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Tenet reaches $900m accord in Medicare case

Penalty spurs plan to sell 12 hospitals

DALLAS -- Tenet Healthcare Corp., the nation's second-largest hospital operator, has reached a $900 million settlement with federal officials to end investigations into alleged overbilling of Medicare, and plans to sell about a dozen hospitals in an effort to regain its financial footing.

The settlement -- valued at about one-fourth of Tenet's stock market value -- will be paid over four years and ends all federal investigations by the Department of Justice and several US attorneys, Tenet said.

The deal means there will be no finding that Tenet broke the law, but president and chief executive Trevor Fetter said the Dallas-based company ``made mistakes" before 2003, when the company came under investigation.

Tenet will pay $725 million plus interest to settle allegations that it overbilled Medicare for the most costly cases, made illegal kickbacks to doctors to refer Medicare patients to its hospitals, and used improper billing codes to bilk the healthcare program.

Tenet said it would pay $450 million plus $20 million interest immediately and pay off the balance by mid-2010. The company also agreed not to seek an additional $175 million that it argued it was owed by Medicare.

Some analysts had expected Tenet to pay even more -- estimates ran as high as $1.5 billion. Prosecutors said the final amount was based on the company's ability to pay.

Fetter, who became CEO in 2003, said, ``Some of this company's past actions did not measure up to the high standards that we have imposed on ourselves."

Tenet officials had hoped that with a settlement, the company would put behind it a series of investigations and lawsuits that have alienated doctors and sent the stock price plunging. They even raised their outlook for 2006 operating profits by $25 million, to between a pretax loss of $75 million to a pretax gain of $25 million.

But investors responded tepidly to the deal. Tenet shares fell 13 cents, or 1.8 percent, to close at $7.10 on the New York Stock Exchange. They have crashed from more than $50 in late 2002 to a range of $6.77 to $13.06 in the past year.

The settlement did not end a Securities and Exchange Commission investigation into the company's disclosure of Medicare and managed-care payments.

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