Speaking of which, in the allegations, edited lightly for style and brevity, Tenet claims that:
- CHS systematically bills cases as higher-paying inpatient admissions that would have been billed as lower-paying outpatient observations in most U.S. hospitals. Tenet claims this is part of Community's strategy.
- When patients present themselves to hospitals, they are seen and discharged; placed in outpatient observation status; or admitted as inpatients. Doctors make the treatment decision, with input from hospital employees. More than 75% of U.S. hospitals use one of two objective systems as the basis for these determinations. CHS uses its own set of "Admissions Justifications" called the "Blue Book."
- The difference in Medicare payments between an outpatient observation stay and an inpatient admission is substantial. Medicaid and managed care generally pay more for inpatient admissions than for observations, but actual rates depend on contracts. Only Medicare fee-for-service data is publicly available.
- CHS' use of observation status is less than half the national average rate for U.S. hospitals. There is no legitimate explanation for the difference.
- No other publicly traded hospital company follows a similar practice.
Again, these are Tenet's claims, and Community has yet to respond to them systematically, which they certainly will. But they are potentially explosive—and expensive to deal with.
Maybe this lawsuit is a sign of desperation from Tenet. After all, if its management team were confident that shareholders view the takeover attempt as a severe undervaluation of Tenet, taking this fight to Defcon 1 would not be necessary.