04/11/2012 12:36 pm ET

Tenet Healthcare 'Proud' To Settle Medicare Fraud Charges For $43 Million

The second-biggest for-profit hospital chain in the U.S. has agreed to pay $42.8 million to settle allegations it overcharged Medicare during the middle of the last decade. The Justice Department's deal with Tenet Healthcare is the latest salvo in regulators' assault against health care fraud.

Tenet, according to the government, inappropriately billed Medicare for more expensive services than patients needed. The 50-facility chain moved patients from ordinary hospitals into more costly facilities intended for those who need intensive follow-up treatment after undergoing hospital procedures, Reuters reported. The alleged overbilling took place from 2005 to 2007, the Justice Department says. Neither the Justice Department nor the company said how much Tenet may have overcharged Medicare.

It was Tenet who alerted federal authorities to the overbilling that led to its settlement, the company says in a press release. Tenet discovered in 2007 that the rehab unit of one of its Georgia hospitals was treating patients it shouldn't have been. "As odd as it might sound, it is something that Tenet is proud of," Tenet spokesman Rick Black told Modern Healthcare.

Health care fraud against government programs and private insurance companies costs Americans $60 billion every year, Attorney General Eric Holder has said. The administrations of presidents George W. Bush and Barack Obama stepped up enforcement of health care fraud over the past five years by coordinating the efforts of the Department of Justice and the Department of Health and Human Services.

The Obama administration recovered $4.1 billion for taxpayers last year, a 50 percent increase since 2009, the Associated Press reported in February.

The Obama administration has pledged to improve the government's ability to detect Medicare and Medicaid fraud as it happens instead of just working backwards to chase dollars already lost. The health care reform law enacted two years includes new anti-fraud tools the administration says helped nab Texas physician Jacques Roy and his cohorts, who are alleged to have bilked Medicare and Medicaid of $275 million.

This isn't Tenet's first run-in with federal anti-fraud authorities and a previous agreement made to settle other fraud allegations actually compelled the company's disclosure of the improper billing in Georgia, Tenet says in its press release.

Tenet paid more than $900 million to settle federal charges that it overcharged Medicare by manipulating the program's payment rules and paid kickbacks to physicians who referred patients to its facilities. The company sold off 11 hospitals at the time to cover the cost of the penalties.

As part of that 2006 deal, the government required Tenet to institute a compliance program to root out improper billing practices and report its findings to the Department of Health and Human Services' Office of Inspector General. When Tenet uncovered the problem in Georgia, that's just what it did. Tenet also settled fraud charges in the 1990s and early 2000s related to overcharging for psychiatric care (when the company was called National Medical Enterprises) and for performing unnecessary heart surgeries.

Ironically, Tenet accused a rival hospital chain, Community Health Systems, of Medicare fraud last year after Community Health Systems launched a hostile takeover bid against Tenet.