News in brief - Nov. 3, 2003

Magellan reorg plan approved - Tenet receives another subpoena - Big gains for small-group administrators - WebMD issues profit warning - New stent helps Johnson & Johnson

Magellan reorg plan approved

A federal bankruptcy judge in October approved a Chapter 11 reorganization plan for Magellan Health Services that slashed the behavioral managed care company's debt by about $600 million.

The company also announced that chief operating officer Rene Lerer, with the company since January, was named president.

Magellan has said that it does not plan to trim payments to doctors as a cost-cutting strategy.

Tenet receives another subpoena

Tenet Healthcare Corp. says it has received another subpoena from the U.S. Attorney's Office seeking information about Medicare outlier payments at its subsidiaries.

The Santa Barbara, Calif.-based hospital chain announced on Oct. 17 that investigators were seeking medical and billing records for the last five years for patients who were treated at two Los Angeles-area facilities owned by Tenet subsidiaries.

Tenet said it is cooperating with investigators. Tenet's financial practices were already under scrutiny by the Dept. of Justice, which filed a lawsuit in January accusing the company of overbilling Medicare. The same month, Tenet voluntarily changed its Medicare outlier billing policy.

The company said the latest subpoena also calls for personnel information about managers at the two Los Angeles-area hospitals, Tarzana Regional Medical Center and USC University Hospital.

Big gains for small-group administrators

Practice administrators in medical groups of six physicians or fewer saw an average 15% increase in compensation in 2002, according to a new Medical Group Management Assn. survey.

The survey also reported that administrators in practices with fewer than 25 physicians saw a pay increase of 7.1%.

Increases were curtailed as groups grew in size, according to the survey. Practice administrators in groups with between seven and 25 physicians saw an average 4.2% increase in pay in 2002, while those in groups with more than 25 doctors saw only a 3.5% increase, according to the survey.

WebMD issues profit warning

WebMD Corp. has warned that its financial results for the third and fourth quarters will fall short of Wall Street's expectations.

The Elmwood Park, N.J.-based company expected third-quarter revenue of about $250 million, or $7 million below what analysts had expected. The company, which sells physician practice management software and medical transaction processing services, forecast that revenue for the fourth quarter will range from $255 million to $265 million, short of the analyst consensus of $270 million.

Third-quarter net income is expected to be 3 cents a share, down from an earlier estimate of 4 cents. The company also cut its fourth-quarter net income estimate from 7 cents a share to 4 cents a share.

Lower-than-expected software sales and revenue from support and maintenance at its physician practice management business led to the shortfall, WebMD said. The company's financial results also were hurt by reduced transaction volume from its claims clearinghouse business, higher than expected spending on HIPAA obligations and an ongoing federal investigation of its physician practice management software division, the company said.

New stent helps Johnson & Johnson

Health care giant Johnson & Johnson reported dramatically increased earnings and record sales during the third quarter of 2003, based on the impact of new drugs and the CYPHER drug-eluting stent, a product of the company's Cordis Corp. division. The stent received regulatory approval earlier this year.

The company reported earnings of $2.1 billion and 69 cents a share in the third quarter of 2003, compared with the $1.7 billion and 57 cents a share the company reported during the same quarter last year. Sales were $10.5 billion in the quarter, a 15.2% increase over the third quarter of 2002.