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Tenet Healthcare
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(The Second Coming)

The Story Part II
The Struggle to Survive
(Jun 2003 to 2007)

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This corporate web site addresses the issues of corporate health care within a broad framework. A web page describing this broad context should be considered as an introduction to each page on the web site. If you have not yet read it then
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Content of this page
This page tells the story of Tenet's struggle to survive as it battled multiple investigations, court proceedings and a precarious financial situation. Its restructuring and claims to have reformed are noted and questioned.



Tenet Healthcare has been the central player in two massive fraud related and standard of care scandals. An overview of both of its scandals and links to all the Tenet pages for both scandals can be found on the main Tenet Healthcare web page.

The story of Tenet Healthcare's second scandal is told on two web pages. Several other pages explore Specific issues in greater depth.

Part I traces the story from the aftermath of the fraud settlement in 1994 through Tenet's spectacular success to it's dramatic fall from grace when the scandal broke in October 2002. It documents the myriad fraud and other investigations that had commenced by the middle of 2003. The page documents what happened, explores the social dynamics underlying what happened, and describes Tenet's early response.

Click Here to go to Part I

Part II picks up the story in June 2003 after the principles responsible had been forced out. It summarizes the multiple fraud and other settlements and then looks at the consequences of Tenet's past business strategy. It describes its struggle to survive and to settle the fraud allegations. It looks at its position and its prospects after the fraud actions were resolved.

This page is part 2



The scandal that broke in October 2002 was remarkably similar in many ways to that which it exploded in 1991. The new scandal caused Tenet's shares to fall 75% in three weeks and then to continue going down. State and Federal Government agencies started investigations. Multiple other entities and individuals commenced law suits. Tenets, reputation, its worth and its income plummeted. There was a liquidity problem and some senior executives were driven out. Chairman and CEO Jeffrey Barbakow was one of them.

Mid 2003 found Tenet facing a multitude of investigations and court actions from almost every quarter of the USA. There was widespread adverse publicity. The two administrators who had masterminded what happened had gone. Barbakow had been forced out but he had been re-placed, temporarily, by one of his proteges, Trevor Fetter. After a public display of recruiting an independent outsider this appointment of an entrenched insider was quietly made permanent.

This appointment of a member of the old guard was something few, except for Dr Pearce's Shareholder Committee, found concerning. Whatever else Tenet is to do this single step shows that it ultimately intends to resume its successful market focus and business philosophy. This is exactly what Richard Eamer, Tenet/NME's founder did when he was forced to resign during the first scandal. He handed the company to his old friend, fellow market thinker and adviser, Jeffrey Barbakow.

It is little wonder that we have had a replay of the same scandal. There is no more certain pointer that we were about to go through another long process of mea culpas, settlements and professions of integrity, trustworthiness and reform before returning to normal business practices.

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The Shareholder Committee

 Dr Lee Pearce, a Florida doctor turned businessman had been a director of both AMI and OrNda. Tenet had acquired both in the years after its resolved its first scandal. I do not know if Pearce opposed these mergers at the time. Pearce soon became a strong critic of Tenet's new managements and its Wall Street medicine. His attempt to depose Barbakow in 2000 failed but he and the Shareholder Committee he formed have remained strong critics of Tenet's practices and the governments dealings with them. Tenet has tried to discredit him, accusing him of self interest and even suing him. This is the way that Tenet has dealt with those who criticize its practices since its early days as Tenet/NME

It is important to remember that Pearce and his committee (like most businessmen in the USA) are not critics of a market in sickness and decrepitude but critics of the way Tenet has operated in that market. They believe that it is legitimate to trade in illness and to make a profit for distant shareholders from this. They believe that money for profits can be taken out of the system without compromising care. Villwock is often a spokesperson for the group.

The committee's earlier criticisms are in part 1 of this story. Here are some examples of their criticisms during Tenet's subsequent struggle to survive. This is a group that is close to the company and knows what is happening. It probably had considerable influence.

Villwock calculates that Tenet owes nearly $2 billion -- at least -- to the federal government alone. The company also faces a number of patient lawsuits that could cost it $1 billion or more.
Tenet Limps Toward Another Round of Cuts (Melissa Davis) Jan 27, 2004

A dissident shareholder of Tenet Healthcare Corp., the struggling hospital operator, said on Monday it is likely the company will have to break up into as many as four companies to survive.

The shareholder, M. Lee Pearce, who runs a group called the Tenet Shareholder Committee, questioned whether Tenet would have enough money to pay for potential settlements and penalties resulting from several investigations and lawsuits into its operations.
Tenet shareholder says break-up may be necessary Reuters February 09, 2004

Villwock is a financial adviser for the Tenet Shareholder Committee, a dissident shareholder group that once led an unsuccessful proxy fight. He helped the committee draft a report in February called "Tenet's Death Rattle," which predicted that the company won't survive in its current form.
Villwock said that just because HCA and Tenet both had been threatened by regulatory woes doesn't mean that the for-profit hospital chain model is flawed. "Every single hospital in America better turn a profit. Whether you pay taxes or not is not the issue," he said.
Troubled times for Tenet: Company's future in doubt : The nation's second largest hospital chain is in deep debt and deep trouble. Will it survive? And will physicians get hurt if it doesn't? AMNews April 19, 2004.

"Past corporate integrity agreements with Tenet have failed to protect patients, shareholders and taxpayers from a recurrence of fraud," committee Chairman M. Lee Pearce stated last month. "That is why we believe in any future settlements with Tenet, the Department of Justice must include strict provisions to protect patient health and safety and to end financial rip-offs of government healthcare programs."
Florida Heart Surgery Law Bugs Tenet Healthcare The (Melissa Davis) July 6, 2004

A shareholder group on Tuesday called on Tenet Healthcare Corp. to sell its worst-performing hospitals and fire a regional vice president, citing losses totaling $378 million at the company's Florida hospitals in 2004
Tenet shareholder group urges sale of hospitals Reuters Jun 14, 2005

The committee blames Tenet's tarnished reputation and its lack of capital improvements for the problem. It has, therefore, called for new leadership in the Florida market and new ownership for the company's worst-performing hospitals in that state. To be fair, however, the committee's chairman -- Lee Pearce -- has already made clear that he would like one of those Florida hospitals for himself.
Still, he (Young a business consultant) agrees with the Tenet Shareholder Committee that at least one more company employee -- the highest ranking executive in Florida -- probably ought to go.

"I, too, find it beyond logic that, given the large number of legal, investigative and quality of operations issues that have occurred in this market, Tenet would retain in a leadership position Don Steigman, Tenet's Florida head," Young said. "Moreover, it is difficult to make progress with the Department of Justice in terms of change in tone or by retaining new experts with [Washington] D.C. experience when one of the main problem areas -- Florida -- continues with the same leadership."
"We believe it is far better to sell the hospitals that cannot be fixed by Tenet and concentrate on those that can be fixed," Pearce said. "We do not believe Tenet has any other realistic choices. The only question now is how long senior management will let the company continue to bleed before they come to grips with reality."
Tenet Faces Red Ink in Florida (Melissa Davis) Jun 14, 2005

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The investigations and law suits

The various frauds and related actions and settlements are examined on other web pages, but particularly the Tenet fraud page. An overview of the issues and actions is given in part 1 of the story. Only an overview of the settlements is given here.

The whole process of reaching a final settlement took 4 years to work itself out. Investigation after investigation and court action after court action dragged to its conclusion as Tenet fought a bitter battle to avoid the mistake it felt it had made in 1994 - pleading guilty.

Tenet did everything except acknowledge that it had done anything illegal. It reached multiple settlements with shareholders, patients, state authorities, the Federal Trades Commission and others. It paid large sums without any admissions of culpability. It desperately wanted a final global settlement of all of the government actions so that it could put all this behind it and get back to business. This is what all of the market wanted them to do. While the market speculated about Tenet's survival no one actually wanted it to go under and so rid the system of this recurrent cancer.

Government wanted a guilty plea and Tenet was determined not to give one. The outlier "fraud" was a very problematic area as the law had such a big loophole that the company may have been acquitted. Instead they decided to prosecute the company for paying kickbacks to doctors. This also was a very complex and confusing area in the law. They elected to test this in a case against one hospital, the Alvarado hospital.

This case was bitterly contested and dragged on for years. The jury was unable to sort it out and there were two hung juries resulting in mistrials. The government eventually gave up and settled the Alvarado case for a moderate sum of US $21 million in May 2006. This was followed 6 weeks later by a global settlement without a guilty plea. Tenet paid US $900 million; far less than the $1.9 million that the government considered Tenet had rorted. The payment's terms were lenient.

Tenet accepted and entered into a Corporate Integrity Agreement (CIA) in September 2006. My impression of this document is that it has been prepared for public and political effect. It is very stringent and onerous. The possibility of anyone rigorously following its requirements, and of any other body overseeing and enforcing such a complex process are, I feel, remote.

The clue to what will happen during the CIA is the oversight process. Oversight is to be contracted out. Tenet will be appointing the oversight company itself and will be able to fire and appoint another if its not happy. Its all going to be very much in house. The CIA is not meant to be effective. If it was Tenet could not survive and that is not intended. The settlements and the CIA are examined on the fraud page.

In April 2007 an action by the US Securities and Exchange Commission against Tenet was settled. Barbakow and a number of other directors were also charged. Although only the company and a few executives have agreed to settle to date, the amounts paid have been a slap on the wrist. Barbakow and some others have not yet settled.

