Tenet Healthcare Corp. (THC) filed a lawsuit against Community
Health Systems Inc. (CYH), questioning its admission practices,
which Tenet alleged overstate the hospital operator's growth
statistics.
The company also accused Community, which went public in
December with its $3.3 billion hostile offer for Tenet, of
misrepresenting expected "synergy potential" of a deal between the
companies. Tenet claims Community Health's stock price has for many
years been artificially inflated as a result of the alleged
improper admissions.
Shares of Tenet were down 6.4% at $7.07 in early trading.
Community Health was off 8.7% at $36.78.
According to Tenet's filing with the U.S. Securities and
Exchange Commission, Community Health allegedly failed to disclose
its practice of systematically admitting, rather than observing,
patients into its hospitals for financial, rather than clinical,
purposes.
A representative from Community Health wasn't immediately
available for comment.
The complaint asks Community Health to disclose fully its
admissions practices and to recover Tenet's litigation costs.
The complaint, filed in U.S. District Court in the Northern
District of Texas, comes after the Texas attorney general's office
in February opened a civil investigation involving Community Health
hospitals in the state, focusing on emergency-department procedures
and billing.
Since Community went public with its hostile $6-a-share bid
offer, Tenet has taken defensive moves, saying the offer doesn't
reflect its "compelling growth prospects." The company delayed by
roughly six months its annual shareholders meeting and adopted a
shareholder-rights plan, or poison pill, that could dilute the
holdings of a major acquirer of its stock. Community Health has
announced a full slate of 10 director nominees to Tenet's
board.
Tenet in February said its fourth-quarter earnings more than
tripled as strengthening patient volume trends, higher pricing and
lower operating costs helped the hospital operator.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481; Tess.Stynes@dowjones.com