The U.S. government has consolidated an investigation of billing practices by hospital operator Community Health Systems Inc., the company said Monday.
The Civil Division of the U.S. Department of Justice, multiple federal prosecutors' offices and the Office of the Inspector General for the Department of Health and Human Services are now "closely coordinating" their investigation, according to a securities filing by Community, which cites a court motion filed by the Justice Department.
According to the filing, the government considers recent allegations against Community by rival hospital company Tenet Healthcare Corp. to be related to the government probe.
Tenet is trying to fight off a takeover bid from Community and filed a lawsuit against its suitor earlier this month. On Friday Tenet rejected Community's latest $3.3 billion offer.
Community, the No. 2 hospital operator, had sweetened its $6-a-share bid by making it all cash, a move meant to protect Tenet shareholders from any risk associated with the stock of Community and its legal challenges.
But Tenet's board said the price "grossly undervalues the company."
Through Thursday, Community shares had fallen nearly 24 percent since Tenet filed its lawsuit on April 11, alleging that its suitor had admitted patients for needless stays and bilked the government and private insurers.
Community shares were down 3.3 percent at $29.69 in premarket trading on Monday.
Through Thursday, Tenet shares had fallen more than 10 percent since it announced its lawsuit, as some investors worry about broader government scrutiny of the hospital sector.
Shares of Tenet, the third-largest U.S. hospital operator, were down 2 cents at $6.75 in premarket trading, still above Community's offer price. Tenet is seen as still in play.
If Community's share price continues to languish, its shareholders may soon start to pressure the company to drop its bid for Tenet and focus on the investigations, Jefferies & Co. analyst Arthur Henderson said in a research note.
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