Overall Tenet paid in the region of US $2 billion dollars to settle multiple matters over the 5 years since October 2002 - larger than the US$1.7 billion paid in a single settlement by HCA a few years ago. I have recorded most of Tenet's settlements on a table at the foot of the fraud page. The largest were the US $500 million paid to settle allegations of unnecessary major surgery on over 700 patients at Redding hospital, and the US $900 million global settlement embracing kickbacks, outlier payments and other matters.

2003 A litany of problems
The company is facing a litany of regulatory problems since October 2002, including claims that two doctors performed unnecessary surgeries at a Tenet hospital in Redding, California, and an indictment of a hospital executive for physician recruiting violations.
Moody's cuts Tenet Healthcare rating to junk Reuters June 25, 2003

2004 Wanting a global settlement
Tenet is also pursuing a global settlement of the government investigations, a process the company said would preclude any sudden resolution. In addition, executives said Tenet would not agree to any settlement with the government that it could not finance.
Tenet's Problems Fixable, CEO Says LA Times March 17, 2004

2005 Dragging on
By now, he (Prudential analyst David Shove) notes, the government's investigation of Tenet has dragged on for more than three years. In comparison, he notes, other fraud probes -- including an earlier inquiry into Tenet itself -- ended sooner. Thus, he concludes, a settlement of the current Tenet probe is now "long overdue."
Push Comes to Shove at Tenet The (Melissa Davis) December 9, 2005

2006 Alvarado settlement
"Considering the stakes involved, we feel Tenet achieved a favorable resolution in this long-standing litigation (Alvarado hospital kickback case). We view the sale of an unprofitable facility as a small sacrifice in the pursuit of a greater goal - a master resolution," Prudential Equity Group LLC said.
Citigroup "saw the case as the last remaining obstacle, and think this paves the way for a global settlement of all outstanding matters," including a key issue, Tenet's previous handling of Medicare outlier cases. "We view this as a very good development given the small settlement relative to the government's allegations."
Tenet Settles Probe of San Diego Hospital June 8, 2006

2006 Global settlement
Tenet Healthcare Corp., the No. 2 U.S. hospital chain, agreed to pay $725 million and waive another $175 million in government payments to resolve a federal probe of its Medicare pricing.
Tenet Settles U.S. Investigation for $725 Million Bloomberg June 29, 2006

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Tenet's strategies

Tenet's strategies throughout this period was little different to that between 1991 and 1994. It commissioned its own inquiry, made elaborate claims about it but then refused to disclose its contents. It is not known if the senate inquiry or any other agency managed to prize a copy from Tenet.

The findings and results of the Mercer Consulting Group's review of the cardiology program and all related programs at RMC (Mercer Report).
Request for documents by Senator Grassley September 5, 2003

In both cases Tenet consistently denied wrong doing and the enormity of its conduct but admitted to excessive zeal. It made much of its cooperation with the government authorities investigating and prosecuting it while at the same time doing everything it could to fight the allegations and reach a favourable settlement. In both cases it stayed out of court. The evidence and the material that was to be used in both cases was sealed. The public never learned the details of what was done.

This is a company which is alleged to have misused the sick for profit, have gouged citizens, and to have defrauded the public purse. It is a matter of public interest and democratic accountability that what it did be transparent to the public who will be its customers in the future so that they can decide whether to trust their care to it. They need to see that justice was done when Tenet was allowed to reach a settlement without a guilty plea. Surely this is the key to the successful operation of a market system and an essential component of democracy - but it seems not in the USA, that bastion of democracy.

In both cases Tenet was the subject of multiple court actions accusing it of defrauding and misusing others and of gaming government, insurers and competitors.

At the same time as it was being accused, and as it claimed to have changed in a fundamental way, it was using the courts to challenge those who trod on its toes or who attempted to criticize it. There was little sign of any change in its aggressiveness as it attempted to protect its monopolies in two states from competition.

Tenet Healthcare Corp., Santa Barbara, Calif., won its bid for an injunction against a new Florida law exempting open-heart programs at four hospitals from the certificate-of-need process. A Leon County (Fla.) Circuit Court judge struck down the law as unconstitutional because it only benefited local communities and there had been no referendum calling for the measure.
Fla. court finds CON exemptions unconstitutional Modern Healthcare's Daily Dose September 15, 2003

Charlie Miller has a simple message for the three rival hospital systems vying to build a 64-bed hospital on Tenet Healthcare Corp.'s turf in York County -- bring it on.

"We have made it perfectly clear that we will aggressively protect our right to serve the people of Fort Mill," says Miller, president and chief executive of Tenet's Piedmont Medical Center in Rock Hill. "We will litigate."
Tenet ready to defend its turf Charlotte Business Journal April 1, 2005

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The impact of Tenet's policies 

While Tenet's lawsuits and settlements received a vast amount of adverse publicity, its financial and business problems were as great or greater. Tenet did eventually survive the litigation but the key question now is whether it can survive the business consequences of its past policies? It struggled desperately over the 5 years following the scandal. Tenet's share price did not rise after it reached a global settlement in 2006, indicating that shareholders were still very concerned.

Melissa Davis from The has followed Tenet carefully and written extensively about it. I have quoted from many of her excellent articles in these web pages.

2003 Policies catching up
Tenet conceded its past pricing policies are catching up with it. It is being sued by the U.S. Justice Department over the Medicare fraud allegations.
Trouble Reigns at Tenet Healthcare New York Times June 23, 2003

2006 Response to global settlement
Tenet Healthcare Corp. shares ended Thursday's session to the downside as investors digested the hospital chain's $900 million Medicare fraud settlement with the Justice Department and focused instead on its road to recovery.

Tenet shares retreat from settlement-related gains MarketWatch Jun 29, 2006

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 Comparing 1994 and 2006

The 2006 fraud settlement differs from the 1994 settlement with NME (Tenet's previous name) in the larger sums paid and in the absence of a criminal conviction.

In 1994 NME was forced to sell about 50% of its hospitals as part of the settlement but it kept the funds. NME also had a large international division which it would later sell. The market was eager for it to recover so that they could buy shares and make a killing. The financial institutions lent large sums against the security of these hospitals. Now renamed Tenet Healthcare, the company used these funds to buy new general hospitals and upgrade them.

By 2006 Tenet had already sold large numbers of hospitals and had raised loans to keep itself afloat. The hospitals it sold were in poor condition and many were no longer profitable. They did not get premium prices. Tenet had little to borrow against. Those it retained also needed refurbishing and upgrading.

In 1994 Tenet's general hospitals were not involved in the scandal and the doctors in these hospitals were not affected by what was happening - nor were the doctors in the hospitals they purchased. It did not concern them.

In 2006 the hospitals and the doctors were at the centre of what happened and bore the full consequences. The scandal had a direct negative impact on them. They responded by walking away. 

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Tenet's concentration on sicker patients and outlier payments

Tenet chased profits rather than the needs of the community so that its services were skewed. It had focused all its efforts on more costly high acuity patients. This is because outlier payments, stop loss payments, and similar extra charges to others, made treating them very profitable even though the costs were higher. (see the fraud related web page)

When Tent hurriedly abandoned this policy it not only lost this extra money from Medicare, Medicaid, insurers and others, but it was left with these complex and expensive units containing costly patients which were losing money under DRG payments. It was now a drain on their resources. After the publicity surrounding surgery at Redding hospital, patients (and many staff) went elsewhere.

This emphasis on high acuity care had resulted in the neglect of other services. These had atrophied, causing Tenet to lose staff and referrals.

Tenet had chased profits. As a market focused entity it paid little attention to the needs of the community. This is what the market demanded of it. When Tenet needed these other services to provide income they were not there.

Tenet's voluntary reduction in Medicare outlier payments will lower 2003 revenue by $760 million, the company said.
Tenet woes spread to contract talks Modern Healthcare's Daily Dose June 23, 2003

State payments also have fallen under Medicaid, the government health-insurance program for the poor, Tenet said.
Tenet cuts 2003 profit estimates BLOOMBERG NEWS Jun 24, 2003

Campanini said Tenet is going through a "transitional period" as it voluntarily changed its outlier billing policy in January, leading to a reduction in monthly revenue to $8 million from $65 million for treating the sickest Medicare patients. The company also intends to change its policy of billing for uninsured patients, which could hurt revenue by an estimated $40 million in 2003.
Moody's cuts Tenet Healthcare rating to junk Reuters June 25, 2003

Subsequent rate increases will also probably be smaller than in the past. In addition, weak Medicaid reimbursement is also expected to affect future profitability.
S&P cuts Tenet Healthcare ratings to junk status Reuters July 10, 2003

The (Shareholder) committee points to the loss of high-paying patients who seek lucrative procedures -- such as ambulatory and cardiac surgery -- as the reason for that downturn. And it questions whether Tenet has the reputation, the doctors or the investment dollars necessary to win those patients back.

Peter Young, a business consultant at HealthCare Strategic Issues, believes that Tenet could be losing a slew of employees as well. He highlights the high job opening rates at Tenet's hospitals in Florida as an area of possible concern.
Tenet Faces Red Ink in Florida (Melissa Davis) Jun 14, 2005

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Losing negotiating leverage

Tenet's size, its regional dominance, its high prices, and its specialist units, dominant in each sector, gave it strong leverage in negotiating high payments from insurers and others. The scandal brought a savage backlash from insures who had been gamed. They negotiated lower payments. Tenet has been forced to sell off half of its hospitals reducing its size and regional dominance. It no longer has the same leverage when negotiating and must accept lower payments.

