Ongoing Trial Complicating Tenet’s Efforts for Separate Settlement
A lawsuit in a San Diego court against California-based Tenet Healthcare that alleges violations related to physician kickbacks, medical billing and cardiac procedures is complicating the company's efforts to settle patient lawsuits at other hospitals, the Los Angeles Times reports (Girion, Los Angeles Times, 12/16). Federal prosecutors in several states have launched investigations into physician-relocation agreements at Tenet hospitals. In October, a criminal trial of Tenet HealthSystem Hospitals, a Tenet Healthcare subsidiary, began in which federal prosecutors allege that the company and two administrators at Alvarado Hospital Medical Center paid illegal kickbacks to doctor groups to boost patient referrals and revenue.
Federal prosecutors also have claimed that Alvarado and other Tenet hospitals have offered physician-relocation agreements in exchange for patient referrals (California Healthline, 12/14). According to the Times, Tenet general counsel Peter Urbanowicz, during an investor conference, "confirmed the pessimism of some analysts that a resolution was unlikely while the company was in trial in San Diego." Urbanowicz said, "As a practical matter, while the government is trying to convict our hospital and CEO in San Diego, it makes settlement discussions with them on other matters difficult" (Los Angeles Times, 12/16).
Separately, Tenet officials on Wednesday did not disclose fourth-quarter or 2005 outlooks to investors despite having "prepar[ed] them for a gloomy outlook earlier this week," the Dallas Morning News reports (Quinn, Dallas Morning News, 12/15). Tenet officials on Monday announced that fourth-quarter charges could exceed $1 billion and that the company would report a larger loss for the fourth quarter than it reported for the third quarter. Tenet officials also said that the company would do no better than break even in 2005. According to Thomson Financial Network, analysts had estimated that Tenet would report a loss of 4 cents per share for the fourth quarter and earnings of 11 cents per share for fiscal year 2005 (California Healthline, 12/14).
Tenet Chief Operating Officer Reynold Jennings at the conference said, "We simply couldn't reduce costs fast enough to offset falling revenue. We are set to implement a series of significant cost-management efforts, which should be mostly done by June" (Dallas Morning News, 12/15). According to the Times, Tenet's cost-reduction strategies would include job cuts and increased use of contract labor (Los Angeles Times, 12/16). Jennings said, "Over the next 12 months, Tenet will continue to struggle with the impact of a tarnished brand." Peter Young, a Florida health care consultant who attended the conference, said, "I did not hear anything indicating the very dim light in the tunnel would become brighter any time before 2006. What we did hear were a number of business operational and quality-improvement efforts that are objectives of all hospitals in America" (Dallas Morning News, 12/15).