Exhibit 10(b)
CIVIL SETTLEMENT
AGREEMENT
I.
PARTIES
This Settlement Agreement (“Agreement”) is entered into
between the following (hereinafter “the Parties”)
through their authorized representatives:
(a) the United States of America, acting through the United
States Department of Justice and on behalf of the Office
of
Inspector
General (“OIG-HHS”) of the Department of Health and
Human Services (“HHS”); the TRICARE Management Activity
(“TMA”) (formerly the Office of Civilian Health and
Medical Program of the Uniformed Services
(“OCHAMPUS”)), through its General Counsel; and the
Office of Personnel Management (“OPM”), which
administers the Federal Employees Health Benefit Program
(“FEHBP”) (collectively, “the United
States”); and,
(b) Tenet Healthcare Corporation, on behalf of its
predecessors, and current and former affiliates, divisions, and
direct and indirect subsidiaries (“Tenet”); Tenet
HealthSystem HealthCorp.; Tenet HealthSystem Holdings, Inc.;
Tenet HealthSystem Medical, Inc.; OrNda Hospital Corp.; and
the 165 hospitals listed in Exhibit 1 hereto (referred to
herein as the “Settling Hospitals”) (collectively the
“Tenet Entities”).
II.
PREAMBLE
As a preamble to this Agreement, the Parties agree to the
following:
A. Tenet is a Nevada corporation with headquarters in Dallas,
Texas. Tenet, through its predecessors, subsidiaries, and/or
affiliates, operates or has operated the Settling Hospitals during
some or all of the time period January 1, 1990 to the
present.
B. The United States has filed three actions against certain Tenet
Entities in the Central District of California (collectively the
“DRG Complaints”), captioned as follows:
(1) U.S.v.
Tenet Healthcare et al. , CV03-206 GAF
(2) U.S.v.
Tenet Healthcare et al. , CV04-857 GAF
(3) U.S.v.
Tenet Healthcare et al. , CV04-859 GAF
The DRG
Complaints allege that these Tenet Entities engaged in
“upcoding” as further described
in Paragraph
II.E(2) below.
C. Various relators have filed qui tam actions that are pending
against the Tenet Entities, including the actions identified in
Paragraph II.E below.
D. The Tenet Entities submitted or caused to be submitted claims
for payment to the Medicare Program (“Medicare”), Title
XVIII of the Social Security Act, 42 U.S.C. §§
1395-1395ggg (1997); the Medicaid Program (“Medicaid”),
42 U.S.C. §§ 1396-1396v; the TRICARE Program
(“TRICARE”), 10 U.S.C. §§ 1071-1107; and the
FEHBP, 5 U.S.C. §§ 8901 et. seq . (collectively
the “Government Health Care Programs”).
E. The United States alleges that it has certain civil claims
against the Tenet Entities, as specified in Paragraph III.4 below,
for engaging in the following conduct (hereinafter the
“Covered Conduct”):
(1) Outlier
Payments:
From October 1, 1995 through August 7, 2003, the Tenet
Entities allegedly submitted or caused to be submitted claims to
the Government Health Care Programs for inpatient and outpatient
outlier payments that the Tenet Entities were not entitled to
receive because (a) the Tenet Entities allegedly had
artificially and purposely inflated the charges billed for
inpatient and outpatient care substantially in excess of any
increase in the costs associated with that care, (b) as a
result, the Tenet Entities allegedly improperly received outlier
payments that were further inflated because they were computed
pursuant to statewide average cost-to-charge ratios that should not
properly have applied, and (c) the Tenet Entities allegedly
billed for inpatient and outpatient services and supplies not
provided to patients. Certain of these claims were submitted by
hospitals identified in the relators’ Complaint filed in
U.S. ex rei. [Under Seal] v. Tenet Healthcare Corporation. et
al. , Case No. 02-8309, (E.D. Pa.).
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As a result of
these artificially inflated and allegedly false claims, the Tenet
Entities allegedly caused the Government Health Care Programs to
pay to Tenet money that lawfully belonged to the United States in
that it exceeded the amount Tenet would have received had these
claims not been artificially inflated and false.