It was still having problems in 2006 when it employed someone from the insurance industry and tried a new strategy. When Healthscope tried something similar in Australia the dispute that resulted harmed patients and everyone else suffered as well.

Tenet Healthcare Corp., Santa Barbara, Calif., said today that its problems with Medicare outlier reimbursements have spread to managed-care contract negotiations. The company acknowledged what analysts had been predicting -- that health plans are driving a harder bargain with Tenet than its competitors because of Tenet's prior strategy of rapidly increasing its gross charges.
Tenet woes spread to contract talks Modern Healthcare's Daily Dose June 23, 2003

A key factor contributing to Tenet's weaker profitability is a major change in its managed care pricing. Tenet is renegotiating many contracts after previously employing aggressive pricing practices. This is resulting in far weaker pricing trends, including actual reductions in certain cases. The weak trend will likely continue for the next couple of years as contracts are renegotiated on an ongoing basis.
S&P cuts Tenet Healthcare ratings to junk status Reuters July 10, 2003

The company also said it is fighting managed-care payers, either in arbitration or court, over $250 million in disputed accounts receivable. Tenet previously disclosed that commercial health plans were balking at more claims than in the past, as a reaction to the revelation of Tenet's strategy of rapidly increasing gross charges.
Tenet to sell 27 hospitals in $1.4 billion overhaul Modern Healthcare's Daily Dose Jan. 28, 2004

At least one major health system is trying to beat managed care companies at their own game. In early 2004, Tenet Healthcare, the country's second largest hospital chain, created a national, centralized approach to managed care contracts aimed at garnering fair, market-based rates for every region in which the company operates. CEO Trevor Fetter, during a December 2004 presentation to investors, said the initiative was needed because Tenet was "being outgunned by the managed care companies in negotiations."

The 73-hospital chain hired a veteran managed care executive to revamp its managed care division, which now uses a national negotiating template and new technology to analyze payer-specific profit and loss data, giving negotiators ammunition during contract talks. The result: Its base rates from managed care companies were up almost 13 percent for the third quarter of 2005.
READY TO RUMBLE Hospitals & Health Networks January 1, 2006


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The hospitals

Tenet had not been very profitable between 1994 and 1999 but during this period it was aggressively expanding in size and gaining local leverage. It was probably building up its specialist units in preparation for its revival. It did not spend money on the basic needs of its hospitals, on less profitable services and on upgrading the main buildings. As a consequence they were generally in poor condition and did not keep up with competitors.

During the heady and profitable 3 years between 1999 and 2002 Tenet concentrated on cost cutting and pushing up profits. The money it did spend went on high profit projects like a massive new cardiac centre in Redding. Hospitals continued to deteriorate.

In 2003 Tenet was left with a large number of run down hospitals whose specialist units were not profitable. It had to hoard its resources to pay its US $2 billion in settlements. It was struggling to raise money and meet its large debt commitments. It did not have the money to upgrade hospitals to make them profitable. Its occupancy rates fell and it had large losses each year.

Villwock (Critic from Shareholder Committee), for one, has seen Tenet misspend its money before. In its heyday, he says, Tenet spent more than $1 billion a year on capital improvements -- "a huge amount compared to the company's revenue base." However, he says, most of that money went to "sexy" profit centers like cardiology and neurosurgery while routine maintenance went heavily ignored. As a result, he says, the company still has plenty of catching up to do.
Others, however, blame Tenet's capital spending program as well. They believe that Tenet has spent far too little upgrading its hospitals and has begun losing out to better-equipped competitors as a result.
Tenet's Fraying Ties to Doctors The (Melissa Davis) August 23, 2005

Tenet can't afford to keep 20 percent to 30 percent of its 71 hospitals in the long term because of their poor performance and will likely look to sell them, said John W. Ransom, who covers Tenet for St. Petersburg-based Raymond James. He holds no position in the company's stock.

The company (NYSE: THC) owns 14 hospitals and one rehabilitation center in South Florida, where its combined hospital operation lost $324.8 million in 2004, - - - .
The Tenet hospitals had a combined occupancy rate of 53 percent, compared with 63 percent for all South Florida hospitals combined.
"If you look at the Tenet portfolio, you'll see they can't afford to carry a hospital long term that isn't paying for itself," Ransom said. "What investors expect is another round of asset sales to shed its weak sisters."
More sales by Tenet expected The Business Journal of South Florida February 3, 2006

At one commission meeting, Dr. David Dodson, an infectious-diseases specialist who is on the Good Samaritan board of governors, said Tenet was in a "hunkered-down mode" and not looking to invest in the hospital.
Tenet, which has sold 43 hospitals since 2002, acknowledges that it has "constrained" investing in hospitals to make sure it has enough cash to pay a government settlement.
Tenet CEO: We're on the way back The Palm Beach Post, Florida March 27, 2006

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Gouging the uninsured

In the USA Medicare pays only for those over 65 years and everyone else has to pay for themselves. If they can afford it they insure but this is too costly for large numbers who elect to pay when they have to.

About 43.6 million people in the United States, or 14.8 percent of the population, had no health insurance in 2006, according to a survey by the Centers for Disease Control and Prevention released Monday.
The estimate is based on those who did not have insurance at the time of the interview. About 54.5 million people in the country, or 18.6 percent of the population, had no insurance for at least part of 2006.
Survey Finds 43.6 Million Uninsured in U.S. New York Times June 26, 2007

The community's Samaritan tradition required that hospitals provided care to all patients and then either forgave fees or arranged lenient terms for reduced payments for the poor. This was expected by the community and accepted by hospitals and doctors when the not for profit ethic dominated.

With the advent of the corporate chains and a very competitive marketplace this has changed and even not for profits have become much less forgiving. A state system called Medicaid provides only limited relief. Medical fees are the commonest precipitating factor in bankruptcies in the USA.

The unprofitable uninsured got more sympathetic treatment at not for profit hospitals and gravitated to them. Tenet further discouraged the unprofitable by its high prices and the aggressive way in which it pursued them for payment (see gouging the uninsured). Most of the poor would have gone elsewhere if they could.

When the uninsured mobilized and took to the courts Tenet was forced to back down. It promised to treat the poor and entered into settlements offering reduced fees and favourable terms for payment. It had no choice but to do so and the poor would have realized that they were now going to be faced with lower fees in Tenet hospitals. This undoubtedly brought a flood of the uninsured and more bad debts when they could not pay. Tenet blamed its poor performance on increased bad debt.

A key factor contributing to further declines in Tenet's profitability is a large increase in its bad debts. The company announced that it expects to take a charge of $200 million to $225 million to write down accounts receivable, and it will incur $240 million to $290 million in additional bad debt expense.
TEXT-S&P cuts Tenet Healthcare ratings Press Release Reuters October 23, 2003

Tenet Healthcare Corp. said Tuesday it will begin implementing a managed care-style discount pricing for uninsured patients at its hospitals, subject to state laws and regulations.
Tenet to discount prices for the uninsured Philadelphia Business Journal - March 2, 2004

Tenet said that the revenue decline reflected the company's promise of discounted care for uninsured patients. Tenet announced its "Compact with Uninsured Patients" in 2003, but implementation did not begin until March 2004.
Tenet records $2 billion loss with legal, other charges Modern Healthcarre March 8, 2005

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Alienating doctors

Doctors are undoubtedly Tenet's major long term problem.

Tenet's policies meant that its relationships with doctors were based on financial "partnerships" to bind them to its hospitals, rather than any sense of loyalty. While doctors might have gone along with this they would have experienced ethical and professional discomfort and not identified with the hospitals. The scandal forced Tenet to change its relationships with the doctors and it lost its hold over them.

The doctors on whom future prospects depended were those who had been caught up in the hospitals involved in the scandal. This would have generated internal disputes and unhappiness. Those outside the specialist units already felt neglected and unhappy. Doctors would want to work in those hospitals with the best facilities and staffing. Tenet did not have the money to improve the hospitals to keep them there. The scandals precipitated a flight of doctors.

Many doctors left Tenet for competitors with better facilities. Others became splitter physicians doing much of their work at competing hospitals. They established satisfying relationships with these competing hospitals and needed good reasons to change.

Tenet was now giving the uninsured more favourable deals and these doctors would very probably have advised their patients of this, and brought these patients to Tenet's hospitals. Tenet's bed occupancy fell and its uninsured numbers increased. It attributed its ongoing losses to bad debts.

Doctors who have established at other hospitals are unlikely to return unless Tenet offers them upgraded hospitals with more up to date facilities and better staffing. Tenet does not have the money to do this. The question is whether the banks are so wedded to Tenet and its business policies that they will lend it the money in the hope that Tenet can lure the doctors back. Being the sort of people they are, they will urge Tenet to find new economic ways to tempt doctors - kickbacks again.

Some of these matters are addressed in more detail on a page about Tenet and its problems with doctors.

The company termed $212 million of the provision "additional" and said it reflected "an adverse change in our business mix as admissions of uninsured patients grew at an escalating rate." Tenet cited higher unemployment rates, a higher level of uninsured patients, and higher co-payments that must be shouldered by patients instead of insurance companies.  
Bad Debts Weigh on Tenet's Quarter November 11, 2003

"If you're working at a Tenet hospital that is on the block, you've got to be worried about who is going to purchase it and if anybody is going to purchase it," Schwab said.

