BUSINESSTenet shaking up board, managementThe hospital chain makes its moves after being targeted in a Medicare investigation.By Katherine Vogt, amednews staff. April 28, 2003. The nation's second largest for-proft hospital chain, Tenet Healthcare Corp. is seeking to revive itself with new leadership -- replacing one-third of its board and appointing a new board chair, in the wake of a federal probe and a series of scandals and financial setbacks. Tenet announced April 8 that Jeffrey T. Barbakow would step down as board chair later this year. In addition, three other long-serving board members are slated to retire to make room for new members. Barbakow will remain chief executive officer, and the board said it would name a nonexecutive chair.
"The events of the last several months have obviously put us under a microscope, and our shareholders have told us having a strong, independent board is something they favor. We are taking action in response,'' Tenet spokesman Harry Anderson said. The U.S. Justice Dept. filed a lawsuit against Tenet Jan. 9 saying it had overbilled Medicare by submitting claims with inflated diagnostic codes. Last fall, the FBI raided a Tenet hospital in Redding, Calif., as part of a probe into claims that two doctors had performed hundreds of unnecessary heart operations. And in December 2002, the government launched a probe into whether a San Diego hospital had paid kickbacks to doctors or violated physician recruitment laws.
Tenet announced in March that it plans to divest itself of 14 of its 114 hospitals.
The Tenet Shareholder Committee, a group of dissident shareholders, announced earlier this month that Tenet could face up to $6 billion in legal liability in the federal probe into its Medicare billing practices. Tenet has filed a lawsuit against the committee and its founder, M. Lee Pearce, MD, a Miami Beach, Fla., physician who in 2000 led an unsuccessful fight to unseat Barbakow and the board, claiming that the $6 billion figure was "outrageously inflated'' and developed with no basis of fact. The company announced in March that it would sell, consolidate or pull out of 14 of its 114 hospitals to help cope with declining revenue; in January Tenet changed its policy on Medicare outlier payments so it would collect fewer of them. Losses mountingTenet reported a $55 million loss in the third quarter as it wrote down the value of some hospitals and felt the effects of its new policy on Medicare outlier payments. The net loss of 12 cents a share for the quarter ending Feb. 28 compared with a net income of $280 million, or 56 cents per share, for the same quarter a year ago. The loss included $383 million in charges related to the write-down of the value of 10 hospitals and four properties. Tenet said the write-downs were necessary because of several business changes, including projected reductions in Medicare outlier payments. In the third quarter, such payments dropped to $40 million, down from $191 million a year earlier. Tenet said net operating revenues had grown 5.8% to $3.7 billion in the third quarter, compared with $3.5 billion in the same quarter last year. Copyright 2003 American Medical Association. All rights reserved.
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