Risk Management

Tenet to Settle Medicare-related Suits

Former chairman and chief executive officer Jeffrey C. Barbakow will contribute $1 million of his own funds, and former chief operating officer Tho...
Stephen TaubJanuary 12, 2006

Tenet Healthcare Corp. has agreed to pay $215 million to settle two lawsuits accusing the company of fraud. The cases alleged that Tenet and a number of former officers and directors made or were responsible for false and misleading statements concerning Medicare payments and other issues.

The agreements would settle federal securities class-action lawsuits brought in U.S. District Court in Los Angeles and a shareholder derivative action in California Superior Court in Santa Barbara.

“These settlement agreements represent an equitable conclusion to one of the significant private civil litigation issues arising from actions and events that took place at the company prior to 2003,” said Peter Urbanowicz, Tenet’s general counsel, in a statement.

Directors’ and officers’ insurance will pay $75 million of the total. In addition, former chairman and chief executive officer Jeffrey C. Barbakow will contribute $1 million of his own funds, and former chief operating officer Thomas B. Mackey will pay $500,000.

According to Tenet, the settlement covers all the former directors and officers named in the securities litigation, but not its outside auditors, who are also defendants in the litigation.

Bloomberg noted that the Department of Justice, the Securities and Exchange Commission, and the Department of Health and Human Services are investigating charges of misconduct in billing and recruitment of doctors by Tenet.

It also pointed out that a jury is currently deliberating in a retrial involving charges that Tenet’s Alvarado Medical Center offered to pay the relocation expenses for doctors to encourage them to refer patients under government programs.