"Tenet's woes are bad news for [doctors]. Physicians need a good hospital partner, and they have got to be very worried that in the future Tenet might not be a good partner."
Troubled times for Tenet: Company's future in doubt : The nation's second largest hospital chain is in deep debt and deep trouble. Will it survive? And will physicians get hurt if it doesn't? AMNews April 19, 2004.

There was a time when Phillip Sutton referred all his patients to a Houston hospital now operated by Tenet Healthcare (THC:NYSE) .

But these days, the busy surgeon thinks twice. He looks around Houston Northwest Medical Center -- a hospital prized by its previous owners -- and feels ashamed.

"It's old," Sutton says. "It's worn-out. Tenet really needs to invest about $100 million more just to update it."
Some doctors say Tenet has never spent enough on hospital maintenance, and that the company has alienated physicians who can choose to send their patients to more updated facilities operated by competitors. Tenet has, in fact, seen many physicians do just that in some of its largest markets. And it risks losing other doctors who, for now, continue to practice at Tenet hospitals with hopes that they may somehow regain their former stature.
That crowd now is huge. Tenet estimates that some 8,700 physicians refer patients to both Tenet and non-Tenet facilities -- and that it needs every one of them to start sending at least a few more patients its way in order to regain lost volumes and start growing again in earnest.
The decline in commercial admissions "means that the company has not made much progress in reclaiming referrals from departed [splitter] physicians," writes Skolnick, a veteran industry analyst who has a neutral rating on Tenet's stock. "It is not enough to simply assert that the company and the hospitals could or should achieve industry-average margins. It is much harder on Main Street to get doctors to refer patients than Wall Street supposes."

Moreover, critics say, Tenet has never enjoyed a warm relationship with many of its referring physicians in the first place. Instead, they say, the company has often treated doctors as expendable even though it relies on them for virtually all of its business.
By early 1997, however, OrNda -- along with its star hospital -- had been acquired by Tenet. And Sutton began to feel the hospital's purse strings tighten just a few years later.
But government subpoenas, by themselves, can do plenty of damage in the meantime.

"This sends a very sobering shock to every physician involved with Tenet," Young said when the government first began questioning the doctors in El Paso. "Physicians could start backing away from some business involvement with the company."

Since then, Tenet has, in fact, weathered a drop in overall admissions. And the company itself has pointed to government scrutiny as a big reason for that decline.
Tenet's Fraying Ties to Doctors The (Melissa Davis) August 23, 2005

But Young sees major complications. Notably, he doubts that physicians will "magically" start reappearing at Tenet hospitals with their patients. He points out that many of those physicians have forged relationships with other hospitals that offer attractive perks, such as joint ventures, that should keep them where they're at. Ultimately, he suggests that the industry has changed considerably -- with Tenet unable to keep up -- throughout the company's woes.
Push Comes to Shove at Tenet The (Melissa Davis) December 9, 2005

Admissions are down at Tenet hospitals nationwide, and the company is struggling to deal with growth in bad debt from the rising number of uninsured and underinsured patients. In Palm Beach County, the company also has struggled to find enough specialists to cover emergency patients.
Tenet CEO: We're on the way back The Palm Beach Post, Florida March 27, 2006

- - - - - but the company said volume declined, particularly for patients covered by commercial health insurance.
Tenet turns profit despite decline in admissions Modern Healthcare May 9, 2006

Volume and physician issues remain and will take a very long time to fix, said Jefferies & Co.'s Frank Morgan, who rates Tenet underperform.

"Moreover, this has to occur against a very difficult backdrop for the entire hospital industry," he wrote.
Tenet shares retreat from settlement-related gains MarketWatch Jun 29, 2006

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 Tenet's financial position

Tenet's financial position went from bad to worse with massive losses and downgrades. Its share price dropped from over $50 by 75% in the first 3 weeks after the scandal then continued to decline staying in the low teens. At its worst it was below $8.

Forecasts and performance

Tenet's poor performance continued through to 2006. The reports speak for themselves.

Tenet was in big trouble by the middle of 2003 and all its predictions were negative.

Hospital chain Tenet Healthcare Corp. (THC.N), under government probe for billing practices, on Monday said earnings would fall well short of Wall Street forecasts, leading the stock to lose roughly a quarter of its value
Tenet conceded its past pricing policies are catching up with it. It is being sued by the U.S. Justice Department over the Medicare fraud allegations.
Shares of Tenet sank to $12.50, down $3.73 or 23 percent, in midday trading on the New York Stock Exchange.
Trouble Reigns at Tenet Healthcare New York Times June 23, 2003

"This is a company where costs are growing seven to eight times faster than revenues," said John W. Ransom, an analyst with Raymond James & Associates.
Already Battered, Tenet Healthcare Reduces Earnings Forecast New York Times June 24, 2003

Tenet has cut estimates three times since former Chief Executive Officer Jeffrey Barbakow disclosed Nov. 7 that the company had inflated profit by raising prices and triggering higher Medicare payments by the government.
Tenet cuts 2003 profit estimates BLOOMBERG NEWS Jun 24, 2003

The outlook is negative. Tenet, based in Santa Barbara, Calif., had about $4.1 billion of debt as of March 31, 2003.
S&P cuts Tenet Healthcare ratings to junk status Reuters July 10, 2003

The company is budgeting money for "significant" legal and investigation costs, Mr. Anderson said. "We can't quantify what the total costs will be at this time."
SEC expands Tenet investigation Globe and Mail July 16, 2003

Tenet reported a loss of $195 million, or 42 cents per share, compared with a profit of $242 million, or 48 cents per share, a year earlier.
Tenet Healthcare Reports Loss Reuters August 7, 2003

Tenet had expenses of $322 million, or about 69 cents a share, for settling the (Redding) hospital case and defending lawsuits, writing down the value of hospitals that have lost revenue, cutting jobs as part of a reorganization and for a tax dispute with the Internal Revenue Service, according to the filing with the Securities and Exchange Commission.
Tenet Posts Loss on Write-Downs, Layoffs and Legal Fees The New York Times August 8, 2003

Tenet Healthcare Corp., Santa Barbara, Calif., said it will take a $200 million to $225 million charge in the third quarter to reflect increased bad debt caused by an accounting change, higher numbers of uninsured patients and scraps with insurers.
Tenet to take charge for increased bad debt Modern Healthcare's Daily Dose Oct. 22, 2003

The nation's second biggest hospital chain also said it expects to miss earnings projections through mid-2004 and would no longer provide earnings guidance
Tenet stock plummets as hospital chain lowers earnings expectations The Associated Press Oct 22, 2003

Tenet Healthcare lost more than $300 million in the third quarter as its provisions for doubtful accounts ballooned and revenue contracted.
The company's provision for doubtful accounts totaled $522 million in the latest quarter compared with $260 million last year.
Bad Debts Weigh on Tenet's Quarter November 11, 2003

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Optimistic analysts were hoping for a turn around in 2004 but things stayed bleak with more and more losses

Tenet expects to record charges worth a total of $1.4 billion in the fourth quarter related to the sales plans.
Tenet to sell 27 hospitals in $1.4 billion overhaul Modern Healthcare's Daily Dose Jan. 28, 2004

A possible cash shortage
Shares in Tenet Healthcare Corp. tumbled 14% on Wednesday as investors reacted to a new bank credit agreement that suggested the nation's second-largest hospital chain could face a cash shortage.

Santa Barbara-based Tenet saw its shares fall to a 52-week low of $9.90 before closing at $10.06 on the New York Stock Exchange, down $1.66 for the day.
"Their cash flow is more negative than we thought, and their credit facility has shrunk so much. You put those two things together, and you say if they don't stop the hemorrhaging they don't have another four quarters of liquidity," said Sheryl Skolnick, an analyst with Fulcrum Global Partners who has a "sell" rating on Tenet.
Tenet Healthcare Investors Frown Upon Bank Credit Agreements : Shares in the hospital chain fall 14% on signs that cash is in short supply as it faces myriad legal problems. LA Times March 11, 2004

Tenet Healthcare Corp. on Monday posted a $954-million net loss for the fourth quarter, partly because of write-downs for hospitals that the company plans to sell as it downsizes.

The nation's second-largest hospital chain took a fourth-quarter charge of $1.45 billion, which included a $500-million write-down on the value of its aging hospitals.
Tenet has $425 million in cash on hand, and analysts said Tenet appears to have spent $150 million more than it brought in during the fourth quarter.
Tenet's Chief Financial Officer Stephen D. Farber said it had a "good chance" of reaching break-even in cash flow in 2005. But that estimate does not include the cost of any legal settlements.
Tenet Posts Loss of $954 Million After Big Charge LA Times March 16, 2004

Tenet's shares dropped to $9.15, their lowest price since 1995, before closing at $10.29, up 48 cents for the day, on the New York Stock Exchange.

The stock has fallen 36% this year.
Tenet's Problems Fixable, CEO Says LA Times March 17, 2004

With $4 billion in debt, a dwindling cash position and massive potential legal liability from government investigations and lawsuits, some critics say Tenet is in danger of drowning in its problems. At the very least, they predict Tenet will have to dissolve into a new form to emerge from its woes.
"Tenet is a pretty sick patient. In the near future, there's going to be an amputation. It has got some appendages that are cancerous and are going to have to be cut off," said Schwab, who works for Sokolov, Sokolov & Burgess and consults to hospitals, physicians and health plans.
Troubled times for Tenet: Company's future in doubt : The nation's second largest hospital chain is in deep debt and deep trouble. Will it survive? And will physicians get hurt if it doesn't? AMNews April 19, 2004.

