Tenet: Chief Compliance and Legal Counsel – Caught in the Cross-Hairs of the False Claims Act

Thomas F. O’Neil III and Melinda H. Waterhouse

Dec. 6, 2007

As federal and state enforcement authorities pursue companies and corporate officers with ever-increasing fervor, they are developing novel theories of liability to expand dramatically the targets of their investigations. Over the past decade, both chief legal and compliance officers have found themselves in the spotlight previously beamed on their colleagues in accounting and finance. A recent case in the health care sector highlights the potential exposure.

In September 2007, the United States Department of Justice (DOJ), through DOJ’s Civil Division and the United States Attorney’s Office for the Southern District of Florida, filed a lawsuit against Christi Sulzbach (Sulzbach), former general counsel to Tenet Healthcare Corp. (Tenet or the Company), seeking tens of millions of dollars under the False Claims Act (the FCA or the Act). In a novel application of the FCA, the complaint (filed in federal court in Miami) alleges that Sulzbach submitted one or more false sworn compliance declarations required by a corporate integrity agreement imposed on Tenet’s predecessor, National Medical Enterprises, Inc. (NME), thereby causing the government to pay claims erroneously.

Sulzbach was not involved in any facet of the claims at issue, so the lawsuit epitomizes the zeal of current recovery initiatives. It also raises important questions regarding internal investigations, settlement agreements, and voluntary disclosures.

The Corporate Integrity Agreement
In June 1994, NME settled an investigation of, among other things, alleged kickbacks, and the Company agreed to pay a then unprecedented fine of over $350 million. The Company also entered into a corporate integrity agreement (CIA) with the Office of Inspector General of the Department of Health and Human Services (HHS). Sulzbach executed the settlement agreement and the CIA on behalf of NME.

The CIA required NME to submit to HHS annual compliance reports, which would include certifications regarding the company’s compliance or non-compliance with federal program legal requirements and the status of any relevant ongoing investigations. The CIA remained in effect after NME and American Medical Holdings, Inc. merged in 1995 to form Tenet. Sulzbach became Tenet’s associate general counsel and corporate integrity program director.

The Internal Investigation
According to the complaint, in February 1997 an executive at Tenet drafted a memorandum expressing concerns regarding the legality of certain contracts with physicians. The executive later met with Sulzbach, and she retained outside counsel to conduct an internal investigation.

In or about June 1997, the law firm submitted the final version of its report, determining, in essence, that the contracts at issue had in fact violated a federal statute known as the Stark Law which prohibits kickbacks and payments for physician referrals. Those findings and conclusions were not disclosed to enforcement officers.

The CIA Compliance Reports
After receiving the report from outside counsel, Sulzbach submitted reports under the CIA in 1997 and 1998; in each instance, she certified that, to the best of her knowledge and belief, Tenet was in material compliance with the terms of the CIA and federal program legal requirements. Sulzbach filed the 1997 compliance report four days after receiving outside counsel’s findings concerning violations of the
Stark Law.

Notably, the DOJ complaint also details an apparent effort by Sulzbach to correct the situation. Roughly a month after she submitted to HHS the 1997 compliance report, Sulzbach issued an internal memorandum to a colleague whom the executive had originally contacted, directing him to implement corrective action recommended by outside counsel, advising him that failure to do so could trigger the disclosure provisions of the CIA, and requesting that he send her a written status report within 30 days. The complaint suggests that Sulzbach failed to follow up on this memorandum and that as a result, the violations continued.

The Qui Tam Litigation
A former Tenet employee filed a qui tam action against the Company in May 1997, claiming that it had violated the FCA by, among other things, billing Medicare for referrals from the physicians who had been identified by the executive several months earlier. Tenet denied the allegations in that case and, during discovery, asserted evidentiary privileges with respect to over 15,000 documents, including the report from outside counsel and the internal memorandum from Sulzbach to her colleague.

The government intervened in that case and filed a motion to compel production of documents identified on the privilege logs; this motion was pending when the litigants settled in 2004.

The 2006 Settlement
In 2006, the Company resolved a Medicare fraud inquiry by the government. Under the settlement agreement, Tenet agreed to pay $920 million and to produce certain documents that had been withheld as privileged, including some materials from the long-settled qui tam action. That concession resulted in the disclosure of two versions of the 1997 report from outside counsel and the internal memorandum thereafter authored by Sulzbach.

The following year, the DOJ sued Sulzbach under the FCA in a
three-count complaint seeking treble damages and civil penalties.

The Act
Congress enacted the FCA during the Civil War to empower citizens to pursue fraud claims against contractors, usually in situations where contractors had made false claims or falsified records to receive payment from the government. By the late 1990s, the Act had become a significant weapon in the arsenal of federal enforcement officials and private-sector whistleblowers, primarily in the defense and health care sectors.

