A shareholder filed a putative class-action lawsuit against Tenet Healthcare Friday, claiming the Dallas-based for-profit hospital operator made false and misleading statements about its business, which caused shareholders to suffer losses.
Here are seven things to know about the lawsuit against Tenet, which is pending in California federal court.
1. Tenet disclosed in June 2015 that it was the subject of a criminal investigation by the Department of Justice. The criminal investigation, which dates back to 2012, arose out of a civil lawsuit filed under the qui tam provision of the False Claims Act. The suit alleges four Tenet hospitals paid illegal kickbacks to clinics that referred undocumented pregnant patients to them for Medicaid-covered deliveries.
2. The criminal investigation centers on the relationship the four Tenet hospitals had with Hispanic Medical Management. The hospitals contracted with HMM for translation, marketing, management and Medicaid eligibility determination services.
3. In 2014, federal investigators filed criminal charges against two people involved in the kickback scheme, a former owner of HMM and a former employee of a Tenet hospital. On April 10, 2015, the DOJ informed Tenet that four of its hospitals had become targets of the criminal investigation.
4. According to the lawsuit filed Friday by shareholder Nicholas Pennington, Tenet violated the Securities Exchange Act by repeatedly failing to disclose the kickback scheme in Securities and Exchange Commission filings from February 2012 through 2015. He alleges Tenet artificially inflated its share price by misleading investors about its Medicaid reimbursements and making false or misleading statements about its business and operations.
5. On Aug. 1, 2016, Tenet said it believed it had reached an agreement in principle with the government to resolve the criminal investigation and civil litigation for nearly $514 million. According Mr. Pennington's complaint, Tenet's share price fell 4.64 percent after this news, closing at $27.57 on Aug. 2.
6. On Oct. 3, Tenet said the agreement had been finalized. In addition to the $514 million settlement, Tenet agreed to pay $3 million in related fees and expenses. Tenet's share price fell 4.02 percent after the announcement, closing at $21.75 on Oct. 3, according to the investor's lawsuit.
"As a result of defendants' wrongful acts and omissions, and the precipitous decline in the market value of the company's securities, plaintiff and other class members have suffered significant losses and damages," the lawsuit states.
7. Two of Tenet's current executives are named as defendants in the lawsuit: President and CEO Trevor Fetter and CFO Daniel Cancelmi. Tenet's former CFO Biggs C. Porter is also named as a defendant.
More articles on healthcare industry lawsuits:
Medical transportation company accused of bilking MassHealth out of $19M
Parkview Hospital ordered to disclose rates, chargemaster info in billing lawsuit
Bridal shop sues Texas Health Resources for $1M over Ebola-infected nurse's visit