Tenet’s Recent Troubles Spur Stock Devaluation Across Health System Industry
Tenet Healthcare's recent troubles have prompted widespread concern over a possible "crackdown on Medicare fraud" that has begun to "dra[g] down" share prices for Tenet and other health care systems, the San Francisco Chronicle reports (Abate, San Francisco Chronicle, 11/12). The HHS Office of Inspector General announced last week that it is preparing to audit Tenet's hospitals in an attempt to determine whether the company properly billed Medicare for outlier payments, special Medicare reimbursements that cover unusually costly procedures. Tenet executives also announced last month that federal officials are investigating allegations that two surgeons performed unnecessary procedures at Tenet's California-based Redding Medical Center. In addition, Tenet said last 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).
Moody's Investors Service yesterday changed Tenet's rating outlook to negative, saying that the "significant uncertainty of recent developments ... could adversely impact the company's future cash flow and strategy" (Rundle/Wilde Mathews, Wall Street Journal, 11/12). The value of Tenet stock has fallen 72% since an analyst for UBS Warburg predicted on Oct. 28 that the company would be investigated for its Medicare billing practices. Tenet shares fell 90 cents yesterday to close at $14, a 52-week low. Meanwhile, the allegations against Tenet concerning improper Medicare billing have led to concerns that a "general tightening" of Medicare reimbursement policies may lie ahead, the Chronicle reports. As a result, shares of HCA, which owns 184 hospitals nationwide, have fallen to $36.94, down 28% since Oct. 25. Shares of Triad Hospitals, which operates 46 hospitals and other health care facilities, have dropped 32% since Oct. 25, closing at $28.08 yesterday. The Standard & Poor's health care facilities index, which measures overall performance in the sector, has fallen 43% since the allegations against Tenet were revealed (San Francisco Chronicle, 11/12).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.