Tenet Healthcare Corp's (THC) board rejected the latest $3.3 billion offer from Community Health Systems (CYH), saying the price "grossly undervalues the company."

Community Health sweetened its hostile bid earlier this month, changing its $6 per share offer to all cash from $1 in Community Health stock and $5 in cash. The move was meant to protect Tenet shareholders from any risk associated with the stock of Community Health, which is currently the subject of a U.S. government probe into billing practices.

The board of Tenet said in a statement that after consultations with advisors it had determined that the revised bid is "not in the best interest of Tenet or its shareholders," saying the $6 per share price was the same as its initial offer made back in November.

Tenet CEO Trevor Fetter said that since the November offer the company "has demonstrated improving business trends, including the best fourth quarter results in seven years. In addition, industry fundamentals are improving, and Tenet's Outlook for 2011 and longer-term financial performance reflects strong growth."

Community Health, the second-largest U.S. hospital chain, has disclosed that the U.S. government had subpoenaed the company in connection with an investigation of possible improper claims submitted to Medicare and Medicaid, hitting its stock further.

Tenet, meanwhile, has filed a lawsuit again Community Health accusing it of admitting patients for needless stays and bilking the U.S. government and private insurers.

Shares of Community Health fell 20 cents to $30.69 on Thursday, while Tenet shares rose 6 cents to $6.77. U.S. stock markets were closed Friday.

(Reporting by Paul Thomasch; Editing by Marguerita Choy)