The FCA prohibits:

  • knowingly presenting or causing to be presented to the government a false or fraudulent claim for payment or approval;
  • knowingly making, using, or causing to be made or used a false record or statement to receive payment or approval for a false claim from the government;
  • conspiring to defraud the government by obtaining approval or payment from the government for a false or fraudulent claim;
  • intending to defraud the government or conceal property from the government by delivering less property than the receipt indicates;
  • intending to defraud the government by certifying a receipt for property used by the government without knowing the truth of the information in that receipt;
  • knowingly buying or receiving public property from the government when this acquisition is unlawful; or knowingly making, using, or causing to be made or used a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit property to the government.

Under the FCA, the United States can recover civil penalties of $5,000 to $10,000 per violation. The government is also entitled to recover treble damages, except when the target has provided the government information about the violation within 30 days of obtaining the information; the violator has cooperated fully with the government; and no criminal prosecution, civil action, or administrative action had previously commenced regarding the violation. Finally, the government can recover the costs of any civil action brought under the Act.

Ramifications for Legal and Compliance Officers
The heart of the DOJ’s case against Sulzbach is the notion that, as associate general counsel and corporate integrity program director, she was personally responsible for investigating alleged violations of any federal program legal requirements and for reporting to HHS the existence and status of any such internal inquiry.

That factual assertion hardly seems debatable. It has, however, given rise to a new theory of liability under the FCA. DOJ’s ardor in this case quite clearly was fueled by the alleged failure to follow through on the corrective measures and by the vigorous defense of the qui tam action.

Perhaps this aggressive pursuit of compliance and legal officers under the Act will be confined to exceptional circumstances involving a confluence of aggravating factors. Case-specific facts notwithstanding, all compliance and legal officers operating in regulated industries should review this decision carefully. The imposition of a CIA is a serious matter, as is the subsequent submission of contractually mandated compliance reports. Furthermore, the potential consequences of a privilege waiver in a settlement agreement must be analyzed comprehensively before negotiations are concluded.

Eli Lilly, the big bully

As many of you know, a few years ago I battled Tenet Healthcare Corporation in the case of Kathleen Garrett, an elderly woman who was being forcibly shocked at a St. Louis Tenet-owned hospital. They tried to threaten and bully me into silence with threats of lawsuits, etc. I now keep track of Tenet’s bad behavior (and it’s really quite bad) on this website.

It seems that Eli Lilly is using the same tactics, what are called SLAP lawsuits, in their effort to shut activists up about the dangers of the drug Zyprexa. But they’ve actually filed lawsuits against Mindfreedom.org and a number of activists.

Read all about it and spread the word! Find out what Eli Lilly doesn’t want you to know.


Coronary’ cuts to heart of Tenet scandal

Some books are good enough to keep me in a chair reading eight hours straight, but not many of them are medical-legal nonfiction. “Coronary: A True Story of Medicine Gone Awry” was riveting.

The book, about the 2002 FBI investigation into Tenet Healthcare and accusations of unnecessary heart surgeries at Redding Medical Center, was released Jan. 9. Local bookstores can hardly keep it in stock.

“Coronary” is paced like a thriller, but this long-form journalism is a factual account packed with details. It captures well the tone and history of the region, and recounts the stunning effect the scandal had on the medical community, patients and California’s north state at large.

The author lived in Redding almost a year, conducting hundreds of interviews and collecting millions of details. It’s as comprehensive a story of what happened as we’ll probably ever get, complete with heroes, villains and unsuspecting innocents.

I’ve heard and read a bit of bizarre commentary about the book; flippant, dismissive chatter by people who appear to have prejudged the book without reading it. Weird. Some folks never let facts get in the way of an opinion.

I met Steve Klaidman and his wife, Kitty, on two or three occasions while they were here, and found them to be warm and intelligent people who seem genuinely fond of Redding. Soft-spoken and careful, Steve, 68, is the picture of gentle concern.

In the author’s note, he says he has been interested in America’s health care industry for more than 20 years.

Of his initial consideration of the
Tenet-RMC events as a book, he writes: “My interest was in systemic flaws in American medicine, not criminal fraud. But the more I thought about it the more obvious it seemed to me that vulnerability to fraud was a major systemic flaw in American medicine. … My previous book, Saving the Heart,’ had dealt with cardiac medicine and I knew that two well-qualified clinicians could evaluate the same patient’s disease and reach very different conclusions about how it should be treated or even if it needed to be treated. Suppose the cardiologists and cardiac surgeons in Redding were guilty of no more than being aggressive practitioners who believed they were practicing good, up-to-date medicine and their local colleagues were simply … behind the curve? Well, it didn’t take me too long to recognize there was a book in that, too. This story was not just about medicine, it was also about justice, irrespective of whether the victims were patients or doctors.”