(2) DRG
Upcoding:
(a) From January 1, 1992 through December 31, 1998,
Tenet and the Settling Hospitals listed in Exhibit 2 allegedly
submitted or caused to be submitted claims to Medicare that
assigned diagnosis codes for inpatient discharges that were not
supported by physician documentation in the patient’s medical
records or were otherwise improper for the following diagnosis
related groups (“DRG’s”): 79, 106, 124, 415, 416,
475 and 483; and,
(b) Between January 1, 1992 and December 31, 1998,
Tenet annually certified compliance with its obligations under its
Corporate Integrity Agreement notwithstanding its alleged knowledge
of claims of the type described above.
(3) Physician
Relationships:
From January 1, 1992 through October 12, 2005, the Tenet
Entities allegedly submitted or caused to be submitted claims to
Medicare for items and services delivered by those Tenet Entities
that were ordered by a physician, a member of a physician group
practice, a professional corporation, or other legal entity owned
at least in part by a physician with whom the Tenet Entities had a
financial relationship, directly or through a family member. The
United States alleges these claims were false because
(a) Section 1877 of the Social Security Act
(“SSA”), 42 U.S.C. § 1395nn (also known as the
Stark Law) prohibited the Tenet Entities from billing Medicare for
items or services referred or ordered by physicians with whom the
Tenet
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Entities had
improper financial relationships, (b) the Tenet Entities
forfeited the right to bill Medicare for such items and services by
allegedly paying remuneration to physicians intending that
remuneration to induce those and other referrals in violation of
the Anti-kickback Statute, 42 U.S.C. § 1320a-7b(b), and
(c) the Tenet Entities were required to and did certify on
cost reports submitted to fiscal intermediaries for the applicable
fiscal years that items and services identified or summarized in
each cost report were not provided or procured through the payment
directly or indirectly of a kickback or billed in violation of
federal or state referral laws (e.g., the Stark Law).
Certain of these claims
were submitted by the hospitals identified in the relators’
Complaints in U.S. ex rel. Albaral v. Tenet Healthcare Corp.
(E.D. La.) and U.S. ex rel. Greene v. Tenet Healthcare Corp., et
al. (E.D. La.).
(4) Tiered
Charges:
From January 1, 1996 through September 30, 2005, Tenet
and the Settling Hospitals listed in Exhibit 3 allegedly
submitted or caused to be submitted claims to Medicare that used
higher charges for inpatient than outpatient services, when those
charges were required to be uniform. These claims were identified by the
relator’s First Amended Complaint in U.S. ex rel.
[Sealed] v. Tenet Healthcare Corporation , Case No.
[Sealed] (C.D. Cal.).
(5) Centinela
Hospital Medical Center Claims:
From January 1, 1999 through December 31, 2005, Centinela
Hospital Medical Center allegedly submitted or caused to be
submitted claims to Medicare for cardiac catheterizations that were
not medically necessary.
(6) Desert
Regional Medical Center Claims:
(a) From January 1, 1997 through May 31, 2004, Tenet
and Desert Regional Medical Center allegedly submitted or caused to
be submitted claims to Medicare for outpatient
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care rendered
at the Comprehensive Cancer Center (i) with the following
billing codes that were inaccurate and resulted in excessive
reimbursement: modifiers 25, 27, and 59, and diagnostic codes
related to screening and diagnostic mammograms, and (ii) for
diagnostic laboratory and imaging services that were not supported
by appropriate documentation. These claims were alleged by the
relator’s Complaint in U.S. ex rel. [Sealed] v.
Tenet Healthcare Corporation, et al. , Case No. [Sealed]
(C.D. Cal.); and
(b) From January 1, 1997 through May 31, 2001, Tenet
and Desert Regional Medical Center allegedly submitted or caused to
be submitted cost reports to Government Health Care Programs that
sought reimbursement for excessive management fees paid to the
Comprehensive Cancer Center.
