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Community Health Seeks Dismissal of ‘Baseless’ Tenet Healthcare Suit

Community Health Systems Inc. (CYH), accused in a lawsuit by Tenet Healthcare Corp. of overcharging Medicare, moved to dismiss what it called a “baseless” legal action.

Community Health, which has an unsolicited buyout offer for Tenet, said in court papers that the claims must be dismissed in part because Community Health modified its acquisition proposal to an all-cash offer. Community Health filed its motion today in federal court in Dallas.

Tenet, a Dallas-based operator of hospitals, sued Community Health on April 11, charging that it would have difficulty raising money for a buyout because its methods for admitting patients to hospitals under Medicare could subject it to “liability and damages of well over $1 billion.”

“In a misguided effort to score points in this contest for corporate control, Tenet has filed this lawsuit attacking the ethics and professional judgment of 15,000 attending physicians, who make the decision whether to admit patients at CHS- affiliated hospitals,” Community Health said in the filing.

Community Health offered $6 a share, or $7.3 billion, to acquire all the stock of Tenet. Tenet rejected the offer in December, saying it wasn’t “remotely fair.”

“This changes nothing,” Rick Black, a spokesman for Tenet, said in a telephone interview. “We intend to vigorously prosecute our claims.”

Tenet owns 49 hospitals. Community Health owns, operates or leases 130 hospitals.

Tenet rose 15 cents, or 2.3 percent, to $6.64 in New York Stock Exchange composite trading at 4:15 p.m. Community Health, based in Franklin, Tennessee, climbed 70 cents, or 2.3 percent, to $31.20.

The case is Tenet Healthcare Corp. (THC) v. Community Health Systems Inc., 11-00732, U.S. District Court, Northern District of Texas (Dallas).

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 in San Francisco at mhytha@bloomberg.net.

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