The book has received high marks, and a Business Week review says, “Klaidman never forgets that, at its core, this is a tale of a company that seems to have cracked under pressure from Wall Street to continually boost profits.”

Americans are at the mercy, ultimately, of a giant medical machine. Parts have our best interests at heart. Other parts will grind our bones to make their bread.

Tenet Healthcare (THC) Announces Settlement With IRS

Nov 22, 2006

Tenet Healthcare Corporation (NYSE: THC) has reached a settlement with the Internal Revenue Service to resolve certain disputed issues in connection with the audit of its tax returns for the fiscal years 1995, 1996 and 1997. As part of the settlement, the company said it expects to make a payment in the fourth quarter of 2006 of approximately $80 million representing taxes and interest owed under the settlement.

The company expects the settlement announced today will not have a material impact on income from continuing or discontinued operations after taking into account the impact of the deferred tax valuation allowance.

Fraud tip-offs really paid off

The Associated Press
Nov 24 2006

WASHINGTON — Whistle-blowers tipped off the government to $1.3 billion worth of fraud cases over the last year, largely at hospitals or other healthcare providers, the Justice Department said this week.

Whistle-blowers were paid $190 million over the year for alerting the government to the fraud. In all, the department recovered a record $3.1 billion in settlements from individuals and companies during the 2006 fiscal year that ended Sept. 30.

The largest settlement, worth $920 million, came against Dallas-based Tenet Healthcare Corp. Following claims from six whistle-blowers, prosecutors accused Tenet of overbilling the government for $806 million in Medicare payments and paying $49 million in kickbacks to doctors who referred patients to the chain.

Tenet Looks for Way to ‘Cure Itself’

Tenet Healthcare Corp. didn’t admit any wrongdoing when it reached a civil settlement with the government earlier this year over alleged Medicare fraud. But the company voluntarily made a significant number of personnel changes, an apparent acknowledgment that not everything was right at the Dallas-based hospital chain. In addition to bringing on several new executives and directors, about 80 of the 97 vice presidents who were at Tenet prior to January 2003 are now gone. The shake-up was one of several major reforms that the company has implemented over the last few years.

The sweeping personnel overhaul at Tenet was “uncommon,” says Peter Henning, a former lawyer in the criminal division of the U.S. Department of Justice. Now a law professor at Wayne State University, Henning adds, “When you get down a couple of levels into management, that’s a substantial change” — and one that rarely happens.

Still, despite the employee shake-up, Tenet managed to avoid criminal charges, and that was what was most important for GC Peter Urbanowicz. Tenet’s settlement, which was announced June 29, comes at a time when other companies under investigation for alleged criminal violations have had to enter into more severe deferred and nonprosecution agreements with the government. On Sept. 28 Tenet also signed a “corporate integrity agreement” with the U.S. Department of Health and Human Services, which administers Medicare.

Urbanowicz supported the decision made by Tenet CEO Trevor Fetter to settle with the government. A former deputy general counsel at Health and Human Services, Urbanowicz became Tenet’s legal chief at the end of 2003. “When I joined the company, I let them know we couldn’t afford to have a bad relationship with the government,” Urbanowicz says. But, he adds, “you don’t want to agree to [settle claims] just for the sake of expediency,” and Tenet fiercely defended itself against any accusations of criminal wrongdoing.

Tenet’s problems started in October 2002 when nearly a dozen whistleblower suits were filed against the company, alleging it had inflated Medicare claims to increase payments for the sickest patients in its hospitals nationwide. By the end of that month, the FBI was looking into additional claims that two doctors in one of Tenet’s San Diego hospitals were performing medically unnecessary surgeries. The Justice Department quickly jumped in with its own investigation of the claims against Tenet.

In November 2002 Fetter was hired as the company’s new CEO. A new CFO and COO also came on at that time. The hires were part of the company’s attempts at changing its reputation with the government. Amid these changes, Tenet had to contend with the criminal trials of both San Diego doctors, which twice resulted in a hung jury.

This summer Tenet finally reached a settlement with the office of the U.S. attorney in Los Angeles and the civil division at the Justice Department’s headquarters in Washington, D.C., which shared the lead on the probe of the company. Tenet agreed to pay $725 million over a four-year period, plus interest, to the government for restitution of excessive Medicare payments. The company also agreed to fork over $47 million to resolve claims that it paid kickbacks to physicians who patients referred to its clinics. In addition, Tenet will pay $46 million for “upcoding” payments, which caused already costly procedures to be billed at an even higher rate. The settlement also put an end to the whistleblower suits.

