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State Committee To Probe Hospital Billing Practices

Dec 5, 2002 | San Francisco Chronicle The chair of the state Assembly Committee on Health said on Wednesday that his committee will investigate hospital industry billing practices, spurred in large part by Tenet Healthcare Corp.'s aggressive pricing.

"When you read in the papers that hospital chains like Tenet are charging 63 percent more than their competitors for the same services, it's alarming because hospital costs are one of the leading drivers of health care cost inflation," said Assemblyman Dario Frommer, D-Los Angeles.

He was referring to information first reported in The Chronicle that Tenet's average hospital charge of $33,547 is almost two-thirds higher than the statewide average charge.

"We want to make sure hospitals are not gaming HMOs, the state or the federal government with charges," Frommer said.

His committee will hold hearings early next year about allegations that Tenet, the nation's second-largest for-profit chain and the largest in California, dramatically overbilled for services and pharmaceuticals.

Frommer said the hearings will look at other hospital chains as well, such as HCA Inc., the largest for-profit chain, which is facing civil fraud litigation from the Justice Department.

"We would expect to participate in the hearings and we are happy to help the Assembly committee understand the complex subject of hospital billing," said Steven Campanini, a spokesman for Tenet, which is based in Santa Barbara.

Tenet's high charges have already inspired other investigations. Medicare is probing the company for reaping hundreds of millions of dollars in payments for unusually expensive cases called outliers.

Tenet's surge in profit during the past two years was largely due to Medicare outlier payments, which were fueled by its steep pricing. On Tuesday, Medicare said that it will intensely scrutinize hospitals that receive large sums of outliers, and that they could face consequences if they artificially inflated rates to reap excessive payments.

The Securities and Exchange Commission is informally looking into circumstances surrounding the nosedive in Tenet's stock, which is down 66 percent since its Oct. 3 52-week high of $52.50.

Tenet has said that its charges were aggressive, but legal. Still, the company said the pricing strategy didn't reflect the kind of reputation it wants to have. On Tuesday, Tenet told Wall Street analysts that it would freeze its charges until May 31, 2003, the end of its fiscal year, and was proposing lower charges for uninsured patients.

Frommer, who was in the Legislature during the California energy crisis, said he had a sense of deja vu when he started reading about Tenet.

"It seems some hospitals have taken a page out of the Enron book and are using that to game taxpayers and HMOs," he said.

Also on Wednesday, class-action law firm Milberg Weiss Bershad Hines & Lerach filed suit in Alameda County Superior Court alleging that Tenet's prescription drug charging policies are an unfair business practice.

"It is a free market but at some point I think the courts will determine that price gouging, particularly on an issue this sensitive, is an unfair practice," attorney Jacqui Mottek said.

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