CNA Sponsored Study: 'Big Hospital' Tenet Chain Overcharges Patients for Drugs

Home Health Columnist / Guide · Nov 25, 2002

Tenet hiked drug prices, study finds

More than double U.S. average

Chuck Squatriglia, Tyche Hendricks,

San Francisco Chronicle Staff Writers

Sunday, November 24, 2002

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2002/11/24/MN94878.DTL

See chart:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2002/11/24/MN94878.DTL&type=chart

Tenet Healthcare, already under federal scrutiny for collecting unusually high Medicare payments, charged California patients 10 times more for drugs than it paid for them, according to a study commissioned by the California Nurses Association.

Nationwide, the country's second-largest for-profit hospital chain inflated prices by 736 percent -- more than twice the national average, according to the study obtained by The Chronicle.

The report's findings are the latest in a series of allegations to shake the Santa Barbara chain, which operates 113 hospitals in 16 states. More than one-third of those facilities are in California.

Late last month, 40 FBI agents raided Redding Medical Center during an investigation into allegations that two of its doctors had performed hundreds of unnecessary heart surgeries for patients. Since then, Tenet has come under fire from other medical regulators and has seen its stock price plunge.

The three-month analysis, to be released Monday, was conducted by the Institute for Health and Socio-Economic Policy for the nurses association. It examined 42,000 federal cost reports filed by 5,000 hospitals between 1993 and 1999, the latest year for which data was available.

Tenet and the nurses association have long had a strained relationship. More than 400 nurses at Tenet's Doctors Medical Center hospitals in San Pablo and Pinole walked off the job Nov. 4 after contract negotiations stalled. The labor dispute is still unresolved.

"It's pretty apparent that California residents who use Tenet-affiliated facilities have been unfairly victimized by Tenet's aggressive pricing policies," association spokesman Charles Idelson told The Chronicle.

STUDY'S METHODOLOGY QUESTIONED

Tenet spokesman Harry Anderson acknowledged the company has what he called "an aggressive pricing strategy."

The company is reviewing the policy, he said.

Anderson also cited the California Nurses Association's adversarial relationship with Tenet and questioned how the study was conducted.

"I have no way to know what their methodology was," he said. "I can't vouch for those numbers, but I would view them with suspicion given that CNA, which is in contention with us, is putting them out."

Charges for drugs and services are based on several factors and are often set above the hospital's true costs. Those list prices do not always represent what hospitals receive. Many government programs pay hospitals less than their cost to treat a patient. But charging high prices for drugs and services increases payments hospitals receive from Medicare, private insurance companies and others.

The study found that, while all hospitals inflate drug prices, Tenet's charges far surpassed those of its competitors.

Nationwide, hospitals boosted drug prices by an average of 335 percent. Tenet's increase averaged 736 percent, the survey found.

MARKUPS DOUBLE THOSE OF RIVALS

In California, hospitals raised their drug prices by 504 percent. Tenet charged an average of 1,038 percent, the study found.

Some Tenet hospitals in California charged more than the company average. Sierra Vista Regional Medical Center in San Luis Obispo was the most aggressive, charging 18 times more for drugs than it paid for them.

Redding Medical Center charged nearly 15 times more than it paid for drugs, the study found.

In the Bay Area, Doctors Medical Center in San Pablo boosted its prices by 1,379 percent, while Doctors Medical Center in Pinole bumped them 1,174 percent, the study found.

In addition to the FBI and Medicare investigations, the Joint Commission on Accreditation of Healthcare Organizations has initiated a quality review of Tenet hospitals.

Several former patients have sued Tenet, the Redding hospital and a cardiologist there, accusing them of defrauding patients by attempting to coerce them into unnecessary medical procedures, coronary bypass operations.

The Medical Board of California tried unsuccessfully last week to suspend the two doctors' medical licenses. The doctors have not been charged with any crime.

DRUG COSTS KEY HEALTH CARE ISSUE

The study's findings have broad implications for health care policy, the CNA's Idelson and others said, because mounting drug costs are a major factor in rising health care costs. They also suggest that discussions on how to address rising drug prices are missing a key component.

"The national debate on the prescription drug issue is incomplete," said Don DeMoro, executive director of the Institute for Health and Socio-Economic Policy. "No one's looking at this."

The debate has so far focused on the prices charged by drug manufacturers. Any reform effort "is doomed to fail," Idelson said, unless policymakers take steps to limit the prices hospitals can charge.

He also condemned the inflated prices as a fraud committed against Medicare.

"It's a systematic looting of the public trough by Tenet Healthcare," Idelson said.

Chronicle staff writer Carolyn Said contributed to this report. / E-mail the writers at [email protected] and [email protected].

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Story as reported in NY Times: (Free registration http://www.nytimes.com/2002/11/24/business/24NURS.htmlrequired).

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CNA Info:

Press Release:

Tenet's Markup on Drug Charges - Over 700%

Charges in California More Than 1,000% Over Costs

Drug Prices May Be Key Factor in High Outlier Payments

Markups a Stealth Issue in National Debate on Prescription Drugs