Tenet Allegations Resemble Complaints Made Last Year

As if things weren’t strange enough in the takeover battle for Tenet Healthcare, Monday brings yet more information on the genesis of that scorched earth lawsuit last week from Tenet.

In an 8-K filing released Monday morning, Community Health Systems revealed that questions about its admissions policies had been raised long before Tenet filed its lawsuit.

The CTW Investment Group, which manages funds for a variety of unions, first wrote to CHS (Community Health Systems) last September. In that correspondence, CTW's complaints bear a striking resemblance to the charges laid out last week by Tenet in its complaint.

Since Tenet first made its claims last week (essentially alleging fraud on the part of CHS), sell-side analysts have weighed in with differing opinions on whether any of those allegations have merit.

Regardless, they helped to crush CHS’s stock price and took quite a bit of market cap out of the entire hospital group.

Now it appears that the third party Tenet refers to in its complaint was in fact CTW. Tenet says the third party gave it a heads-up about the low level of observation rates at CHS hospitals —a key contention of the lawsuit.

Investors have taken notice of this. CHS stock has not been badly beaten up today despite its admission (seven days after receiving the subpoena) that it recently received a subpoena from the Office of the Inspector General (in yet another 8-K filing late last Friday).

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