(7) Brookwood
Medical Center Claims:
From January I, 1997 through May 1, 2000, Brookwood
Medical Center submitted claims to Government Health Care Programs
for reimbursement for (i) units of blood that allegedly were
not administered and (ii) blood filters that allegedly were
not used. These
claims were alleged by the relator’s Complaint in U.S. ex
rel. [Sealed] v. Tenet Healthcare Corp. (N.D.
Ala.).
(8)
People’s Health Network Claims:
From January 1, 1999 through August 23, 2005,
People’s Health Network (“PHN”), an entity in
which Tenet had an ownership interest, allegedly failed to provide
services and provided services not consistent with the standard of
care required under applicable regulations and statutes to patients
that were included in the capitated rate paid by Medicare to
PHN.
F. The United States also contends that it has certain
administrative claims against
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the Tenet
Entities for the Covered Conduct under the provisions for
permissive exclusion from Medicare, Medicaid and other Federal
health care programs, 42 U.S.C. § 1320a-7(b), the provisions
for permissive exclusion from TRICARE, 32 C.F.R. § 199.9, and
the provisions for civil monetary penalties, 42 U.S.C. §
1320a-7a.
G. The Tenet Entities deny the contentions of the United States set
out in Paragraphs II.E and II.F above.
H. To avoid the delay, uncertainty, inconvenience and expense of
protracted litigation of these claims, the Parties reach a full and
final settlement as set forth in this Agreement. The settlement
amount required to be paid by the Tenet Entities pursuant to this
Agreement reflects limitations on the Tenet Entities’ ability
to pay occasioned by the financial condition of the Tenet
Entities.
III.
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the mutual promises, covenants,
and obligations set forth below, and for good and valuable
consideration as stated herein, the Parties agree as
follows:
1. The Tenet Entities agree to pay to the United States a total of
$900 million, plus applicable interest, as follows (the
“Settlement Amount”):
(a) The Tenet Entities agree to pay the United States $450
million, plus interest accruing at a simple rate of 4.125% from
November 1, 2005, within ten (10) days after the
Effective Date of this Agreement. The payment shall be made by
electronic funds transfer pursuant to written instructions to be
provided by Michael F. Hertz, Director, Commercial Litigation
Branch, Civil Division, United States Department of
Justice.
(b) The Tenet Entities agree to waive, and not assert any
claim for, additional
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Disproportionate Share Hospital
(“DSH”) program payments related to Medicaid eligible
patient days and SSI patient days to which the Tenet Entities may
be entitled for all cost reporting periods beginning on or before
December 31, 2001, which claims and potential claims have a
value of $50 million.
(c) The Tenet Entities agree to waive, and not assert any
claim for, any additional outlier payments from any Government
Health Care Program to which the Tenet Entities may be entitled for
any period prior to August 7, 2003, which claims and potential
claims have a value of $125 million.
(d) The Tenet Entities further agree to pay the United States
$275 million, plus interest accruing at a simple rate of 4.125%
from November 1, 2005, in quarterly installments from
November 1, 2007 through August 1, 2010 in accordance
with the schedule of payments attached as Exhibit 4. All
quarterly payments shall be made by electronic funds transfer
pursuant to written instructions to be provided by Michael F.
Hertz, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice.
2. The principal portion of the Settlement Amount is attributable
to the Covered Conduct as follows (with interest to be allocated on
the same pro rata basis):
(a) Outlier Payments: $788,851,228, with $106,359,191 of this arnount
attributable to claims submitted by the hospitals identified in the
relator’s Complaint in U.S. ex rel. [Under Seal] v. Tenet
Healthcare Corporation. et al. Case No. 02-8309, (E.D.
Pa.).
(b) DRG Upcoding:
$46,886,882
(c) Physician Relationships: $47,533,514, with $6,029,735 of this amount
attributable to claims submitted by the hospitals identified in the
relator’s Complaint in U.S. ex rel. Albaral v. Tenet
Healthcare Corp. (E.D. La.) and $34,402,514 attributable to
claims submitted by the hospitals identified in the relator’s
Complaint in U.S. ex rel. Greene v. Tenet Healthcare Corp., et
al. (E.D. La.).
