Tenet To Voluntarily Reduce Medicare Outlier Payments by $700 Million Per Year
In anticipation of new CMS regulations, Tenet Healthcare, the nation's second largest for-profit hospital chain, announced yesterday that it will voluntarily reduce the amount of money it charges Medicare per year by $700 million, the Wall Street Journal reports. The new pricing policy will apply to outlier payments, which reimburse for unusually expensive care. Outlier reimbursement levels will no longer be based on "statewide average" calculations but on the "latest available" cost data, the Journal reports (Pasztor, Wall Street Journal, 1/7). Tenet's new policy is expected to reduce outlier payments from $65 million per month to $8 million, according to company officials, the AP/Philadelphia Inquirer reports (Gentile, AP/Inquirer, 1/7). Tenet President Trevor Fetter said the company wanted to "step forward and adopt what we anticipate may become central components" of CMS' new regulations governing outlier payments. Analysts say Tenet is making the voluntary move to "blunt criticism that it abused a loophole in Medicare's payment system to effectively gouge the government," according to the Journal (Wall Street Journal, 1/7).
CMS Administrator Tom Scully said he was "pleasantly surprised" by Tenet's new voluntary policy, saying the company has taken a "pretty honorable step," the Los Angeles Times reports. However, Scully added that federal audits of Tenet would continue and that the Justice Department and the HHS Office of Inspector General would have to decide if Tenet acted illegally based on their own investigations into suspicious outlier payments (White, Los Angeles Times, 1/7). "Tenet is making an effort to stay in front of the story" by lowering future earnings estimates, Clifford Hewitt, an analyst for Legg Mason, said. He added, "But the real story will depend on what happens to those government investigations." Analysts predict the new pricing policy will lower Tenet's earnings by as much as 78 cents a share in the fiscal year ending May 31, 2004 (Wall Street Journal, 1/7).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.