In a prepared statement released after Tenet signed the deal with the DOJ, CEO Fetter said, “Some of the company’s past actions did not measure up to the high standards that we have imposed on ourselves since these issues first arose.”

The settlement with the DOJ was followed by the corporate integrity agreement with Health and Human Services’s inspector general. The agreement formalizes several changes that Tenet had already put into place, such as creating a compliance program headed by a chief compliance officer. Under the agreement, which will last for five years, the company must create a database to track patients, services, and activities. The stated aim of the agreement is to avoid violations of two federal statutes: one that bars a physician from referring patients to products or services in which he has an interest, and one that imposes criminal penalties on anyone in the Medicare system who accepts bribes.

Urbanowicz, 42, was charged with negotiating the settlement with the government. He says that his experience at Health and Human Services was one of the reasons he was hired at Tenet: “I think the board wanted … someone who knew the rules [at HHS], and knew them very clearly.”

After he arrived at Tenet, Urbanowicz made sweeping changes to the legal department. He streamlined the staff, reducing the number of lawyers from about 60 to around 40 today. He also severed relationships with several outside counsel in a quest for a “fresh viewpoint,” and hired a defense team headed by Latham & Watkins.

David Schindler, a Latham partner who worked on the agreement, says that the biggest challenge for Tenet was establishing trust with the government prior to and during the negotiations. The government was “particularly skeptical,” he says. Tenet’s lawyers had to “persuade [the government's lawyers] that the company that lives today bears no resemblance … to the old one.”

But the organizational changes weren’t the only steps Tenet took. Urbanowicz also moved the corporation’s compliance program outside the legal department to encourage transparency. He helped develop a new position — independent compliance officer — who reports directly to the board. At Urbanowicz’s urging, Tenet’s compliance department has grown from just three staffers to more than 100 full-time employees (there’s one in almost every one of the company’s hospitals).

In Urbanowicz’s view, it was especially important for Tenet to figure out a way to cure itself. “It’s not like a number of other companies [in other fields] where someone else could pick up the slack,” he explains. “In many cases we [operate] the only hospital in town.” Thanks to the settlement, those hospitals are staying in business.

Feds and Tenet reach agreement

“Affairs Public” @LIST.NIH.GOV on 09/28/2006
11:15:44 AM

Sent by:    owner-hhs-oig-media-l@LIST.NIH.GOV


Subject:    OIG Posts Tenet CIA/Release, MFCU 04/05 Annual, 3 Audits   9/28

Hello To All,

OIG today posts a Corporate Integrity Agreement with Tenet Healthcare
Corporation and an accompanying press release.

From the press release:

OIG Executes Tenet Corporate Integrity Agreement
Unprecedented Provisions Include Board of Directors Review

Inspector General Daniel R. Levinson announced today that the Office of
Inspector General (OIG) of the U.S. Department of Health & Human
Services has reached an agreement with Tenet Healthcare Corporation on a
Corporate Integrity Agreement (CIA).  The CIA is part of Tenet’s
resolution of its civil and administrative liability for a wide range of
investigated conduct, including Diagnosis Related Group (DRG) upcoding,
improper outlier payments, kickbacks to physicians, and other fraudulent

“OIG is committed to protecting the integrity of Federal health care
programs, and today’s Corporate Integrity Agreement with Tenet
Healthcare Corporation contains comprehensive and unprecedented
provisions designed to prevent future harm to the programs.  OIG expects
Tenet to fully comply with the requirements of the Corporate Integrity
Agreement, and we will closely monitor Tenet’s compliance with its
terms,” said Inspector General Daniel R. Levinson.

For the full press release, go here:

The Tenet CIA document is here:

Also today, OIG is posting the Fiscal Year 2004/2005 Medicaid Fraud
Control Unit Annual Report.  Go here:

The enactment of the Medicare and Medicaid Anti-Fraud and Abuse
Amendments of 1977 authorized the establishment of, and Federal funding
for, the State Medicaid Fraud Control Units (SMFCUs). Currently, 47
States and the District of Columbia participate in the Medicaid fraud
control grant program through their established SMFCU. The majority of
the Units are located within the Office of State Attorneys General. A
small number of the Units are located in various other State Agencies.
The mission of the Medicaid fraud units is to investigate and prosecute
Medicaid provider fraud and incidences of patient abuse and neglect.

