Tenet: CHS admitting patients unnecessarily to pad bottom line

The ongoing battle between hospital chains Tenet Healthcare (NYSE: THC) and Community Health Systems (NYSE: CYH) has taken yet another turn this week, with the former claiming in a complaint in federal court that the latter has been overbilling Medicare by "systematically admitting rather than observing" patients at its hospitals.

According to the complaint, Franklin, Tenn.-based Community--which, thus far, has tried unsuccessfully to take over Dallas-based Tenet--has been "greatly underusing 'observation' status" for years, which in turn has inflated its admissions totals and thus its overall revenues and profits. In all, improper Medicare billings could total $377 million, according to the Associated Press.

Essentially, Tenet appears to be painting a less-than-flattering picture of Community's business practices to halt any possible future attempts at a takeover.

"By failing to disclose its ... substantial liabilities, Community has made false and misleading statements and material omissions to its own shareholders," the complaint reads. "Now, as CHS attempts to acquire Tenet for $6.00 per share, $1.00 of which would be paid in CHS stock to Tenet's shareholders, 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, or elect CHS nominated directors who will approve a transaction with CHS."

Investors aren't taking too kindly to either hospital chain after the move, as shares of both plummeted in early-morning trading.

To learn more:
- here's the complaint (.pdf)
- check out this Nashville Business Journal piece
- read this Associated Press article
- read this Dow Jones Newswires brief