A Tenet Healthcare shareholder filed suit in a California federal court, claiming the Dallas-based hospital chain misled investors about its financial health after a $514 million Medicaid kickback settlement came to light.
- The putative class action lawsuit, filed by Nicholas Pennington, alleges Tenet hoodwinked investors by repeatedly failing to acknowledge the kickback scheme in regulatory filings, causing the company’s stock to inflate.
- Tenet announced last week it had finalized a $514 million settlement involving two former hospitals.
Atlanta Medical Center and North Fulton Hospital, which Tenet sold in March, agreed to plead guilty to one count each of conspiring to violate federal kickback statutes. The whistleblower case accused three of Tenet’s former hospitals and one current hospital of paying the Clinical de la Mama in exchange for referring undocumented pregnant women to them for deliveries in violation of the False Claims Act.
Friday’s lawsuit also charges Tenet CEO Trevor Fetter, Chief Financial Officer Daniel Cancelmi and former CFO Biggs Porter with knowingly hiding the scheme from shareholders. The company’s stock dropped 4% as a result of the settlement.
Meanwhile, former Louisiana attorney general Charles Foti, Jr.’s law firm is investigating whether any of Tenet’s officers and directors are guilty of misleading shareholders.
Tenet finished 2015 with a $140 million loss and posted another loss — $59 million — in the first quarter of this year. A rise in uninsured patients and debt at Tenet hospitals contributed to its losses. In April, the S&P 500 ousted Tenet, saying the company was a better fit for the S&P MidCap 400.