Tenet (THC) Files Suit Against Community Health (CYH); Alleges Possible Over-Billing

Tenet Healthcare Corp. (NYSE: THC) filed a complaint against Community Health Systems (NYSE: CYH) Monday in a north Texas U.S. District Court.

The following is a summary of the key points in the complaint:

• Tenet alleged Community Health "systematically billed cases as higher-paying inpatient admissions that would have been billed as lower-paying outpatient observations in most U.S. hospitals" for years.
  
  
• Community Health's "use of observation status is less than half the national average rate for U.S. hospitals. There is no legitimate explanation for the difference."
  
  
• Community Health is running an unsustainable model of driving up admissions while driving down observations, with a potential material affect upon the unwinding of this strategy.
  
  
• Community Health's $6 per share bid for Tenet may be impaired.
  
  
• Tenet urged Community Health to "disclose fully its unique and non-industry standard patient admissions criteria and billing practices and the financial and legal implications arising from them."
  
  
• Community Health receives about $3,300 (approximately 257 percent) more per "admitted" patient rather than "observed" patient. Tenet said the U.S. government may be able to recoup three times the originally billed amount plus penalties of up to $11,000 per false claim under the Federal False Claims Act.
  
  
• Community Health could face exclusion from participating in Medicare.

Community Health shares are 34.3 percent lower on the day, while Tenet is down 15.5 percent.

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