Tenet Sues Community Health Over Medicare Billing After Spurning Takeover

Tenet Healthcare Corp. (THC), after rejecting Community Health Systems Inc. (CYH)’s unsolicited buyout offer, said it sued that company for allegedly overbilling Medicare in admitting patients to its hospitals. Community Health Systems shares plunged.

Tenet seeks to compel Community Health Systems to disclose how it admits patients to hospitals for “financial rather than clinical purposes,” according to a Securities and Exchange Commission filing today in which Tenet said it filed the lawsuit in federal court in Texas.

Community Health, the largest publicly traded hospital company in the U.S., bid $6 a share in cash and stock, or $7.3 billion, in November to acquire Tenet. Tenet rejected the offer in December, saying it wasn’t “remotely fair.”

“CHS is making false and misleading statements to Tenet’s shareholders in the hope that they will exert pressure upon Tenet to accept an inadequate offer,” Tenet said in the complaint that was included with the SEC filing.

Tomi Galin, a spokeswoman for Franklin, Tennessee-based Community Health, didn’t immediately return a call seeking comment.

Tenet, based in Dallas, fell $1.35 cents, or 18 percent, to $6.20 in New York Stock Exchange composite trading at 10:35 a.m. Community Health fell $14.79, or 37 percent, to $25.51., before trading curves were implemented.

To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net