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(d) Tiered Charges: $822,577 , with all of this amount attributable to the
claims identified by the relator’s First Amended Complaint in
U.S. ex rel. [Sealed] v. Tenet Healthcare Corporation
, Case No. [Sealed] (C.D. Cal.).
(e) Desert Regional Medical Center Claims: $452,417,
with all of this amount
attributable to the claims identified by the relator’s
Complaint in U.S. ex rel. [Sealed] v. Tenet Healthcare
Corporation, et al. , Case No. [Sealed] (C.D. Ca
l.).
(f) Brookwood Medical Center Claims: $30,065,
with all of this amount
attributable to claims alleged by the relator’s Complaint in
U.S. ex rel. [Sealed] v. Tenet Healthcare Corp. (N.D.
Ala.).
(g) People’s Health Network Claims:
$15,423,316
3. If the Tenet Entities fail to make any of the payments described
in Paragraph III. 1 above at the specified time, upon written
notice to the Tenet Entities of this default, the Tenet Entities
shall have ten (10) calendar days to cure the default. If the
default is not cured within the ten-day period: (a) the
remaining unpaid principal portion of the Settlement Amount shall
become accelerated and immediately due and payable, with interest
at a simple rate of 4.125% from November 1, 2005 to the date
of default, and at a simple rate of 9.5% per annum from the date of
default until the date of payment; (b) the United States may
pursue any and all actions for collection as it may choose,
including, without limitation, filing an action for specific
performance of this Agreement; and (c) the United States may
offset the remaining unpaid balance of the Settlement Amount
(inclusive of interest) from any amounts due and owing to any of
the Released Tenet Entities (defined in Paragraph III.4 below) by
any department, agency, or
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agent of the
United States. The Released Tenet Entities agree not to contest any
collection action undertaken by the United States pursuant to this
Paragraph III.3, and to pay the United States all reasonable costs
incurred in any such collection action, including attorney’s
fees and expenses.
4. Subject to the exceptions in Paragraph III.11 below, in
consideration of the obligations of the Tenet Entities set forth in
this Agreement, conditioned upon the Tenet Entities’ payment
in full of the Settlement Amount, and subject to Paragraph III.18
below (concerning bankruptcy proceedings commenced within 91 days
of the Effective Date of this Agreement or any payment under this
Agreement), the United States (on behalf of itself, its officers,
agents, agencies, and departments) hereby releases Tenet, together
with its current and former parent corporations, each of its direct
and indirect subsidiaries including the Settling Hospitals, brother
or sister corporations, divisions, current or former owners,
partnerships or other legal entity in which Tenet or a Tenet
subsidiary has or had an ownership interest, and the successors and
assigns of any of them (the “Released Tenet Entities”),
from any civil or administrative monetary claim the United States
has or may have under the False Claims Act, 31 U.S.C. §§
3729-3733; the Civil Monetary Penalties Law, 42 U.S.C. §
1320a-7a; the Program Fraud Civil Remedies Act, 31 U.S.C.
§§ 3801-3812; any other statutory cause of action for
civil damages or civil penalties which the Civil Division has
actual and present authority to assert and compromise pursuant to
28 C.F.R. Subpart I, Section 0.45(d) (2004); or the
common law and/or equitable theories of payment by mistake, unjust
enrichment, restitution, recoupment, disgorgement of illegal
profits, and fraud, for the Covered Conduct.
5. Within 30 days of the Effective Date of this Agreement, the
United States will seek dismissal with prejudice of (a) the
claims stated in the United States’ Complaints and
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Amended
Complaints in the Civil Actions identified in Paragraph II.B above;
(b) claims asserted against the Tenet Entities in
the qui tam
cases identified in Paragraph II.E above that encompass the Covered
Conduct.The stipulations of dismissal will be conditioned upon
receipt by the United States of the Settlement Amount, and if
necessary, will request that the courts retain jurisdiction to
resolve issues of relators’ share and attorney’s
fees.
