Jeb Bush and Tenet Healthcare Corp.

Jeb Bush left the Florida governor’s office in January of 2007, after eight years of service.  Three months later, he joined the board of a hospital company that had been pillaging government health programs and abusing patients, in Florida and around the country, for most of the years he sat in the governor’s office.

Apart from a very generous compensation package, why did Bush sign on with such a tarnished company?  And will whatever explanation he now offers hold up under the microscope of a presidential campaign?

Tenet Healthcare Corp. is a national for-profit hospital company with a sordid history.  In the middle 1990s, operating under a previous name, the company pled guilty to seven federal felonies, paid a record fine for health care fraud and kickbacks, and was placed under special government scrutiny for five years (in what is called a Corporate Integrity Agreement).  That deal was arranged by Eric Holder, then U.S. attorney for the District of Columbia, and by Charles Ruff, representing the company and later to become President Bill Clinton’s White House counsel.

As soon as that five-year review ended, the same company, now operating as Tenet Healthcare, launched a program to increase profits by gouging Medicare.  It took a while for everyone to catch on to the new schemes, but starting in 2002 and running on into 2007, the company faced allegations of fraud, Medicare false claims, patient abuse, overcharging federal health care programs, kickback violations, falsely inflating hospital charges, unnecessary heart operations, unnecessary patient deaths, and SEC violations.  Again, the company bought its way out of these charges, paying around $1.7 billion to settle government investigations, government lawsuits, and private lawsuits.  And the government signed Tenet up for another five years of special scrutiny, another Corporate Integrity Agreement.

Bush was a catch for Tenet.  Of Bush’s addition to the Board the company wrote, “The Governor's knowledge of Florida, our second largest region (in terms of number of hospitals), has already proven to be very valuable.”  That value went both ways.  For his first year on the Board, Tenet paid Bush, $451,581.  That amount was $216,000 more than the average paid to the seven other directors and $61,000 more than paid to the chairman of the board.  From 2007 through 2013, Tenet has paid Bush $2.3 million.  A large part of the compensation is in the form of stock awards.  In 2013, Bush sold Tenet shares in three transactions worth $1 million.  And the most recent proxy statement shows that Bush still holds another $3 million in stock at the current market value.

Allegations against Tenet erupt like an unpredictable geyser.  Since Bush has been on Tenet’s board, several new reckonings for old charges (pre-Bush) have come due, and new scandals have surfaced.

In 2009, Tenet paid $85 million to settle claims that the company had denied overtime for approximately 23,000 current and former employees.  The cases had been filed in 2003 and 2004.

In July of 2011, Tenet paid $25 million to settle a class action lawsuit brought on behalf of patients trapped in a Tenet-owned hospital in New Orleans in the aftermath of Hurricane Katrina in 2005.  Forty-five bodies were recovered in the hospital, and some doctors acknowledged hastening the death of patients by injecting them with drugs.

In April of 2012, Tenet paid $43 million to settle government allegations that the company had improperly billed Medicare between May 2005 and December 2007 (a period including eight months of Bush’s time on the company board).

In February of 2014, the federal government joined a whistleblower lawsuit against Tenet and another hospital chain, alleging payment of kickbacks for patient referrals (DOJ press release, 2/19/14).  As alleged in the lawsuit, a company in Georgia (Hispanic Medical Management Inc., Clinica) recruited pregnant undocumented Hispanic women to the company’s prenatal clinics, using the well-advertised slogan “we care about your health, not your immigration status.”

As alleged, Tenet then paid Clinica to refer those women to Tenet hospitals.  Such payments or kickbacks are illegal.  The lawsuit alleges that the payments to Clinica were disguised as payments for interpreter services.  Tenet then submitted claims to Medicaid for services provided to these patients.  Specific cases cited as examples in the lawsuit cover the period from 2004 through 2012.

As explained in the lawsuit, undocumented aliens are not eligible for regular Medicaid coverage, but Medicaid does provide emergency medical assistance, and childbirth is considered an emergency condition under the Medicaid program.  As alleged, the increased volume of low-income patients, generated by the kickbacks, then triggered additional federal funds, paid to hospitals serving a large number of low-income patients.

Apart from any new allegations that pop up, Bush will also have to deal with Tenet’s affection for Obamacare.  Tenet is headquartered in Dallas, Texas, where the Dallas Business Journal (5/6/14) ran this headline: “Obamacare a boon to Tenet Healthcare, CEO Trevor Fetter says.”  Just before the midterms, the same CEO said he does not expect Obamacare to be repealed, regardless of the outcome of the elections, and that to do so would be “self-destructive” (Dallas Business Journal, 11/4/14).  Sitting on the board of a company benefiting from and defending Obamacare will not endear Bush to Republican primary voters.

Perhaps Bush has a prepared list of things he did as governor to rein in this rogue company.  (The State of Florida did file a civil racketeering suit against Tenet in 2005, but that came from then Attorney General Charlie Crist, not Bush.)  And perhaps Bush has a list of actions he took on Tenet’s board to reform the company.  But regardless, with Tenet, Bush is dragging a land mine behind him as he prepares to enter the presidential campaign.