For-profit healthcare corporation

Dallas-based Tenet Healthcare Corp. will pay a record-setting $42.3 million settlement to the Department of Justice over charges of fraudulent Medicare claims. Instead of admitting patients to other, less expensive hospitals for care, Tenet redirected them to more expensive inpatient rehabilitation hospitals. Tenet’s internal investigators found that many of these patients would not otherwise have been eligible for admission. This meant that Tenet intentionally overbilled Medicare over a two-and-a-half-year period, from May of 2005 to December 2007, a violation of the False Claims Act.

It’s interesting to note that the fraud was exposed from within. After Tenet’s compliance department discovered the fraudulent claims, the company notified the Justice Department of its own volition.

Shares of Tenet Healthcare fell two percent after the settlement was announced.

The full report from Reuters can be found here.

The False Claims Act dates to 1863. Known also as the “Lincoln Law,” the bill originally targeted the 19th-century equivalent of the military-industrial complex: some suppliers of weapons, provisions, and pack animals knowingly sold defective goods to the Union Army, prompting Congressional action. The bill was updated substantially via amendments passed in 1986 and 2009. In addition, the Patient Protection and Affordable Care Act (“Obamacare”) further strengthened the FCA with respect to payouts associated with Medicare and Medicaid. It seems likely that the government will continue to crack down on cases similar to Tenet’s as lawmakers struggle to rein in the cost of programs like Medicare and Medicaid.

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