Tenet Healthcare yesterday filed an amended complaint against Community Health Systems, updating its allegations of Medicare fraud to reflect the series of events that occurred after Tenet’s April 11 lawsuit.
The chief difference between the suits is that Tenet is no longer seeking to compel CHS to disclose its practice of “systematically admitting, rather than observing, patients in CHS hospitals for financial rather than clinical reasons.” Instead, Tenet now is focused on recovering the money it spent investigating CHS’ admissions practices during the companies’ proxy battle.
A CHS mea culpa, it seems, is no longer a priority for Tenet, given that CHS has officially ended its quest to acquire the Dallas company. But in justifying the need for its apparently costly investigation of CHS, Tenet has reiterated many of its original allegations — including the core argument that CHS’ admissions practices resulted in hundreds of millions of dollars of Medicare overbillings — and added additional arguments to its complaint.
For example, the amended (and longer by more than 30 pages) suit alleges CHS violated Securities and Exchange Commission’s fair disclosure rules by releasing information about government investigations of its admissions practices that were launched prior to Tenet’s suit only after Tenet had filed its original complaint.
“By failing to disclose promptly the receipt of the OIG’s subpoena, CHS knowingly and materially tainted the integrity of its communications relating to this litigation,” the complaint reads. “By delaying this disclosure until after the market closed on Friday, April 15, moreover, CHS manipulated the market’s reception and understanding of this litigation during the entirety of that first critical week […] so as to try to make CHS appear more credible and artificially buoy its stock price heading into the weekend. And, but for this lawsuit, the OIG subpoena would have remained presently undisclosed.”
Tenet’s amended complaint brings two counts (instead of four) against CHS and executives Wayne T. Smith and W. Larry Cash, seeking a judgment awarding Tenet its costs and disbursements incurred while analyzing CHS’ “false and misleading proxy solicitation and statements, and economic harm related thereto,” as well as its legal costs.
Tenet filed its original lawsuit against CHS on April 11, after several times refusing the Franklin-based company’s acquisition advances. The company argued CHS was asking Tenet's shareholders to warm up to a takeover without an accurate picture of CHS' financial data. CHS responded with a pair of more attractive bids for the company — both of which Tenet also turned down — before abandoning the effort.
Alongside the amended complaint, Tenet filed a red-lined version of the document to show additions, deletions and other changes. Click here to see a page from that filing.