The Inspector General is delegated the authority to annually certify
each SMFCU as eligible to receive Federal grant funds under the Medicaid
fraud control program. The Medicaid fraud units receive 90 percent
Federal funding for the first 3 years of operation and 75 percent
thereafter. A primary goal of the OIG is to ensure that each unit fully
complies with all Federal regulations governing the functions and
operations of a Medicaid fraud unit.

Finally, OIG is today also posting three new Audit reports.  As always,
selecting the link immediately following the report title will take you
directly to the full document.

Nationwide Review of Inpatient Rehabilitation Facilities’ Compliance
With Medicare’s Transfer Regulation (A-04-04-00008)

Our objective was to determine whether inpatient rehabilitation
facilities (IRFs) coded claims as “discharged to home” in compliance
with Medicare’s transfer regulation during fiscal year (FY) 2003.  IRFs
did not always code claims in compliance with Medicare’s transfer
regulation.  Nationwide we identified 2,473 IRF claims coded and paid as
discharges to home that potentially should have been paid as transfers.
We visited or contacted seven IRFs that were responsible for 112 of
these claims and found that all 112 claims should have been coded as
transfers rather than as discharges.

We recommended that CMS:  (1) instruct the fiscal intermediaries to
review the claims in question and to recover, as appropriate, the
estimated $11,967,555 in potential overpayments, (2) instruct the fiscal
intermediaries to review claims paid after our audit period for possible
coding errors like those found in this review, and (3) implement edits
in the Common Working File that match beneficiary discharge dates with
admission dates to other providers to identify potentially miscoded
claims.  CMS concurred with the recommendations and requested that we
furnish the necessary data to initiate recovery of the overpayments.  We
have provided CMS with the requested data.

Review of Durable Medical Equipment Providers’ Medicaid Claims for NY
Residents of Assisted Living Programs (A-02-05-01017)

Our objective was to determine whether durable medical equipment (DME)
providers improperly received Medicaid reimbursement for medical
supplies and equipment not requiring prior approval that were already
included in the per diem rates paid to assisted living programs (ALPs).
New York prohibits Medicaid payments to DME providers for items
furnished by a facility or organization when the cost of those items is
already included in the per diem rate.  The DME providers improperly
received Medicaid reimbursement for medical supplies and equipment not
requiring prior approval that were furnished to ALP residents.  As a
result, $406,081 in Federal funds was improperly claimed under the
Medicaid program.  Our report recommended that the State:  (1) refund
$406,081 to the Federal Government, (2) establish eMedNY edits and
controls necessary to deny DME provider claims for Medicaid
reimbursement for medical supplies and equipment not requiring prior
approval that were furnished to ALP residents, and (3) issue guidance to
DME providers emphasizing that State regulations prohibit Medicaid
payment for items included in the ALPs’ per diem rates.  The State
generally concurred with all three recommendations

Audit of Whitman-Walker Clinic’s Adequacy of Patient Care

Our objective was to determine if an allegation submitted to the Office
of Inspector General that the Whitman-Walker Clinic conducted medically
unnecessary and time-consuming testing procedures that contributed to
the medical deterioration and eventual death of an AIDS patient could be
substantiated.  There was no evidence to substantiate the allegation.
The tests performed for the patient were both necessary as a basis for
treatment and conducted within acceptable timeframes.  Accordingly,
there were no recommendations as a result of this audit.

Well, that’s all for now. As always, if we can provide you with further
information or assistance please don’t hesitate to let us know either by
email (paffairs@oig.hhs.gov) or by phone (202/619-1343) how we can help.
Here’s hoping your week is has been proceeding nicely!  — Don White,
Public Affairs   http://oig.hhs.gov

U.S.C. Files Lawsuit Against Tenet Healthcare

New York Times
August 23, 2006

The University of Southern California sued the Tenet Healthcare Corporation yesterday in an attempt to take over a Los Angeles university hospital that Tenet owns and operates, saying the company’s reputation is in tatters.

Years of disputes, litigation and settlements have reduced Tenet’s unrestricted cash, forcing the company “to substantially alter and vary its funding and capital investment” for the hospital, the university said in its complaint, which was filed in State Superior Court in Los Angeles. The lawsuit seeks to terminate Tenet’s lease and operating agreement.

“With the material difficulties Tenet has brought upon itself, the company has cut back on its financial support for the hospital,” said Marshall B. Grossman, a lawyer for U.S.C. “The university has taken this step to protect its reputation and that of its doctors.”

Tenet agreed in June to pay $725 million in cash and to give up $175 million in fees to settle allegations that it defrauded the Medicare program. Tenet’s revenue has fallen since it disclosed in 2002 that it had used price increases to win higher payments for some of Medicare’s sickest patients.

Tenet, which is based in Dallas, disagreed with the university’s assessment of its financial support.

