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Tenet Healthcare Posts Loss

After Shift in Medicare Policy

Reuters, May 15, 2003

Tenet Healthcare, the hospital operator, reported yesterday that it had a first-quarter loss after it changed its policy for billing the government for the sickest patients.

After a government investigation into Tenet's reimbursement practices, the company adopted a new policy for billing "outlier payments," which are special Medicare payments made to health care providers for patients who incur unusually high costs.

The company, which is based in Santa Barbara, Calif., said it would sell or consolidate 14 hospitals and cut 300 jobs in an effort to reduce costs and increase profit margins.

"Reported results for the quarter were impacted by a number of factors, including our voluntary reduction in Medicare outlier payments and pending hospital sales that must be accounted for as discontinued operations," said Jeffrey Barbakow, chairman and chief executive.

In April, Mr. Barbakow agreed to drop the title of chairman after Tenet's annual meeting because the company is seeking an independent chairman. A dissident shareholder group has called for his dismissal from the company.

Tenet reported a loss of $20 million, or 4 cents a share, including charges for revamping and other items, in contrast to a profit of $278 million, or 55 cents, a year ago.

Excluding charges and discontinued operations, the company earned 34 cents a share. On that basis, analysts expected Tenet to earn 32 cents a share, according to Thomson First Call.

Revenue rose 2 percent, to $3.45 billion from $3.38 billion a year earlier.

Tenet said its revenue would have increased 8 percent if not for the outlier payments. In the first quarter of 2003, it received $18 million in payments for outlier patients, compared with $197 million a year ago.

Shares of Tenet rose 43 cents, to close at $16.50.

Tenet's shares have been battered by a Medicare investigation, accusations that two doctors at a Northern California hospital owned by the company performed hundreds of unnecessary heart procedures and a government subpoena regarding the merger of two hospitals in Missouri.