Officials at Tenet Healthcare, the second-largest for-profit hospital chain in the nation, on August 6 agreed to pay $54 million to settle allegations that two physicians at Tenet-owned Redding Medical Center in California performed unnecessary heart surgeries, the Los Angeles Times reports (Vrana/White, Los Angeles Times, 8/7). In October 2002, federal officials launched an investigation into Drs. Chae Hyun Moon and Fidel Realyvasquez, two physicians at Redding Medical Center who allegedly performed unnecessary surgeries and defrauded Medicare. Federal officials alleged that the physicians participated in a "scheme to cause patients to undergo unnecessary invasive coronary procedures," such as artery bypass and heart valve replacement surgeries (Kaiser Daily Health Policy Report, 11/1/02). As part of the settlement, the largest recovered from a hospital in a case related to alleged unnecessary surgeries or other medical services, Tenet agreed to implement new procedures for physicians and staff at Redding Medical Center (Los Angeles Times, 8/7). The procedures include six random audits of the Redding Medical Center cardiology program over the next three years, the results of which the hospital must send to federal officials (Eichenwald, New York Times, 8/7). The settlement ends civil and criminal investigations into Tenet, subsidiary Tenet HealthSystems Hospitals and Redding Medical Center. However, federal investigations into the involvement of individuals in the alleged Medicare fraud at Redding Medical Center will continue (Berthelson/Colliver, San Francisco Chronicle, 8/7). Tenet, which admitted to no wrongdoing in the settlement, agreed to cooperate with the investigations (Los Angeles Times, 8/7). The settlement allows HHS to continue an investigation into whether the agency should bar Tenet and Tenet-owned hospitals from participation in Medicare and other federal health programs (New York Times, 8/7). Total disbarment from federal health programs could eliminate more than one-quarter of Tenet's revenue, according to the company's most recent quarterly statement (San Francisco Chronicle, 8/7). Tenet, Redding Medical Center and the two physicians also face about 100 civil lawsuits filed by individuals who said that they or their family members underwent unnecessary surgeries.

Reaction
U.S. Attorney McGregor Scott on August 6 called the settlement a "double win," the Los Angeles Times reports. "We protect the taxpayer and we protect the future patients of Redding Medical Center," Scott said. Tenet President and CEO Trevor Fetter said that the company "made a strategic business decision to negotiate a reasonable settlement in a spirit of cooperation in order to put this matter behind us." However, some analysts said that the settlement could prompt private health insurers to file suit against Tenet. "It opens the door for the private health plans to go in and get their pound of flesh. Potentially you will have a similar size settlement in the private area," Andreas Dirnagl, an analyst for Harris Nesbitt Gerard, said (Los Angeles Times, 8/7). The settlement "concludes just one facet of a mountain of problems" for Tenet, the Chronicle reports (San Francisco Chronicle, 8/7). On July 17, a federal grand jury issued a 17-count criminal indictment of San Diego-based Alvarado Hospital Medical Center; hospital CEO Barry Weinbaum; and Alvarado owner Tenet HealthSystem Hospitals. Earlier in July, the U.S. Attorney's Office in Los Angeles issued subpoenas to Tenet for records related to physician-relocation agreements since 1995 at seven Southern California hospitals. In addition, the Securities and Exchange Commission, the HHS Office of Inspector General and the Federal Trade Commission have launched investigations into Tenet since October 2002 (Kaiser Daily Health Policy Report, 8/5).

Patient Volume Increases for Tenet
The Los Angeles Times on August 7 examines the increase in patient volume at Tenet hospitals in California this year despite the recent "bad publicity" that the company has received. According to state data, in the first quarter this year, the 40 Tenet-owned hospitals in California had a 2% average increase in total patient volume from a year earlier (Vrana, Los Angeles Times, 8/7).