The company had a net loss of $122 million, or 26 cents a share, for the quarter ended March 31, compared with a loss of $20 million, or 4 cents a share, a year ago. Revenue fell almost 3% to $2.67 billion
Tenet Beats Despite Itself May 4, 2004

Tenet posted a second-quarter net loss of $426 million, or 91 cents per share, compared with a loss of $195 million, or 42 cents per share, a year earlier.
Tenet Healthcare loss widens, gets new subpoena Reuters Aug 3, 2004

The bad news at acute care hospital operator Tenet Healthcare keeps getting worse. Today, the company announced that it expects weak results to continue into the fourth quarter. While holding out the hope that 2005 will "improve meaningfully," the company also said that it doesn't expect results to exceed breakeven.
Tenet: A Real Soap Opera December 13, 2004

The Tenet Healthcare Corporation, one of the nation's largest hospital chains, said yesterday that fourth-quarter charges may exceed $1 billion and its loss from continuing operations would widen from the third quarter because of increased bad debt.

Tenet, which is based in Santa Barbara, Calif., had a third-quarter net loss of $70 million, or 15 cents a share, and a loss from continuing operations of $52 million, or 11 cents a share, which it reported in November.
Tenet Healthcare Says Its Loss Will Be Worse in 4th Quarter The New York Times December 14, 2004

Its stock price is depressed, ending the year at $10.98 per share. Twenty-six months ago, it was as high as $52.20, ahead of competitors such as HCA and Plano-based Triad Hospitals Inc. Analysts' target price for the next year ranges from $7 to $16 per share.
Tenet faces tough road to recovery. CEO knows his hands are full as hospital chain moves to Dallas The Dallas Morning News January 1, 2005

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The bleeding continued during 2005 although for short periods the losses were less.

In a statement released Dec. 13, 2004, Tenet said that it did not expect results from continuing operations to exceed break-even in 2005 even though several cost-cutting measures will be phased in throughout the year.
Tenet expects at best to break even this year AMNews Jan. 3/10, 2005

Tenet Healthcare Corp., Dallas, said it lost $2.02 billion for the fourth quarter ended Dec. 31, 2004, or $4.33 per share, more than double its losses in the year-ago quarter, as the company took massive charges related to restructuring and its $395 million settlement with patients at the former Redding (Calif.) Medical Center. Tenet warned investors in December that it expected to post a loss on charges.
The loss was more than double Tenet's 2003 fourth-quarter loss of $954 million, or $2.05 per share.
Tenet records $2 billion loss with legal, other charges Modern Healthcare March 8, 2005

Hospital chain Tenet Healthcare Corp. reported much smaller first-quarter losses on Tuesday, citing stronger admissions, improving volume trends and continued cost management.

Quarterly losses narrowed to $3 million, or 1 cent per share, from $122 million, or 26 cents per share, a year ago.

Tenet Healthcare Posts Narrower 1Q Loss Forbes and Associated Press May 3, 2005

The company's once-prized Florida hospital system last year swung to a pretax loss of $378 million, according to financial reports filed with the state of Florida and gathered by the Tenet Shareholder Committee. Of the company's 15 Florida hospitals, the group says, nine -- or 60% -- operated in the red last year.
Tenet Faces Red Ink in Florida (Melissa Davis) Jun 14, 2005

Hospital chain Tenet Healthcare Corp. on Tuesday posted a much slimmer second-quarter loss as greater volume of surgeries and emergency room visits offset a decline in admissions to hospitals open at least a year. Its shares rose 2.6 percent
Tenet Healthcare Posts Smaller Loss in 2Q LA Times August 2, 2005

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By 2006 Tenet had lost in the region of US $5 billion and in spite of a small profit one quarter it was still going down. The situation was desperate and Tenet needed to reach a global agreement with government urgently. It accomplished this in June 2006 but the market was unimpressed and their share price continued to fall. The market remained cautious although the banks seemed willing to lend a hand.

Tenet's stock, down a penny to $7.03 on Monday, is currently trading near a 12-year low.
Tenet Critics Split The (Melissa Davis) Feb 13, 2006

Tenet Healthcare (THC:NYSE) managed to make a $286 million quarterly loss look reasonably good Thursday, but the stock took a hit on a soggy outlook.
"Despite this considerable progress on the pricing and cost fronts, our results for the fourth quarter and full-year 2005 were adversely impacted by continuing declines in patient volumes and stubbornly high levels of bad-debt expense.
Tenet Loss Is $286 Million The March 2, 2005

Must reach a settlement
Tenet Healthcare Corp., Dallas, said it must reach a reasonable settlement with the federal government on various investigations in order to turn around the company's performance. Tenet lost $286 million in the fourth quarter of 2005, and it lost $724 million for the year. That compared with a $2.19 billion loss in the year-ago fourth quarter and a $2.81 billion loss for 2004. Quarterly revenue dropped 4.3% to $2.30 billion, and annual revenue was down 3% to $9.61 billion. Tenet said it took charges of $266 million in 2005 for writing down the value of assets, some as a result of Hurricane Katrina damage, compared with $1.28 billion in such charges in 2004, including $1.25 billion in the fourth quarter of 2004.
Tenet says federal settlement crucial to turnaround Modern Healthcare Mar 2, 2006

Tenet Healthcare Corp., Dallas, said the first three months of the year generated its first quarterly profit since the quarter ended Nov. 30, 2002, thanks to temporarily lower bad-debt expense and income from discontinued operations and control of labor costs, - - - - .
Tenet turns profit despite decline in admissions Modern Healthcare May 9, 2006

Has lost US $5 billion
Stock in Tenet Healthcare Corp. (THC) fell 30% last year, the hospital operator has lost nearly $5 billion in three years, and its financial dealings with doctors are under renewed scrutiny by federal officials. But there were no signs of turmoil at Friday's annual shareholder meeting.
No Signs Of Tenet's Trouble On Display At Annual Meeting The Wall Street Journal May 12, 2006

After the global settlement
Tenet fell 41 cents, or 5.9 percent, to a new 52-week low of $6.49 in afternoon trading on the New York Stock Exchange at higher than average volume. Previously shares traded between $6.77 and $13.06 over the past 52 weeks.
Raymond James analyst John Ransom placed a fair value of around $4 per share for the stock in a research note after calculating the company's core assets and debt.
Tenet slips to new 52-week low Business week Jul 5, 2006

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Tenet's ratings

Standard and Poor, and Moody's ratings reflected the poor financial state and the risks to Tenet's credit rating.

Standard & Poor's, New York, said it was putting Tenet's corporate credit and senior unsecured debt ratings on "CreditWatch Negative," indicating a possible downgrade from the lowest investment-grade rating, BBB-.
Tenet's lowered projections cause stock to crash Modern Healthcare's Daily Dose June 24, 2003

Moody's cut Tenet's senior unsecured rating to "Ba3," its third-highest junk rating, from "Baa3", its lowest investment-grade rating.
Moody's cuts Tenet Healthcare rating to junk Reuters June 25, 2003

Moody's Investors Service placed Tenet's "Ba3" senior unsecured debt rating under review for a possible downgrade in late June.

Standard & Poor's rates Tenet's senior unsecured debt one notch higher at "BB."

Tenet bonds take hit on latest investigation Reuters September 8, 2003

Standard & Poor's Ratings Services said today that it lowered its corporate credit and senior unsecured debt ratings on health care service provider Tenet Healthcare Corp. to 'BB-' from 'BB'

The outlook remains negative. Tenet, based in Santa Barbara, Calif., had about $4.0 billion of debt as of June 30, 2003.
TEXT-S&P cuts Tenet Healthcare ratings Press Release Reuters October 23, 2003

In other news, Moody's Investors Service downgraded three Tenet debt ratings, two to B1 and the third to Caa3.
Tenet to move ahead with discounts for uninsured Modern Healthcare's Daily Dose Mar. 2, 2004

The trouble at Tenet -- rated single-B-minus by Standard & Poor's and B3 by Moody's Investors Service, a mid-range junk rating, but with negative outlooks from both -- shows no sign of abating.
Tenet also is having trouble making money. Its earnings have steadily declined, and last month it said its fourth quarter loss from continuing operations would widen from the third quarter.
Tenet Credit Line Shrinks As Settlement LA Times January 7, 2005

After the settlement. Financiers show support
Standard and Poor's on Wednesday cut its ratings on Tenet Healthcare Corp.'s <THC.N> senior unsecured debt, saying the notes are subordinate to Tenet's other higher-priority debt.
At the same time, the rating agency changed its outlook on Tenet to stable from negative, citing the hospital operator's improved financial performance.
Earlier this month, Credit Suisse raised its 2006 to 2008 earnings estimates for Tenet. Goldman Sachs raised its rating up to "neutral" from "sell," citing Tenet's strong second quarter earnings.
S&P cuts Tenet Healthcare's senior unsecured notes Reuters Sep 27, 2006

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Market opinion

Market opinion has polarized. Some have been so enthralled by Tenet that they have kept predicting a global settlement followed by a turnaround. They castigated management for not achieving this promptly. Most have been much more realistic about its prospects and it is interesting that the market did not immediately respond to the global settlement in June 2006. Its share price remained unchanged. Some investors were even betting on a bankruptcy.