Tenet has made “substantial” investments in U.S.C. University Hospital, including $120 million in a 10-story patient tower that will open in the next few months, a spokesman, Steven Campanini, said.

“The partnership between Tenet and U.S.C. has been successful for 20 years,” Mr. Campanini said. “This appears to be an unfortunate negotiation tactic better left to the arbitration provisions in our agreement.”

Former Tenet exec gets probation, fine over kickbacks

Associated Press
August 23, 2006

SAN DIEGO – A former executive of a troubled San Diego hospital owned by Tenet Healthcare Corp. was sentenced to three years’ probation and fined $27,000 for conspiracy in an alleged scheme to give doctors kickbacks for patient referrals.

Mina Nazaryan, 45, pleaded guilty to one count of conspiracy in 2005 and was sentenced Monday. According to court documents, she admitted that, as associate administrator of Alvarado Hospital Medical Center, she plotted to make illegal payments to doctors disguised as compensation for relocation expenses.

Nazaryan could have spent 27 months in prison under federal sentencing guidelines, but prosecutors asked for leniency because of her cooperation. Nazaryan testified in the first of two trials against Barry Weinbaum, the hospital’s former chief executive, the 306-bed hospital and Dallas-based Tenet.

Both trials ended in hung juries. Tenet settled the federal case against the facility in May by agreeing to pay a $21 million fine and close or sell the hospital by February 2007.

Tenet Settles Bogus Heart Surgery Claims

The Recorder
By Jeff Chorney
December 22, 2004

Tenet Healthcare Corp. has agreed to pay $395 million to settle 769 claims
that doctors at its Redding hospital performed unnecessary heart surgeries.

The massive settlement — which must still be approved by 95 percent of the
plaintiffs and a Shasta County judge — will end litigation against the
health care giant in connection with the surgeries.

Once approved, the settlement money will immediately go into an
interest-accruing fund, and plaintiffs can expect to see payouts as early
January, said Luke Ellis of Gillin, Jacobson, Ellis & Larsen of Orinda,
which represents 186 of the plaintiffs.

Ellis noted that the cases were resolved relatively quickly. The
questionable surgeries came to light when FBI agents raided Tenet’s Redding
Medical Center in October 2002, and many of the lawsuits were filed just
last year.

“You could spend years litigating these cases,” Ellis said. Since the
alleged victims range in age from mid-60s to 90, he said, a protracted
battle would have meant that many of them would “never get a chance to have
[their] day in court.”

In a statement, Trevor Fetter, Tenet’s president and chief executive
officer, characterized the settlement as “the fair and honorable way to
conclude this very sad chapter.”

How much money each plaintiff will receive is confidential, and Ellis
declined to discuss attorneys fees. The lawyers did not seek class action
status, he said, because it’s hard to make personal injury fit into that
rubric. “Every injury is different,” said Ellis. “Every injury is

Since the Redding scandal erupted, Tenet has come under fire for its
and business practices at other California hospitals. The company has since
sold the Redding facility.

Along with the plaintiff suits, Tenet was also under investigation by state
and federal authorities for its practices in Redding. It settled with
government investigators over the summer for $54 million.

In addition, plaintiff lawyers sued a number of physicians in connection
with the heart operations. They reached a confidential agreement with
cardiologists several months ago, and litigation against four surgeons is
slated to begin next summer. Ellis said there are 10 “test” cases against
the surgeons. As soon as those play out, the other cases against the
surgeons will likely settle.

Of the 769 plaintiffs, most are former patients, but 94 are surviving
members who filed wrongful death cases.

Ellis said he didn’t expect to have any trouble getting plaintiffs to sign
on to the agreement.

“I think when people realize what this means to them,” they will agree, he
said. “It will change their life in a major way.”

The procedures at issue include bypasses, valve replacements and
catheterizations. Ellis said they often created additional medical problems
and caused depression in those who underwent them.

“The heart is a metaphysical part of your body. It’s not just an organ,” he

The lead plaintiff firm is Redding’s Reiner, Simpson, Timmons & Slaughter.
Also representing plaintiffs are Barr & Mudford of Redding, and Moriarty &
Leyendecker of Houston, Texas.

San Francisco behemoth Lieff Cabraser Heimann & Bernstein represents 10
plaintiffs. Ellis said they were also included in the settlement.

The case is In re Tenet Healthcare III, J.C.C.P. 4301.

Tenet Healthcare Timeline

Tenet Healthcare Corporation Timeline

Tenet Timeline

Bedlam at SouthPointe

February 26, 2001
St. Louis Post-Dispatch

STATE hospital inspectors saw a psychotic man wandering nude through a hallway. Suicidal patients had access to bleach and other materials that could have been used to end their lives. A psychiatric patient with a history of arson got his hands on a cigarette lighter. He used it to set fires in three patients’ beds — while the patients were in them.

