ATTORNEY GENERAL AND PUBLIC HOSPITALS SUE TENET

Recently, the Florida Attorney General and a coalition of Florida public hospitals filed a federal lawsuit against Tenet Healthcare Corporation (Tenet). This lawsuit, filed in March in the U.S. District Court in Miami, accuses Tenet of engaging in a scheme to inflate its hospital charges, thereby allowing Tenet to obtain greater Medicare payments than they were legally entitled to. The suit further alleges that Tenet's scheme resulted in the public hospitals getting less money than they would have received under Medicare's payment system for inpatient hospital services.

The Attorney General's lawsuit alleges that Tenet deliberately inflated costs that were incurred to care for Medicare patients admitted to Tenet's hospitals. According to the suit, Tenet's inflated costs allowed its hospitals to receive excessive payments from Medicare's Outlier Pool, a fund administered by the Centers for Medicare and Medicaid Services to provide extra payments to hospitals for extraordinarily high-cost cases. The Outlier Pool is funded by a withhold of Medicare payments to all hospitals that participate in the Medicare program. The suit alleges that Tenet fraudulently obtained in excess of $1 billion from the Outlier Pool.

The Attorney General's suit charts the growth of Tenet's Outlier Pool payments as a percentage of its total Medicare revenues. The suit also points out that at the time Tenet was enjoying these increases, the Outlier Threshold (a fixed amount used to calculate hospital outlier payments) was also increasing. The net effect of these increases, charges the Attorney General, was to deprive the Plaintiff public hospitals of Outlier Pool payments for high-cost patient care.

This lawsuit signals Attorney General Charlie Christ's willingness to take on large, institutional health care providers suspected of committing fraud. The suit is unusual, however, in that the subject payments do not involve Florida state funds (i.e., the Outlier Pool entirely comprises federal Medicare dollars). Also unusual is the partnering of the Florida Attorney General's Office and public hospitals to bring this action. Rather than bring a cause of action directly against Tenet for wrongfully depriving them of Medicare outlier revenues, the Plaintiff hospitals elected to team up with the Florida Attorney General, thereby securing the resources and support of this agency in their effort to prove that another hospital system engaged in fraudulent or abusive billing practices. It will be interesting to see how the Attorney General and Plaintiff hospitals handle the litigation responsibilities associated with this case, particularly if Tenet elects to contest the Attorney General's charges.

Finally, it is worth noting that the federal government is conspicuously absent from this action. Given that the Outlier Pool consists entirely of federal Medicare funds, it would seem that the federal authorities would be leading an investigation of fraudulent/abusive outlier billing, particularly given the amount of improper payments (in excess of $1 billion) alleged in the suit. While it remains possible that the federal government could intercede in this action, the fact remains that the Florida Attorney General, alleging violations of the federal and Florida racketeering laws, initiated this suit and is prepared to litigate this case to conclusion. If the Attorney General and the Plaintiff hospitals are successful, Tenet will face up to triple damages, monetary penalties and disgorgement of all improper outlier revenues.

Health care providers in Florida -- physicians as well as hospitals -- should recognize the significance of this case. Although it is likely that it will be some time before it is resolved, two lessons are clear: First, whether it is a State agency or the federal government (for example, the OIG or FBI), health care providers who are involved in an investigation should take the matter seriously and quickly seek experienced legal counsel. Second, notwithstanding the size of the health care provider or the resources it may have to defend itself, the Florida Attorney General is aggressively investigating and prosecuting cases alleging either fraud or abuse involving the Medicare or Medicaid program.