settlement talks broke down Wednesday, Tenet said it expected the government's lawsuit.

The company previously reached a $17 million settlement with the Justice Department over similar allegations involving clinical lab tests.

Tenet owns 114 acute-care hospitals in 16 states.

The chain has been battered by a series of investigations and settlements involving its billing practices.

Last November, federal officials launched an audit of Tenet's Medicare billings relating to supplemental, or "outlier" payments. The payments are made to hospitals for expenses higher than fixed reimbursements. Over the past three years, Tenet's share of these payments has been far above state and federal averages.

Since October, Tenet's shares have plunged 70 percent amid allegations that two doctors at a hospital in Redding, Calif. performed hundreds of unnecessary heart surgeries, and that doctors at a hospital in San Diego may have paid to recruit patients.

Federal officials have raided both hospitals as part of ongoing investigations. Those probes have so far focused on the doctors, not the Tenet facilities. No charges have been filed.

View CBS News In