You might expect hefty fines for such shocking breeches of federal and state regulations. You might expect heads to roll at SouthPointe Hospital, where it all happened in the psychiatric ward. You might expect the hospital’s psychiatric unit to be shut down, at least for an hour or two. You might, but most hospital administrators wouldn’t. They know better.

Faced with serious violations of federal Medicare and state licensing regulations, state inspectors have just two options: Close the hospital, or go along with its plan to correct the problems. The problem is that shutting down the hospital would displace hundreds of patients, including perhaps 100 with severe psychiatric illness who would have difficulty finding care elsewhere. So in cases like SouthPointe, where inspectors found serious problems that threatened vulnerable psychiatric patients, they almost always opt to accept the plan of correction.

SouthPointe is owned by Tenet Healthcare, the nation’s second largest for-profit hospital chain, and one with a history that includes serious patient abuse at psychiatric hospitals owned by a predecessor company.

Officials at SouthPointe have promised to resolve the problems. But the same economic pressures that helped create dangerous conditions at SouthPointe are also evident elsewhere in the region. Every hospital is scrambling to fill vacancies on its nursing and support staff. Every hospital is forced to slash expenses — including staffing costs. All too often, they do so by asking nurses to care for ever larger numbers of patients, often with the help of poorly paid “patient care assistants” with minimal skills, training or experience. That is a recipe for disaster.

Gov. Bob Holden and the Legislature should ensure the state Health Department has enough staff to make regular, unannounced inspections, and to follow up at hospitals where problems are found. Last year, the Legislature approved so-called intermediate sanctions — a hefty fine, or restrictions on hospital admissions. Those sanctions would not displace current patients but would last until problems are resolved. But regulations spelling out the new sanctions are still incomplete. They should be finished and implemented without further delay. Congress should pass a similar law for Medicare. It will, too, if voters insist.

State OKs hospital’s plan for correcting problems

February 24, 2001
By Judith Vandewater
St. Louis Post-Dispatch

Missouri Health Department officials have approved SouthPointe Hospital’s plans for correcting conditions that government inspectors said endangered psychiatric patients. The approval averts a shutdown of the south St. Louis hospital.

The state will not revoke the hospital’s license at this time, said Carey Smith, head of the state’s hospital regulatory staff.

Tenet Healthcare-St. Louis operates the hospital, at 2639 Miami Street. It was called Lutheran Medical Center until renamed by Tenet in 1999.

SouthPointe Chief Executive Doug Doris said he was pleased that the state accepted the hospital’s plan for correcting problems found by state and federal inspectors earlier this month.

“We have given this our highest level of attention because patient care and safety are our top concerns at SouthPointe,” Doris said.

In the inspections, state and federal officials reported that the hospital was not adequately supervising patients who were dangerous to themselves or others. Inspectors said hospital staff had used physical and chemical restraints for more than one hour without the required review by a physician.

Smith said SouthPointe has good patient care policies but had failed to follow them. He said his agency had found no reason to recommend a professional license review for any physician or nurse supervising psychiatric care at the hospital.

State health regulators now will recommend that the federal Medicare program continue SouthPointe’s certification as a care provider. The hospital’s Medicare certification was at risk because of the violations reported earlier this month.

After a weeklong state and federal inspection, state regulators notified the hospital that they would shut the hospital down unless managers fixed the problems quickly. Among other things, the government audit cited SouthPointe for having too few staff members and for inadequately training its staff.

In the plan approved by state regulators Friday, the hospital said it will close a small overflow unit, one of seven psychiatric units. It has asked physicians who admit large numbers of patients to use other hospitals so SouthPointe can reduce its patient load and its reliance on temporary staff.

SouthPointe, with 104 licensed psychiatric beds, temporarily closed another of its seven psychiatric units Feb. 13 because inspectors found safety violations. It will remain closed until repairs are completed.

The hospital said it has begun a series of training sessions for housekeepers, aides, nurses and physicians.

Hospital policy requires that each patient be checked every 15 minutes. Investigators said that in practice, many of the checks were done by aides in a slipshod manner. In one case, inspectors said, a patient died in her room, and an aide doing safety checks did not discover the body until it was stiff.

SouthPointe said it will require a registered nurse to make safety checks on all patients every two hours around the clock. Other personnel will make checks every 15 minutes.

SouthPointe Hospital stays open for now

February 21, 2001
St. Louis Post-Dispatch
By Judith VandeWater

SouthPointe Hospital in St. Louis will remain open — for now — while state investigators assess the hospital’s plan to correct conditions they say put psychiatric patients in danger.

