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Tenet Healthcare to Settle Anti-Kickback Statute Violation


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Tenet Healthcare Corportion (THC - Analyst Report) has announced that it will clear charges to settle the violation of the Federal Anti-Kickback Statute and Stark Laws.
The news which came on Oct 3, dragged down shares by nearly 4% to close at $21.50 on Oct 4, 2016.
The Charges on Tenet Healthcare
The Federal Anti-Kickback Statute safeguards patients and federal health care programs such as Medicaid and Medicare among others from fraud and abuse by restraining the use of money to influence health care decisions. The law clearly states steering patients for Medicare and Medicaid services to hospitals by offering money or bribe to clinics visited by them can be held accountable for a felony.
In this Tenet Healthcare’s subsidiaries – Atlanta Medical Center and North Fulton Hospital in Georgia – were accused of paying remuneration and other benefits to prenatal clinics to encourage patient referrals to Tenet Healthcare’s facilities.
The crime seems more grievous since it was targeted at the underprivileged Latino women who frequented these clinics. The court filing said that the patients were falsely made to believe that Medicaid would cover the cost of childbirth and newborn care only if they delivered at a Tenet hospital.
The court filing also accused these hospitals of using the contracts with the prenatal clinics to obtain patients by referrals, although these were meant for  marketing and other services. 
The hospitals were driven by the greed for additional Medicare reimbursement from the government on account of serving a greater number of low-income patients.
The Settlement
As announced during the second quarter earnings conference call, Tenet Healthcare has accepted the flaw and agreed to pay $514 million to state and federal officials to resolve the long running criminal and civil litigation arising therefrom. 
It has also agreed to pay nearly $3 million of related fees and expenses. These payments will be made by the company during the fourth quarter using available liquidity. Management also commented that such behavior from its units is unacceptable. Tenet sold the Atlanta Medical Center and North Fulton Hospital in April to WellStar Health System.
Apart from paying charges, the company also faces a three-year, non-prosecution agreement (NPA) with the DOJ. Pursuant to it, the DOJ will keep an eye on Tenet Healthcare for the next three years to oversee its compliance with the Federal Anti-Kickback Statute and Stark laws relating to hiring of physicians on referrals.
The company is also reworking on bolstering safety and improving the compliance program by amending and expanded existing policies related to financial arrangements between doctors and hospitals. The company will be more watchful in selecting vendors,and in sharpening its audit and oversight activities. It will also train employees on referral source policy changes.
Zacks Rank & Other Picks
Tenet Healthcare carries a Zacks Rank #2 (Buy). Other stocks worth considering in the medical sector include WellCare Health Plans, Inc. (WCG - Snapshot Report) , Nobilis Health Corp. (HLTH - Snapshot Report) and UnitedHealth Group Inc. (UNH - Analyst Report) . While Wellcare carries a Zacks Rank #1 (Strong Buy), the other two carry the same Zacks Rank as Tenet Healthcare. You can see the complete list of today’s Zacks #1 Rank stocks here.
WellCare Health Plans has seen a 7.5% rise in its 2016 Zacks Consensus Estimate to $5.01 earnings per share over the past 60 days. On average, the company delivered a positive earnings surprise of 29.6% in the trailing four quarters.
Nobilis Health has seen a 2.1% rise in its 2016 Zacks Consensus Estimate to 48 cents per share over the past 60 days. 
UnitedHealth Group has seen a 0.4% rise in its 2016 Zacks Consensus Estimate to $7.91 earnings per share over the past 90 days. On average, the company delivered a positive earnings surprise of 2.93% in the trailing four quarters.

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