6. Should this Agreement be challenged by any relator as not fair,
adequate or reasonable pursuant to 31 U.S.C. § 3730(c)(2)(B),
the United States and the Tenet Entities agree that they will take
all reasonable and necessary steps to defend this Agreement. If a
court concludes that the Agreement is not fair, adequate or
reasonable as to the claims of a particular relator, then the
Agreement shall be null and void as to the Covered Conduct asserted
by those claims; the Agreement will otherwise remain in full force
and effect; and that portion of the Settlement Amount allocated to
the excluded Covered Conduct (the “Allocated Amount”)
will be held by the United States to be used as follows upon entry
of a final judgment resolving (whether by settlement or otherwise)
the amount the Tenet Entities must pay on the particular
relator’s claims (the “Judgment Amount”):
(a) if the Judgment Amount is greater than Allocated Amount,
the Allocated Amount shall remain allocated to those claims, with
the Tenet Entities responsible for payment of the difference
between the Judgment Amount and the Allocated Amount; (b) if
the Judgment Amount is less than or equal to the Allocated Amount,
the portion of the Allocated Amount equivalent to the Judgment
Amount shall remain allocated to those claims, while the difference
between the Allocated Amount and the Judgment Amount shall be
reallocated to the remaining Covered Conduct in an amount
proportionate to the original allocation set forth in Paragraph
III.2 above.
7. In consideration of the obligations of the Tenet Entities set
forth in this
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Agreement,
conditioned upon the Tenet Entities’ payment in full of the
Settlement Amount, and subject to Paragraph III.18 below
(concerning bankruptcy proceedings commenced within 91 days of the
Effective Date of this Agreement or any payment under this
Agreement):
(a) TMA hereby releases and agrees to refrain from
instituting, directing, or maintaining any administrative action
seeking exclusion from the TRICARE/CHAMPUS Program against the
Released Tenet Entities under 32 C.F.R. § 199.9 for the
Covered Conduct, except as reserved in Paragraph III.11, below, and
as reserved in this Paragraph III.7(a). TMA expressly reserves
authority to exclude the Released Tenet Entities from the TRICARE/
CHAMPUS program under 32 C.F.R. §§ 199.9 (f)(1)(i)(A),
(f)(1)(i)(B), and (f)(1)(iii), based upon the Covered
Conduct.
(b) OPM agrees to release and refrain from instituting,
directing, or maintaining any administrative action seeking
exclusion from the FEHBP against the Released Tenet Entities under
5 U.S.C. § 8902a or 5 C.F.R. Part 970 for the Covered
Conduct, except as reserved in Paragraph III.11, below and except
if excluded by the OIG-HHS pursuant to 42 U.S.C. § 1320a-7(a).
Nothing in this Paragraph III.7(b) precludes OPM from taking
action against entities or persons, or for conduct and practices,
for which claims have been reserved in Paragraph III.11,
below.
8. The Released Tenet Entities fully and finally release,
compromise, acquit and forever discharge the United States, its
agencies, officers, agents, employees, and contractors (and their
employees) from any and all claims, causes of action, adjustments,
and set-offs of any kind (including, without limitation, any claims
for additional outlier payments for any period prior to
August 7, 2003; any claims for additional DSH payments related
to Medicaid eligible patient days and SSI patient days for cost
reporting periods beginning on or before
December 31,
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2001; and any
attorney’s fees, costs, and expenses of every kind and
however denominated) which the Released Tenet Entities could have
asserted, or may assert in the future, against the United States,
its agencies, officers, agents, employees, and contractors (and
their employees) arising out of or pertaining to the Covered
Conduct, including the United States’ investigation,
prosecution, or settlement thereof.