Most analysts were interest in what happened and the social implications only as far as they impacted on profitability. They just wanted it to make money so that they could too. That was their job and what their lives were all about.

Citigroup has been among the groups predicting a turnaround. It has invested money in Tenet, has arranged Tenet's loans and assisted in other ways. Dr Pearce's Shareholder Committee is very critical of Tenet's relationship with Citigroup. Given Citigroup's history of deceptive market analysis and other problems one wonders if it too is reverting to the practices for which it was heavily fined a few years ago.

Aug 2003
Now many of the Street's heaviest hitters‚ folks like Bill Miller, Steve Cohen of SAC, Leon Cooperman, and the guys at Cascade (Bill Gates' money-management company)‚ as well as hard-core value investors like Bob Olstein and Dennis Jean-Jacques are dipping their toes into the stock. The thinking is that the company will soon be off Wall Street's sick list.
Today many of the aforementioned big-shot shareholders are not happy. It's not because of the troubles. Heck, that's why they got into the stock! It's because they believe management isn't making the right moves.
"If Tenet management would just say to the government, 'Look, what is this going to cost us? We'll write the check,' this whole thing could be over," says one Tenet shareholder. "The point is to get this behind them." The Tenet spokesman counters that it is working with the government to solve its problems.
Putting Pressure on Tenet : Many of the biggest names on the Street have bought the hospital giant's stock. Now they want some results. FORTUNE August 12, 2003

Oct 2003
Many analysts, unsettled by Tenet's Wednesday morning profit warning, now expect the company to report a bloody third quarter that's firmly in the red. In the meantime, they've slashed their earnings projections for Tenet -- generally in half -- for both this year and next.
"We've run out of fingers and toes counting up these 'factors' that keep taking Tenet management by surprise," wrote Carol Levenson, a bond analyst at Gimme Credit, which ranks Tenet as a member of its "Bottom Ten List." "Surely, management ought to have seen this coming."
"We could not understand how management would achieve its [second-half] guidance ... if pricing trends did deteriorate this sharply," Taylor stated. "Management has now withdrawn that guidance, so perhaps we should have presented our initial skepticism earlier."
From the beginning, Shove (another analyst) has dwelled on these probes as serious areas of concern. And Tenet's ability to look past these challenges -- excluding any settlements or lawsuits from forward guidance -- only troubles him further.
Tenet Watchers Heed the Trouble Signs (Melissa Davis) October 24, 2003

Nov 2003
"To be really cynical about it (a mea culpa by Tenet), it was the wrong audience because none of us really care that much,'' another analyst said shortly after the conference call. "Investors just want to make money.''
Tenet CEO Says He Wants to Set New Course The New York Times November 11, 2003

Jan 2004 About plans to sell more hospitals
"I think it would just confirm that their cash flow is rapidly deteriorating," said Argus analyst Bill Eddleman, who recommends selling Tenet bonds. "They'll get a lump sum of cash, but then the cash flow off those hospitals is gone. ... The chances of a bankruptcy for this company further increase the more hospitals they sell off."
Tenet Limps Toward Another Round of Cuts (Melissa Davis) Jan 27, 2004

Apr 2005
Tenet Healthcare was also hurt by state and federal investigations into its billing practices. But Quinn Stills sees brighter days ahead for the company, which operates one of the nation's biggest hospital chains.
It has 80 acute-care hospitals in 13 states. Its hospitals serve as cornerstones of regional health-care networks that include surgery centers, home health agencies, HMOs and long-term care facilities.
Manager touts Tenet, Intel Quinn Stills seeks companies beaten down during the downturn but rebounding as the economy improves. MSN Money Central April 11, 2005

Apr 2004 Prediction that it will survive
"Tenet's situation is not as bad as [HCA] was." HCA, when it was called Columbia/HCA in the mid-1990s, was the subject of Medicare fraud investigations and questions about its business practices. "They just came out a smaller, leaner company, and that's exactly what Tenet is going to do. And they've got a roadmap on how to do it."
Troubled times for Tenet: Company's future in doubt : The nation's second largest hospital chain is in deep debt and deep trouble. Will it survive? And will physicians get hurt if it doesn't? AMNews April 19, 2004.

Aug 2005 Someone buying up Tenet bonds
"Whoever bought those bonds did not do it because they thought the bonds were going to mature at par in 2031. Clearly, this is a bankruptcy play."

Villwock says his committee -- which has long been critical of Tenet leadership -- began to intensively study possible bankruptcy scenarios about a year ago. He says he ultimately determined that investors looking to best position themselves for a Tenet bankruptcy would want to buy the 2031 bonds, which are cheapest because of their maturity date, and short the company's stock.

Villwock says that somebody has clearly done the first, at least, and now controls enough notes to enjoy a "blocking position" that would protect that investment in any bankruptcy negotiations. Meanwhile, he says, the spread between those bonds and more expensive shorter-term notes has already narrowed from 20 points to 9 points in less than a year.
As for the bankruptcy chatter, the spokesman said, "That sort of speculation is ludricrous." Indeed, Villwock himself sees no immediate threat.

"There's a good probability that Tenet will be able to cure the default, and this issue will go away," Villwock says. "However, I find it very, very interesting that somebody out there is clearly making a very large bet on bankruptcy here."
Tenet Default Raises Eyebrows The (Melissa Davis) Aug 26, 2005

Jun 2006 After the global settlement
"A $900 million settlement leaves Tenet more of a financial cushion and capital to spend on its remaining 58 hospitals," analyst Robert Mains wrote in a morning note.

But he reiterated his market rating, saying he believes Tenet will "face slow going."

"While the smaller-than-expected size of the settlement is a positive development, in our view, our Tenet valuation was always based on post-settlement operations," Mains wrote.

Citigroup reiterated its buy rating on Tenet and said it believes the company's long-term guidance remains conservative. "We view this outcome as even better than our bullish expectations, and a far cry from bearish views that no settlement was forthcoming or recent estimates for a penalty more than twice the amount announced today," analyst Oksanna Butler wrote in a note to investors.

"With this settlement now out of the way, we believe the company's prospects for growth are very strong," Butler said. End of Story
Tenet shares retreat from settlement-related gains MarketWatch Jun 29, 2006

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Raising money

It was not the costs of the investigation or the US $2 billion in settlement payments that proved to be Tenet's biggest problem although its plight was because of the exposure of its conduct. Its biggest problem was that it was now making huge losses and had lost much of its value. It had a massive US $4 billion dollar debt to service. Its large but money losing hospital empire was not costing much less to run. It needed to unload these hospitals as fast as it could even if they would not sell for much. The other options open to it were cost cutting, and raising money from the banks or the market.

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Raising Money from the marketplace

The problem with raising money from the marketplace was that the market expected to get its money back with interest. The greater the risk and the lower the security in terms of fixed assets the higher the interest if they could get a loan.

In 2003 Tenet already had large debts which were maturing. It desperately needed cash to repay these and survive. The big banks came to the rescue. It went to the market and sold bonds. It staggered through the next few years talking to its bankers.

Its not clear just what Tenet's debt was by 2007. It has half the number of hospitals to service that debt and a window of 3 years before it has to start repaying again. Can it spend enough to make its hospitals competitive and even then will it be able to raise so much so soon? Its going to need a lot of help. So many powerful lenders have so much to lose if it goes under that they will want to prop it up.

Jan 2003 Sells bonds
Tenet Healthcare Corporation (NYSE:THC) today announced that it has increased its previously announced offering of $500 million of debt securities to $1 billion. The company today priced the 10-year notes, issuing 7 3/8% Senior Notes due 2013 priced at 97.868%.

The company said that it decided to upsize the bond offering instead of completing its previously announced $500 million 3-year term loan, which has been cancelled. Tenet intends to use the proceeds from this bond offering to repay the entirety of its current borrowings under its $1.5 billion revolving credit facility that matures in 2006 and for general corporate purposes.
The offering was led by Salomon Smith Barney Inc. (part of Citigroup), Banc of America Securities LLC and J.P. Morgan Securities Inc. Credit Suisse First Boston Corporation, The Bank of Nova Scotia, SunTrust Capital Markets, Inc. and UBS Warburg LLC served as co-managers in the offering.
Tenet Prices $1 Billion Senior Notes Issue Business Wire January 23, 2003

Jun 2003 Must reduce $500 million debt
To meet its obligation under its bank credit agreement, it must reduce its debt by $500 million by the end of the year. The company is selling a dozen hospitals and says it will use some of that money to reduce its debt.
Already Battered, Tenet Healthcare Reduces Earnings Forecast New York Times June 24, 2003

Sept 2003 Bonds weaker
Yield spreads on bonds of No. 2 hospital operator Tenet Healthcare Corp. THC.N blew out dramatically on Monday after the U.S. Senate Finance Committee said late on Friday it was investigating the hospital operator's corporate governance practices.

