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Kirkland Wins Appeal for Tenet in RICO Case

The hospital chain operator Tenet Healthcare has dished out hundreds of millions of dollars to settle investigations and litigation related to allegations that it manipulated the Medicare billing system before 2003. Among the recipients of these payments have been the Department of Justice, the Securities and Exchange Commission, and Tenet shareholders. But one group of plaintiffs that have not received any money is a collection of several thousand competing hospitals. And after the Eleventh Circuit's decision last Friday that affirmed a summary judgment in favor of Tenet, it looks more doubtful that they will ever get any money.

The litigation was over so-called outlier payments to hospitals, which Medicare sets aside for extraordinarily costly care. Five years ago, Boca Raton Community Hospital, represented by Greenberg Traurig, filed a class action under RICO and California's unfair competition law alleging that Tenet was getting more than its fair share of outlier payments and essentially stealing from other hospitals by manipulating the Medicare billing process. Boca was seeking treble damages of nearly $2 billion for the class of more than 3,500 hospitals nationwide.

Tenet's lawyer, Jay Lefkowitz of Kirkland & Ellis, argued to Miami federal district court judge Patricia Seitz that if anyone was harmed by Tenet's actions, it was the government, not competing hospitals, many of which allegedly engaged in the same behavior as Tenet. Two years ago, Judge Seitz denied Boca's motion for class certification and granted Tenet's motion for summary judgment.

To argue its appeal before the Eleventh Circuit, Boca brought in appellate specialist Bruce Rogow of Nova Southeastern University Law Center in Fort Lauderdale. In its ruling last week, the Eleventh Circuit affirmed Judge Seitz's summary judgment ruling, which left moot Boca's challenge of class certification.

Still, the appellate court took a parting shot at Tenet. "The district court made a point to emphasize, as we do now, that while summary judgment for Tenet was appropriate, Tenet was not blameless," wrote Judge Edward Carnes for a three-judge panel. "The record shows that Tenet hospitals took advantage of a system designed to help pay for the sickest and least fortunate patients to heal...This may not be what Florence Nightingale had in mind when she warned about the harm hospitals could do, but it is still a harm against which patients deserve protection. The government has addressed this new strain of harm by recovering almost a billion dollars from Tenet and making changes to the way the outlier program runs."

Rogow told us Wednesday that Boca had not decided whether it will appeal the Eleventh Circuit's decision. "Obviously we're disappointed," said Rogow. "We believed our liability theory did work and that our expert testimony was admissible."

Kirkland's Lefkowitz, who argued before the Eleventh Circuit, told us, "We're pleased with the result and happy to have all of the Tenet outlier matters resolved."