9. The Tenet Entities have provided financial information to the
United States and the United States has relied on the accuracy and
completeness of this financial information in reaching this
Agreement. If the United States learns that this financial
information either (a) failed to disclose a material non-contingent
asset or assets in which the Tenet Entities had an interest (a
“Material Nondisclosure”); or (b) contained any
other knowing, material misrepresentation or omission regarding the
financial condition of the Tenet Entities (a “Knowing
Material Misrepresentation”), the United States may at its
option pursue relief under this Paragraph III.9 as follows:
(a) the United States shall provide Tenet with written notice
of the nature of the Material Nondisclosure or Knowing Material
Misrepresentation; (b) within ten (10) calendar days of
the date of the written notice, Tenet shall provide the United
States, in writing, with any explanation it may have regarding the
Material Nondisclosure or Knowing Material Misrepresentation
referenced in the written notice; (c) if unsatisfied with
Tenet’s explanation, as determined in its sole and absolute
discretion, the United States may file an action seeking relief
under this Paragraph III.9 in which action the United States shall
bear the burden of establishing by a preponderance of the evidence
the Material Nondisclosure or Knowing Material Misrepresentation;
(d) if the court finds a Material Nondisclosure or Knowing
Material Misrepresentation, then - (i) the Settlement Amount
shall be increased by one hundred percent (100%) of the amount of
the Material Nondisclosure or Knowing Material
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Misrepresentation; (ii) the remaining
unpaid principal portion of the Settlement Amount (including the
increase specified in subparagraph (d)(i) above) shall become
accelerated and immediately due and payable, with interest at a
simple rate of 4.125% from November 1, 2005 to the date of the
court finding, and at a simple rate of 9.5% per annum from the date
of the court finding until the date of payment; (iii) the
United States may offset the remaining unpaid balance of the
Settlement Amount (inclusive of interest and the increase specified
in subparagraph (d)(i) above) from any amounts due and owing to any
of the Released Tenet Entities by any department, agency, or agent
of the United States; and (iv) the Tenet Entities shall
immediately pay the United States all reasonable costs incurred in
the action seeking relief under this Paragraph III.9, including
attorney’s fees and expenses.
10. OIG-HHS expressly reserves all rights to institute, direct, or
maintain any administrative action seeking exclusion against the
Tenet Entities, and/or its officers, directors, and employees from
Medicare, Medicaid, or other Federal health care programs (as
defined in 42 U.S.C. § 1320a-7b(f)) under 42 U.S.C. §
1320a-7(a) (mandatory exclusion), or 42 U.S.C.
1320a-7(b) (permissive exclusion). The Tenet Entities and
OIG-HHS are engaged in the negotiation of a potential Corporate
Integrity Agreement (“CIA”) and have reached a common
understanding on the basic terms of such a CIA. The Tenet Entities
shall use their best efforts and negotiate in good faith to execute
a CIA with OIG-HHS within 90 days after the Effective Date of this
Agreement (defined in Paragraph III.27 below). Upon execution of
the CIA, OIG-HHS shall provide a release to the Tenet Entities
pursuant to which OIG-HHS will agree not to institute, direct, or
maintain an administrative action seeking an exclusion against the
Tenet Entities under 42 U.S.C. §
1320a-7(b)(7) (permissive exclusion for fraud, kickbacks, and
other prohibited activities) for the Covered Conduct.
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11. Notwithstanding any term of this Agreement, specifically
reserved and excluded from the scope and terms of this Agreement as
to any entity or person (including the Released Tenet Entities) are
any and all of the following:
a. Any civil, criminal or administrative claims arising under Title
26, U.S. Code (commonly referred to as the Internal Revenue
Code);
b. Any criminal liability;
c. Except as explicitly stated in this Agreement, any
administrative liability, including mandatory and/or permissive
exclusion from the Government Health Care Programs;
d. Any liability to the United States (or its agencies) for any
conduct other than the Covered Conduct;
e. Any claims based upon such obligations as are created by
execution of this Agreement;
f. Any liability for express or implied warranty claims or other
claims for defective or deficient products or services, including
quality of goods and services;
g. Any claims for personal injury or property damage, or for other
similar consequential damages, arising from the Covered
Conduct;
h. Any liability for failure to deliver goods or services
due;
i. Any claims against individuals (including, without limitation,
current or former directors, officers, employees, agents, or
shareholders of any of the Tenet Entities
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