Tenet Healthcare on Wednesday agreed to sell or close Alvarado Hospital Medical Center, a Tenet hospital in San Diego, and pay $21 million to settle allegations that Alvarado paid illegal kickbacks to physicians, the Los Angeles Times reports. In the settlement, Tenet acknowledged that Alvarado made "excessive payments" to some physicians but did not admit any wrongdoing (Yi, Los Angeles Times, 5/18). Tenet agreed to the settlement despite the failure of two federal juries to convict Alvarado on criminal charges filed by U.S. Attorney Carol Lam in San Diego. In the two trials, federal prosecutors alleged that Tenet HealthSystem, a Tenet subsidiary, Alvarado and former Alvarado CEO Barry Weinbaum paid more than $10 million in illegal kickbacks to physicians through relocation agreements in exchange for patient referrals. Under Medicare anti-kickback laws for federal health care programs, hospitals cannot directly pay physicians for patient referrals. The first trial ended in a mistrial in February 2005, and the second trial ended in a mistrial in April. Earlier this month, the HHS Office of Inspector General announced a move to exclude Alvarado from participation in Medicare, Medicaid and other federal health care programs (Kaiser Daily Health Policy Report, 5/9). The settlement allows Tenet to avoid a potential third trial and might lead to a larger settlement of other investigations by the federal government (Rundle, Wall Street Journal, 5/18).

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Tenet does not "expect any new inquires" at Alvarado, company spokesperson Steven Campanini said (Darce, San Diego Union-Tribune, 5/18). In the settlement, Tenet said, "We regret that the hospital did not take adequate steps to assure that money provided to relocated doctors, including money earmarked for tenant improvements and office overhead, was in fact used for those purposes and in all instances was justified." Peter Urbanowicz, general counsel for Tenet, said that the company was "given no choice by the government" except to sell or close Alvarado because of the move to exclude the hospital from participation in federal health care programs. Phil McSween, a health care attorney in Tennessee, questioned the fairness of the settlement. The federal government "didn't obtain a conviction in the judiciary branch of government, so they turn around and apply pressure using this incredibly powerful tool they have in the executive branch" (Wall Street Journal, 5/18).

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