"The bonds are weaker across the board," said one trader.
Tenet bonds take hit on latest investigation Reuters September 8, 2003

Oct 2003 Asking for a bank waiver
"Tenet is in talks with its banks about a waiver, but we note the agreement was amended in April to tighten the leverage covenant," Levenson wrote. "It's the unpredictability and the negative trend in debt protection measures that continue to concern us. ... We don't believe the mild bond-market reaction to this news reflects the increased risk here."
Tenet Watchers Heed the Trouble Signs (Melissa Davis) October 24, 2003

Oct 2003 The banks oblige
Tenet Healthcare Corp. on Monday said its banks have agreed to loosen loan restrictions in a deal that places it in compliance with all the terms of its debt agreement.
Tenet currently has about $200 million in unrestricted cash and is about to receive $630 million after taxes and transaction costs from hospital sales in the coming months.
Tenet bankers boost allowed debt, for extra fees Reuters October 27, 2003

Mar 2004 Negotiates new credit agreements with larger debt
Tenet Healthcare Corp. said Tuesday it renegotiated credit agreements with most of its banks so the company could stay in compliance while selling off some of its hospitals.
The new credit agreement allows Tenet's debt to be 5.5 times its earnings before income taxes and depreciation, instead of the previous ratio of 3.5. Earlier, Tenet said it expected to violate terms of its previous bank agreement by exceeding its debt limit in the second or third quarter.

As part of its new agreement, Tenet pledged the capital stock of some of its subsidiaries, a sign analysts said that banks were wary of making unsecured loans to the company.

The deal also reduces the money available to Tenet under the loan agreement to $800 million from $1.2 billion.
Tenet Works Out New Deals With Its Lenders LA Times March 10, 2004

Apr 2004 Need cash
"One thing they clearly are trying to do is get to a smaller size and turn some of their assets into cash," Villwock said. "If at some point it appears that the cash is going to run out or they need more cash, the only assets they have truly are hospitals."
Troubled times for Tenet: Company's future in doubt : The nation's second largest hospital chain is in deep debt and deep trouble. Will it survive? And will physicians get hurt if it doesn't? AMNews April 19, 2004

Jun 2004 Selling US $500 million in bonds
Acute care hospital operator Tenet Healthcare Corp. said Monday that it will offer $500 million of 10-year senior unsecured notes in a private placement.

Tenet Healthcare to Offer $500M in Notes Associated Press Jun 14, 2004

Jun 2004 Raising US $1.1 billion from lenders
Tenet Healthcare Corp., the target of federal investigations including a probe of how it billed Medicare, said Tuesday that it had improved its financial flexibility by raising $1 billion from lenders and reducing debts maturing between now and 2007.
Tenet now has about $1.1 billion of available cash on its balance sheet. The company, which plans to move its headquarters to Dallas, acknowledged in March that its current capital structure was not meant to cover any major legal settlements.
Tenet Raises $1 Billion in Private Note Sale LA Times June 16, 2004

Jan 2005 Breaches loan covenant and renegotiates
Litigation-related woes continue for Tenet Healthcare Corp., as the company was forced to cancel an outstanding credit agreement and enter into a smaller one following a recent lawsuit settlement.
The new deal was forced after Tenet breached a loan covenant due to a recent $395 million settlement with more than 750 patients of a hospital in Redding, Calif., who claimed they were subject to unnecessary cardiac procedures, including open-heart surgery in some cases.

The fact that the new bank facility is so much smaller than the old one triggered speculation that the deal's bankers hesitated to offer a cash cushion on account of continued legal troubles for the company.

"The banks' actions pretty much say it all: no confidence," wrote CreditSights analyst Pearl Chang in a research note.
Tenet Credit Line Shrinks As Settlement LA Times January 7, 2005

Jan 2005 Raises another US $800 million
Hospital operator Tenet Healthcare Corp. said on Tuesday it increased its private placement of 10-year notes to $800 million from the previously announced $500 million.

Tenet said its offering of 9.25 percent senor notes due 2015 priced at 98.406 percent of par value. Proceeds will be used to buy back or redeem its senior notes due in 2006 and 2007 and for general corporate purposes.
Tenet debt offer raised to $800 mln from $500 mln Reuters Jan 25, 2005

Jan 2005 Redeeming outstanding notes
Proceeds will be used to repurchase or redeem its outstanding senior notes due 2006 and 2007 as well as for general corporate purposes.
Tenet says to offer $500 mln in 10-year senior notes Reuters Jan 25, 2005

Jan 2005 Costs of debt increasing
Tenet Healthcare scored a small victory in the capital markets this week, raising $800 million in a well-received debt sale, but its credit spreads still weakened and could be volatile for some time, analysts and traders said.

The sale, boosted from an original $500 million, attracted about $2 billion in orders as investors bet that Tenet's management could turn around a host of troubles at the hospital operator.
The cost of insuring Tenet's debt for five years has swollen by about 74 basis points this month alone to 414 basis points, or $414,000 for every $10 million of principal insured.
One measure of Tenet's clouded future was the 9.25 percent coupon on its new bonds, among the highest offered in the high-yield market this year.
This week's bond sale will allow Tenet to finish paying down debt maturing over the next two years, leaving no debt maturities until late 2011. Other proceeds from the sale, along with about $400 million in tax refunds expected in the second quarter, will leave the company with $1.3 billion in unrestricted cash, a company spokesman said.
US CREDIT - Tenet's outlook still up in the air Reuters Jan 27, 2005

Sep 2006 After the global settlement banks come up with US $800 million
Wednesday after the closing bell, Tenet Healthcare Corp. (THC), an owner and operator of acute care hospitals and related health care services, revealed that it has accepted a commitment from a group of banks led by Citigroup and Bank of America for a five-year, $800-million senior secured revolving credit facility.
The Dallas headquartered Texas company said that the new credit facility coupled with its existing cash in hand would suffice to meet all its future operating needs.
Tenet Okays 5-year, $800 Mln Revolving Credit Facility Commitment RTT News Global Financial Newswires Sep 27, 2006

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 Raising Money by selling assets

Tenet had a US $4 billion debt in 2003 and the only security it had was its hospitals. As its profits plummeted and its legal and other expenses went up it had no choice but to sell or close them.

These hospitals had been allowed to run down over the years and most were no longer profitable. They were no longer desirable and could not fetch a good price. Many were purchased by not for profits, governments and groups of doctors whose objective was to preserve local services and their working environments, then gradually rejuvenate these hospitals. The money did not come from the marketplace.

 Jan 2004
And raising cash, even through asset sales, may not be easy. Villwock points out that Tenet owns a number of underperforming hospitals -- in markets like California, Texas and Philadelphia -- that nobody may want. Tenet's California hospitals are struggling to pay higher labor costs without help from the outlier payments that made them profitable in the past. Meanwhile, the Texas facilities are treating a huge number of uninsured patients who are worsening the company's bad debt load. And the Philadelphia facilities -- including one that Tenet is fighting to close -- have been a drain on the company for years.
Tenet Limps Toward Another Round of Cuts (Melissa Davis) Jan 27, 2004

Those in California had another problem. Government had introduced new costly earthquake upgrade requirements as well as staffing requirements.

Given the costs for seismic upgrades and the difficulty of meeting the state's new nurse staffing requirements, experts said, Tenet's California hospitals will be a very tough sell - even at fire-sale prices.

"Why on Earth would anybody want to buy any of them?" said Sheryl Skolnick, managing director at Fulcrum Global Partners, a brokerage in New York. "They've got some pretty crummy assets in terms of their ability to generate a reasonable economic return over a reasonable period of time."
Tenet to Sell 19 Hospitals in State L. A. Times January 28, 2004

Tenet, the second-largest hospital that is selling nearly one third of its hospitals, on Wednesday said it will cost about $1.6 billion to upgrade those hospitals to meet the state law to refit the buildings to meet earthquake safety standards.
California earthquake rules may damage Tenet proceeds Reuters Health January 28, 2004

"Most of them are going to go for next to nothing," predicted Kemp Dolliver, an analyst with SG Cowen. Some of the hospitals, like Queen of Angels/Hollywood Presbyterian Medical Center, operate in low-income areas.
Hospital Industry Is in 'Crisis' New York Times February 5, 2004

There were concerns that hospitals would be closed or sold to groups interested only in their real estate value.

Correspondence obtained by indicates that the cash-strapped hospital chain hopes to sell some of its ailing Los Angeles hospitals to the venture capital firm Cerberus Capital Management. New York-based Cerberus is a so-called vulture investor known for its acumen in picking up troubled assets on the cheap.
Moreover, some Tenet critics fear that some potential buyers are interested more in the underlying real estate than in the hospitals themselves -- a focus they say could serve to undermine services in hard-hit communities.
"We indicated [to Tenet] that they (Cerberus) may not be the most desirable buyer, since their commitment may well be single-mindedly to get a return on fund investment with potentially little regard for the community," HA005 Chairman Michael Finnigan wrote. "They are an unknown, and we are not aware that they have any relevant hospital management expertise."
Vulture Fund Circles Tenet Hospital Sale The (Melissa Davis) July 27, 2004

Tenet sold the hospitals in three groups reducing its size from 114 hospitals in 2002 to less than 60 in 2007.