Earlier this month, state and federal regulators put the hospital on notice that it is at risk of being shut down unless managers fix problems quickly.

The Missouri Department of Health threatened to revoke or suspend the operating license of the 408-bed hospital. The hospital, at 2639 Miami Street, has 104 licensed psychiatric beds.

Lois Kollmeyer, director of the state’s hospital-licensing division, said Tuesday that SouthPointe had made progress. The likelihood that the state will yank the hospital’s operating license and prevent it from treating patients is diminishing, she said.

“I am not at the point of saying the licensing issues are off the table,” Kollmeyer said.

SouthPointe was cited in the government audit for having too few staff members to respond to potentially threatening situations and for inadequately training the staff it had.

The report said the deficiencies threatened the safety, health and privacy of psychiatric patients.

SouthPointe is one of the largest private providers of inpatient psychiatric services in the St. Louis area. And that has mental-health advocates watching the situation closely.

James House, executive director of the Mental Health Association of Greater St. Louis, said SouthPointe’s beds are needed in the community.

“If they shut that hospital, there will be nowhere for those patients to go,” he said. The association is a nonprofit advocacy group.

In recent years, the number of psychiatric beds has declined in the area as the state and privately owned hospitals reduced psychiatric inpatient services. To some extent, advances in pharmaceuticals allowed patients with extreme psychiatric disorders to lead their lives with less frequent hospitalizations. But House said there have never been enough resources for the mentally ill, and the resource crisis has not abated.

Tenet Healthcare, which owns SouthPointe and three other area hospitals, declined to discuss the detailed plan of corrective action it sent to the state health department and the federal Health Care Financing Administration. The federal agency oversees the Medicare program.

That plan will become a public document once the state approves it, an action Kollmeyer said could come later this week.

“They have been beginning to correct some of the problems even as we were there,” Kollmeyer said.

State inspectors did not reinspect the hospital Tuesday as a state health official had indicated they would last week. Kollmeyer said the inspectors would make an unannounced visit, probably within a few days.

Inspectors investigating a complaint surveyed the hospital for three days in January and found conditions that warranted a full investigation. A team of state and Medicare investigators returned Feb. 3 through Feb. 9, combing the entire facility for regulatory deficiencies.

Their criticisms of general medicine and other departments will be delivered to the hospital Monday. Kollmeyer said none of the infractions found elsewhere in the hospital rise to the gravity of those in psychiatric services. The hospital will then have 10 days to respond to the new set of complaints.

Report on St. Louis psychiatric facilities

Psychiatric facilities

Wednesday, February 21, 2001
St. Louis Post-Dispatch

Source: Missouri Certificate of Need program; Bureau of Hospital Licensing; Missouri Department of Health

In St. Louis and St. Louis County, only 16 facilities provide beds for psychiatric patients. SouthPointe Hospital represents nearly 8 percent of the 1,354 beds available.

Hospitals, ranked by number of psychiatric beds:

1. St. Louis Psychiatric Rehabilitation Center, 5300 Arsenal Street, St. Louis, 215.

2. St. Anthony’s Medical Center, 10010 Kennerly Road, south St. Louis County, 158.

3. Metropolitan St. Louis Psychiatric Center, 5351 Delmar Boulevard, St. Louis, 111.

4. Veterans Affairs Medical Center, 915 North Grand Boulevard, St. Louis, 117.

5. Barnes-Jewish Hospital, 216 South Kingshighway, St. Louis, 109.

6. SouthPointe Hospital, 2639 Miami Street, St. Louis, 104.

7. St. John’s Mercy Medical Center, 615 South New Ballas Road, Creve Coeur, 82.

8. Christian Hospital Northwest, 1225 Graham Road, Florissant, 80.

9. DePaul Health Center, 12303 DePaul Drive, Bridgeton, 78.

10. Hawthorn Children’s Psychiatric Hospital, 1901 Pennsylvania Avenue, north St. Louis County, 60.

11. Forest Park Hospital, 6150 Oakland Avenue, St. Louis, 59.

12. St. Louis University Hospital, 3635 Vista Avenue at Grand Boulevard, St. Louis, 47.

13. St. Mary’s Health Center, 6420 Clayton Road, Richmond Heights, 44.

14. St. Alexius Hospital, 3933 South Broadway, St. Louis, 41.

15. Missouri Baptist Medical Center, 3015 North Ballas Road, Town and Country, 28.

16. Des Peres Hospital, 2345 Dougherty Ferry Road, Des Peres, 21.

Source: Missouri Certificate of Need program; Bureau of Hospital Licensing; Missouri Department of Health