Tenet Healthcare: The Clinic Payment Behind the Hospital Choice

The Tenet Healthcare 2016 kickback settlement included a $368 million civil agreement over alleged hospital kickbacks for prenatal-clinic referrals. The government said clinic payments bought labor-and-delivery referrals to Tenet hospitals, while some women were told Medicaid would cover childbirth only if they delivered there. A hospital choice presented as a coverage rule was, in the government’s account, a referral arrangement the hospital had paid for.

The Patients Behind the Referral Payments

The government alleged that four Tenet hospital companies paid the owners and operators of prenatal care clinics to send patients to their hospitals for labor and delivery. The companies were Atlanta Medical Center Inc., North Fulton Medical Center Inc., Spalding Regional Medical Center Inc. and Hilton Head Hospital. The clinics primarily served undocumented Hispanic women.

The Justice Department’s October 3, 2016 announcement put the referrals at more than 20,000 Medicaid patients. It alleged that the payments helped Tenet obtain more than $145 million in Medicare and Medicaid funds from the resulting referrals. The clinic got paid for sending the patient. The hospital then got paid for treating her.

According to the government’s account, some women were told that coverage for childbirth and newborn care depended on delivering at a Tenet hospital. Others were simply told they had to deliver there. The alleged message left them believing they could not choose another hospital.

The consequences reached beyond the bill. HHS investigators described women traveling past other hospitals that could have provided the health care they needed, increasing the risk to mothers and babies. The alleged arrangement took a decision about where to give birth and put it in the hands of people paid to direct it.

What the Clinic Payment Bought

The hospital revenue that follows a patient helps explain why hospitals want control of referral streams. In the Tenet allegations, the destination was a hospital delivery room.

For someone in clinic administration or hospital finance, the important connection is between the payment and the patient destination. What was the hospital paying the clinic to do? What did staff tell patients? Where did those patients go, and which government program paid the hospital? Those questions connect the business arrangement to the care and the claim it produced.

Hospital referral cases also show why a service description can conceal the bargain. In a separate case involving St. Joseph Medical Center in Maryland, the whistleblowers alleged that Midatlantic used its power over referrals to force the hospital into kickbacks presented as outcomes data research and managed care guidance.

The service labels are the point. They describe work a hospital might purchase, while the complaint alleges that the real purchase was referrals. The useful comparison is what the agreement promised, what work actually happened and what patient business came back.

Why Ordinary Controls Can Miss the Deal

Collusion can defeat hospital controls that rely on independent checks. Types of Hospital Frauds: Nature and Methods of Prevention, published in the Journal of Forensic and Investigative Accounting in 2023, describes a business in which the patient receives the service but a government program or private insurer usually pays the provider. The study identifies that indirect payment structure and collusion as obstacles to detection.

Its discussion of internal controls makes the problem plain:

The paper describes an auditor receiving false confirmation from a third party working with management. The apparent cross-check supports the false account. The paperwork can agree and still conceal the transaction.

For referral arrangements, the study points to staff who notice unusual patient-routing patterns and to comparisons between provider contracts and the services actually delivered. The paper’s contribution is practical: the agreement, the work and the referrals belong in the same picture.

The Civil Money and the Whistleblower’s Share

The civil settlement divided the payment among the federal government, Georgia and South Carolina. A Georgia resident started the Tenet qui tam case under the federal and Georgia False Claims Acts. Georgia and the Justice Department joined it with their own civil complaints.

The whistleblower’s reward was about $84 million of the civil settlement. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

The compliance history makes the case sharper. The government alleged that many of the payments occurred while Tenet was already under the corporate integrity agreement it signed in September 2006.

The Connection an Insider Can Explain

The Tenet allegations join a clinic payment, an instruction about hospital choice, a patient referral and a government-funded hospital service. Someone who knows how those pieces fitted together can explain an arrangement that a payment ledger or patient chart shows only in part.

For an arrangement like the one alleged at Tenet, finance staff may know what the hospital paid a clinic and what patient business it expected in return. Clinic staff may know what patients were told and why a particular hospital kept receiving them. An internal warning and the response to it can show what management knew about the arrangement. Each role sees a different part of the same business decision.

That connection matters in a hospital False Claims Act case. The payment terms, actual services, referral instructions and claims give an account of what the hospital bought and how public money followed. Our whistleblower experts work with people who can explain that connection from inside the business, including those whose work never involved submitting a hospital bill.

Tenet’s Earlier Case and Health Management Associates’ Separate Settlement

Tenet’s 2006 outlier fraud settlement concerned a different set of allegations. The earlier Justice Department announcement described more than $900 million to resolve claims involving inflated charges that increased Medicare payments for unusually costly stays, services and supplies never provided, physician kickbacks and unsupported diagnosis coding. The prenatal-clinic referral case concerns a different way of generating hospital revenue: paying for the patients themselves.

The whistleblower’s lawsuit also named Health Management Associates, which settled separately in 2018. The September 25 announcement covered eight whistleblower cases and civil allegations involving inpatient billing, referral payments and inflated emergency department facility charges.

Inside a Hospital Kickback Arrangement?

If you know what a clinic payment was meant to buy, speak with our whistleblower experts about the referrals behind it. We connect your knowledge of the arrangement to the hospital’s claims and bring in whistleblower lawyers who know hospital kickback cases. We stay beside you from that first account through the case it can become.