Tenet Officials Resign Amid Audit into Medicare Outlier Payments, Other Inquiries
Tenet Healthcare yesterday announced a management restructuring in which the "two highest-ranking officials" under Chair and CEO Jeffrey Barbakow will depart in an effort to "contain a widening crisis," the Wall Street Journal reports. Officials also stated that an internal review has revealed that "sharp rises in certain prices" at some Tenet hospitals have resulted in increasingly high Medicare outlier payments (Rundle/Mathews, Wall Street Journal, 11/8). The HHS Office of Inspector General announced on Wednesday that it is preparing to audit Tenet's hospitals nationwide in an attempt to determine whether Tenet properly billed Medicare for outlier payments, special Medicare reimbursements that cover unusually costly procedures (California Healthline, 11/7). Leaving the company are David Dennis, Tenet's chief financial officer, who resigned, and Chief Operating Officer Thomas Mackey, who retired. Barbakow said their decision to leave was "their own" and stated that they were not "asked to resign," according to the Journal. Barbakow also said that Tenet's pricing strategy was "entirely consistent" with Medicare rules (Wall Street Journal, 11/8). According to the Los Angeles Times, 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." Barbakow said that the "aggressive hospital price hikes" would end, adding, "It is inconsistent with the position and posture that I want Tenet to maintain" (Lee, Los Angeles Times, 11/8). According to Tenet's internal examination, 11 of its 113 hospitals received more than half of the $763 million the company was paid in outlier payments during the fiscal year ending May 2002, the Journal reports.
In addition to the Medicare outlier payment audit, federal officials in California are investigating allegations that two surgeons performed unnecessary procedures at Tenet's Redding Medical Center. If the allegations are true, the unnecessary procedures could have contributed to high outlier payments, presenting a "far more serious problem for Tenet and its reputation," according to the Journal (Wall Street Journal, 11/8). Tenet also announced this week that the Federal Trade Commission has requested information about the 1999 merger of two of its hospitals in Missouri as part of the agency's broad inquiry into hospital mergers nationwide (California Healthline, 11/7). Sheryl Skolnick, an analyst with Fulcrum Global Partners, said that the HHS audit and other concerns have "significantly damaged" Tenet's operating strategy (Abelson, New York Times, 11/8). Following yesterday's announcement of the management shake-up, Tenet's share price "plunged" 31% to $19.25 and closed at $27.95 (Wall Street Journal, 11/8).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.