Problems at Tenet Prompt CMS To Probe Hospital Outlier Payments Nationwide

Prompted by recent allegations that Tenet Healthcare inappropriately used the outlier payment formula to boost its Medicare reimbursements, CMS Administrator Tom Scully said yesterday that his agency will "fix" the formula and launch a review of hospitals nationwide to determine whether they have "taken advantage" of the regulations, the New York Times reports (Abelson, New York Times, 11/13). Tenet officials announced early this month that the HHS Office of Inspector General is preparing to audit the company's hospitals in an attempt to determine whether Tenet properly billed Medicare for outlier payments, which reimburse for unusually costly care. Tenet hospitals have been receiving an "extraordinarily high share," according to government officials. Ken Weakley, an analyst for UBS Warburg, estimated that approximately 23% of Tenet's Medicare reimbursements come from outlier payments, compared to 6% on average for other comparable hospitals (California Healthline, 11/7). The OIG audit will look into allegations that some of Tenet's hospitals sharply raised retail hospital charges, which are used to calculate outlier payments, resulting in hundreds of millions of dollars in higher Medicare reimbursements (California Healthline, 11/8). Scully said Tenet's price hikes took his agency "by surprise" but added, "We are now aware of it, and we are going to fix it." He said that his agency expects to be able to make changes to the formula "fairly quickly." Scully said Medicare officials are currently "looking into" whether other hospital groups across the county may have inappropriately billed Medicare for outlier payments, adding that his agency has not determined whether any other hospital groups had received similarly high reimbursements (New York Times, 11/13).

In related news, the Los Angeles Times today profiles Tenet CEO Jeffrey Barbakow, who is now "facing increasing blame" and "pressure to resign" over the company's recent troubles. Barbakow, who took over as CEO in 1993 -- when the company was known as National Medical Enterprises -- is credited with bringing Tenet "back from the brink of disaster" after it went bankrupt following a series of fraud scandals, according to the Times. However, some analysts now say that Tenet's investors have lost confidence in Barbakow. "I don't see how he regains the trust of investors. I think it has gone too far," Sheryl Skolnick, an analyst for Fulcrum Global Partners, said. Tenet spokesperson Harry Anderson refuted rumors that Barbakow will resign, saying that the CEO is "working hard to produce a more reliable, longer-term profit outlook based on less aggressive Medicare billing practices," the Times reports (White, Los Angeles Times, 11/13).