Corporate Compliance

Tenet reaches $10 million settlement in fraud case

Compliance Monitor, April 11, 2007


The hospital system was charged with failing to disclose to investors that Tenet's strong earnings growth from 1999 to 2002 was driven largely by its exploitation of a loophole in the Medicare reimbursement system, the SCE reported.


SEC's complaint also named the following senior executives:


  • Thomas B. Mackey, Tenet's former chief operating officer and co-president
  • Christi R. Sulzbach, the former general counsel and chief compliance officer
  • David L. Dennis, the former chief financial officer and co-president
  • Raymond L. Mathiasen, the former chief accounting officer


Dennis and Mathiasen have agreed to settle the commission's charges.


According to the SEC, Tenet's management realized that Tenet could inflate its revenue from outlier payments by increasing the gross charges set by its hospitals. From 1999 to 2002, Tenet's outlier revenue more than tripled. Tenet's outlier growth from fiscal 1999 to fiscal 2002 accounted for over 54% of its cumulative growth in earnings per share from operations. By fiscal year 2002, Tenet's outlier revenue comprised more than 40% of its earnings per share, according to the SEC.


Once Tenet admitted that its strategy was not sustainable, the market value of Tenet's stock plunged by over $11 billion, according to the SEC.


The settlement, in which Tenet neither admitted nor denied the allegations, will resolve the SEC complaint against the company once it is approved by the court.


Click here to read the Tenet press release.


Click here to read the SEC press release.

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