Tenet's Medicare Loophole to Close Soon, Analyst Says

[NRSKarenRN, BSN, RN]

CALIFORNIA

Hospital firm received $763 million last year in outlier payments, which a report says the agency will clamp down on.

By Ronald D. White

Times Staff Writer

November 26 2002

http://www.latimes.com/business/printedition/la-fi-tenet26nov26,0,2541276.story?coll=la%2Dheadlines%2Dpe%2Dbusiness

A financial analyst for UBS Warburg warned investors that a federal agency soon will close a "major loophole" that allowed hospital chain Tenet Healthcare Corp. to receive $763 million last year in a particular form of Medicare payments.

The federal Centers for Medicare and Medicaid Services is reviewing Medicare outlier payments that are made to hospitals to help offset the cost of unusually expensive treatments.

These outlier payments are calculated, in part, by comparing a hospital's charges against a complicated statewide average on costs and procedures.

Tenet has acknowledged aggressively raising its retail hospital prices, which help determine its outlier payments. Recently, CMS administrator Tom Scully said Tenet received a disproportionately large share of outlier payments, and he promised quick action to exert greater control over the program.

Investors have been waiting eagerly for news about any potential changes in the outlier program and its effect on Tenet's revenue.

In a research report Friday, UBS analyst Kenneth Weakley wrote that outlier payments based on statewide averages of medical costs would be eliminated after a 60-day waiting period, although he did not estimate how much Tenet would lose in annual revenue.

Weakley, who was the first analyst to raise concerns about outliers at Tenet, was not available for comment Monday.

Tenet spokesman Harry Anderson had no comment on Weakley's report, but he said the company is "eagerly awaiting information" from CMS.

Santa Barbara-based Tenet is the nation's second-largest hospital chain.

Tenet's stock has nose-dived in recent weeks after it was revealed that the company is being audited by CMS for its sizable Medicare billings. The Securities and Exchange Commission also has opened an informal inquiry into the company. And a Tenet hospital in Redding, Calif., was raided by federal agents who are investigating two doctors for allegedly performing unnecessary heart surgeries.

Separately, the California Nurses Assn. on Monday released a report claiming that Tenet inflates drug charges at its hospitals by 736% above costs, or more than double the national average.

"We acknowledge that price increases in recent years have put us ahead of other hospitals. But the important point to remember is that no [patient] pays these prices. People pay an amount set by Medicare or Medicaid or negotiated by their insurance companies," Anderson said.

Also on Monday, a coalition of nurses, community health activists and union leaders called on California Atty. Gen. Bill Lockyer to block Tenet's pending $35-million acquisition of the USC/Norris Comprehensive Cancer Center and Hospital in Los Angeles.

Tenet already manages the small research facility and also owns and operates USC University Hospital.

Carolyn Tapp, who leads a group called the Women of Color Breast Cancer Survivors, is part of the coalition and says she is concerned that Tenet will restrict access and care if Norris is sold.

Tenet vigorously denies that charge.

A USC official said recently that the university was still in favor of selling the hospital to Tenet.

A spokesman for Lockyer said the state takes seriously the sale of all nonprofit facilities, such as Norris, to for-profit companies.

The attorney general has until Jan. 17 to review the proposed sale. His spokesman, Tom Dresslar, said the state already has an outside consultant studying how the sale would affect care at the hospital.

Tenet's shares closed Monday at $16.52, up 12 cents, on the New York Stock Exchange.

If you want other stories on this topic, search the Archives at latimes.com/archives.

[sjoe]

'"We acknowledge that price increases in recent years have put us ahead of other hospitals. But the important point to remember is that no [patient] pays these prices. People pay an amount set by Medicare or Medicaid or negotiated by their insurance companies," Anderson said.'

I like that. So NOBODY pays this money, it just drops from the skies somehow? What a clear view of reality Anderson (and Tenet) seem to have.

My vote? Jail time for the CEO (who, by the way, had his retirement package DOUBLED earlier this year) and other selected Tenet honchos for Medicare/Medicaid fraud.

[oramar]

Didn't someone post that this particular CEO cashed in a lot of stock options right before the regulators showed up at his door? I will look around and see if I can find an article. That alone is enough to get the FTC in on the case.