Tenet Officials Introduce Plan To ‘Reassure’ Investors after Hospital Search
Seeking to address concerns over its responsibility for two surgeons accused of performing "unnecessary" surgeries at one of its hospitals and questions about its overall Medicare reimbursements, Tenet Healthcare, one of the nation's largest for-profit hospital chains, on Friday outlined a plan to "reassure investors," the New York Times reports (Abelson, New York Times, 11/2). Tenet officials last week announced that federal officials searched Redding, Calif.-based Redding Medical Center as part of an investigation of two physicians who may have performed unneeded surgeries and potentially defrauded Medicare. According to an FBI affidavit, government officials suspect that the physicians participated in a "scheme to cause patients to undergo unnecessary invasive coronary procedures," including artery bypass and heart valve replacement surgeries. Also last week, an analyst for UBS Warburg downgraded Tenet's stock because of concerns about the company's high rate of Medicare outlier payments, which compensate for unusual cases that require very costly care. (California Healthline, 11/1). FBI officials state in an affidavit that as many as 25% to 50% of the surgeries that Drs. Chae Hyun Moon and Fidel Realyvasquez performed may not have been necessary (Pollack, New York Times, 11/4). Tenet officials on Friday said they would review "dozens" of cases involving the two doctors, who have not been charged with any crimes. According to the Times, if the company determines that Medicare paid for any unnecessary surgeries, Tenet will refund the program's reimbursements. In the meantime, the doctors will continue to practice and have admitting privileges at Redding Medical Center, although Tenet officials said that the doctors' treatment decisions will be subject to review by independent cardiologists (New York Times, 11/2).
Tenet officials maintain that the federal investigation only involves the two doctors, but lawyers, other doctors and federal officials have said that Redding Medical Center and Tenet may be responsible because Redding "heavily advertises" its cardiac services and because, according to some doctors, Tenet officials knew of the issue but took no action, the Times reports (New York Times, 11/4). Redding began marketing itself as a "leading heart center" in 1987, according to the Times, and spent "millions" on advertising to draw in more business. One cardiologist interviewed by the FBI said that Redding Medical Center gave bonuses to doctors based on the amount of revenue they generated for the hospital, a claim Tenet officials "strongly denied" (New York Times, 11/2). In addition, the FBI affidavit says that "several doctors" in the Redding area warned executives at Redding Medical Center about the high volume of cardiac procedures as early as 1997 (New York Times, 11/4). One doctor quoted in the affidavit said he believed Tenet administrators were aware of the situation but "chose to look the other way" because Moon and Realyvasquez "produced tremendous revenue" for Redding, according to the Times (New York Times, 11/2). Some lawyers have said that they have been "inundated" with calls from patients seeking to bring Tenet and Redding Medical Center to court (New York Times, 11/4). California-based attorney Russell Reiner said he expects to file more than 10 lawsuits against the two doctors and Tenet, accusing them of fraud, false advertising and medical negligence (Martin/St. John, San Francisco Chronicle, 11/4). Tenet officials said last week that the company has "significant malpractice coverage" to cover any claims related to the accusations. Tenet officials also said they learned of the issue only last week, adding that it was the doctors' responsibility to make medical decisions and that the company played no part in those decisions (New York Times, 11/2).
Meanwhile, analysts for Goldman Sachs and Prudential Securities, citing the investigation into the two physicians, on Friday downgraded Tenet shares, Reuters/Los Angeles Times reports (Reuters/Los Angeles Times, 11/2). Tenet's shares fell to $26.50 at closing Friday, down from as high as $52.50 in early October (New York Times, 11/2). Although analysts acknowledged that Tenet was not the focus of the investigation, some said the company's stock "could undergo some near-term pressure" because of the probe, Reuters/Times reports. Other analysts noted that the "distraction" of the investigation could alter the productivity of the company. "It absorbs the focus and energy of addressing the issue" and takes the efforts of Tenet's management away from running the company, Daniel Cain, co-founder of the investment banking firm Cain Bros., said (Reuters/Los Angeles Times, 11/2). NBC's "Nightly News" Friday reported on the FBI investigation of Drs. Moon and Realyvasquez (Smith, "Nightly News," NBC, 11/1). A video excerpt of the segment is available online.This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.