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Selling 14 hospitals in 2003

In an effort to bolster profit and restore investor confidence, Tenet Healthcare Corp. said Tuesday that it would close or sell 14 hospitals - - .
Tenet to Close or Sell 14 Hospitals in an Overhaul :: For-profit chain says it will lay off some employees as it cuts costs and boosts efficiency. LA Times March 19, 2003

Health Management to buy 5 hospitals from Tenet Reuters August 25, 2003
Albert Einstein system to buy Tenet Pa. hospital Modern Healthcare's Daily Dose August 26, 2003
Troubled Tenet Agrees To Sell 6 Hospitals : The hospital chain is continuing negotiations to sell six more. AMNews Sep 15, 2003
Firm to enter acute care by buying Tenet hospital Modern Healthcare's Daily Dose Sept. 30, 2003
Tenet Healthcare Sells 6 Hospitals Associated Press November 3, 2003
- - - - marking the last hospital to be sold or closed from a list of 14 hospitals that Tenet had slated for divestiture.
Iasis to buy Las Vegas-area hospital from Tenet Modern Healthcare's Daily Dose Jan. 20, 2004

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Selling second 27 hospitals starting in Jan 2004

Tenet Healthcare Corp., Santa Barbara, Calif., confirmed that it plans to sell 27 hospitals, including 19 in its core California market, as part of a massive restructuring of the troubled company. The other eight hospitals on the list are located in Louisiana, Massachusetts, Missouri and Texas.
Tenet to sell 27 hospitals in $1.4 billion overhaul Modern Healthcare's Daily Dose Jan. 28, 2004

A major part of Tenet's planned restructuring is the sale of 27 hospitals. Tenet expects about $600 million in net proceeds from the sales, mostly in the form of tax benefits. After the sales are completed, Tenet will be left with 69 hospitals with a total of 17,979 licensed beds.
Troubled times for Tenet: Company's future in doubt : The nation's second largest hospital chain is in deep debt and deep trouble. Will it survive? And will physicians get hurt if it doesn't? AMNews April 19, 2004.

Tenet finds buyer for Texas hospital on divestiture list Modern Healthcare May 17, 2004
Tenet to sell four hospitals to doc-owned firm Modern Healthcare July 19, 2004
Tenet to sell off hospitals on divestiture list Modern Healthcare August 31, 2004
Tenet to sell Los Angeles hospital to docs Modern Healthcare Sep 10, 2004
Tenet agrees to sell four Orange County hospitals San Francisco gazette September 30, 2004
Tenet to sell three Mass. hospitals to Vanguard Modern Healthcare Tue, 12 Oct 2004
Tenet to sell two St. Louis hospitals to new firm Modern healthcare Oct 29, 2004
Tenet completes sales of 4 L.A.-area hospitals November 1, 2004
Tenet to sell Hollywood hospital for net $69 mln Reuters Nov 10, 2004
Tenet to sell New Orleans hospital Reuters Dec 10, 2004

Tenet has sold or agreed to sell all but 5 of the 27 hospitals it put on the block this year to cut the size of its chain by about a quarter.
Tenet Healthcare Says Its Loss Will Be Worse in 4th Quarter The New York Times December 14, 2004

Tenet Settles Lawsuits in Fla for $31 Mln Reuters Dec 23, 2004
Select Medical, Tenet close separate transactions Modern Healthcare January 3, 2005
IHHI Restructures Agreements to Acquire Four Tenet Hospitals in Orange County Los Angeles LA Times January 31, 2005
Tenet Reaches Agreement to Sell Brotman Medical Center Dallas - Dallas Business News May 23, 2005

Tenet will have sold 25 of the 27 hospitals on the list, and talks over the other two are continuing, the company said.
Tenet sells California hospital Miami Herald Oct. 04, 2005

Tenet completes sale of hospitals for $4M Dallas Business Journal Jan 2, 2006

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Third group of 11 hospitals in 2006

Tenet too had no illusions about its parlous financial position after the June 2006 global settlement. Without a lot of publicity it decided to sell off another 11 hospitals. It had been given lenient terms to pay the $725 million it still owed over a 4 year period but its still had to pay it.

Tenet also unveiled plans to sell 11 hospitals before mid-2007, including four in New Orleans and including the previously disclosed plan to sell Alvarado Hospital Medical Center in San Diego. It expects to receive roughly $200 million in sale proceeds by year-end, executives said on the call.
Tenet shares retreat from settlement-related gains MarketWatch Jun 29, 2006

After the divestiture, Tenet will have 57 hospitals in 12 states. It is increasing spending on capital improvements to $800 million this year from earlier estimates of as much as $650 million.
Tenet Settles U.S. Investigation for $725 Million Bloomberg June 29, 2006

Ochsner buying 3 hospitals ; Tenet selling its Memorial, Meadowcrest, and Kenner medical centers Times-Picayune July 19, 2006
Tenet Healthcare sells 4 hospitals Business Week October 2, 2006
Tenet Healthcare Sells Florida Hospital The Houston Chronicle (Associated Press) Oct. 11, 2006
Tenet in deal to sell 2nd Fla. hospital Modern Healthcare's Daily Dose October 12, 2006
Tenet in deal to sell Alvarado Hospital Bloomberg News and the Associated Press October 28, 2006
Tenet to sell Philadelphia hospital Modern Healthcare January 23, 2007

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Other sales

Tenet had other assets it could sell and it did. It owned most of Broadlane, the company it had founded in the 1990s and put Trevor Fetter in charge of. It reduced its holding and then sold many of its home health agencies and some hospices it owned. In 1996 it had sold all of its international hospitals except one in Spain. It now sold it.

2003 Reducing in Broadlane
Broadlane, the group purchasing spinoff of Tenet Healthcare Corp., has completed a $50 million-plus financing reducing Tenet's ownership to 47% from 67%. About 80% of the proceeds were used in equal parts to repay Broadlane's line of credit with Tenet and to repurchase shares that reduced Tenet's ownership, leaving Broadlane with about $10 million to finance growth.
Tenet's stake in Broadlane cut to minority share Modern Healthcare's Daily Dose July 7, 2003

Mar 2004 Home health and hospices
Tenet Healthcare Corp., Santa Barbara, Calif., said it finalized an agreement to sell 11 home-health agencies and two hospices to Amedisys, Baton Rouge, La. Publicly traded Amedisys will pay $19 million for the facilities, which are in Florida, Georgia, Louisiana, Mississippi, Tennessee and Texas. Tenet also will realize $4.3 million by liquidating the facilities' working capital.
Tenet in final pact to sell home-health agencies Modern Healthcare's Daily Dose Mar. 3, 2004

May 2004 Sells in Spain
Tenet Healthcare Corp., Santa Barbara, Calif., said it has sold its only international hospital, Centro Medico Teknon in Barcelona, Spain, for $50 million in cash and $31 million in assumed debt.
Tenet sells Spanish hospital Modern Healthcare May 28, 2004

Apr 2005 What it sold and what it kept
Tenet Healthcare Corp. has completed the previously announced sale of four California home health agencies.

The health care system through its subsidiaries sold home health agencies at Desert Regional Medical Center in Palm Springs, Alvarado Hospital Medical Center in San Diego; Community Hospital of Los Gatos; and Garden Grove Hospital and Medical Center in Garden Grove, as well as a related infusion center at Desert Regional.

The facilities were sold to CareSouth HomeCare Professionals of Augusta, Ga. Tenet's net proceeds after tax were about $6 million. The company will use the money for general corporate purposes.

With this transaction Tenet now has one remaining home health agency that is affiliated with its Frye Regional Medical Center in Hickory, N.C.; one infusion center at Memorial Medical Center in New Orleans; two hospice facilities -- one at Dessert Regional in Palm Springs, Calif., and one at Providence Memorial Hospital in El Paso, none of which are for sale, said Tenet spokesman Steven Campanini.
Tenet sells four home health agencies in Calif. Dallas Business Journal April 1, 2005

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 Cutting Costs

One of the major criticisms of Tenet prior to the scandal was that it had cut costs so drastically to fuel its profits that patient care had been compromised. There was very little fat left to cut and it dared not risk another outcry about standards of care. There was very little it could cut in the hospitals as part of its planned recovery was to claim and demonstrate high standards.

Most of its cost cutting came in moving its headquarters from California to Dallas in Texas. There was also a drastic culling of management and the appointment of new faces. Many of these would have required some form of termination payment. This would not have been cheap. These measures are covered in the section on restructuring below.

*June 13 - Tenet says it will cut 300 jobs in a plan to consolidate business offices
CHRONOLOGY-Tenet Healthcare hit on many regulatory fronts Reuters, September 7, 2003

Although the company has announced plans to cut its costs by about $350 million, Mr. Ransom estimated that Tenet would have to reduce its expenses even more significantly to return to being consistently profitable.
Already Battered, Tenet Healthcare Reduces Earnings Forecast New York Times June 24, 2003

Tenet Healthcare Corp., the second-biggest U.S. hospital company, said it would cut more costs as its first-quarter loss grew more than sixfold - to $122 million - because of expenses related to the planned sale of unprofitable hospitals.
Tenet to reduce costs as losses escalate : The second-largest U.S. hospital chain will focus on its most profitable facilities by shedding 27 BLOOMBERG NEWS May. 05, 2004

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 Restructuring management

Changes to the board had already been made by the middle of 2003. Those principally involved had become scapegoats and pressure had then forced Barbakow to resign. There were calls for a clean sweep and there was a surprisingly extensive change of faces on the board and down into middle management. Whether this was at the insistence of Fetter himself, of the new senior council (Mr Urbanowicz), at the insistence of government prosecutors or due to insistence from Senator Grassley and other politicians. Tenet had close political contacts and had enjoyed support. They may have imposed conditions.

My concern would be that the directors and vice presidents who were kept were core people who had shown their loyalty and subscribed to Tenets core business philosophy - a nucleus for the future. As Barbakow's man, Fetter would have wanted to keep core staff and supporters with him.

Of particular interest to me was that Robert Kerrey, the 2004 Democratic presidential nominee was happy to sit on the board of a company doing these things and continue to do so after it was all exposed to the public. Of almost as much interest is that the brother of the president and the just resigned governor of a state where Tenet's practices had attracted so much attention became a director immediately after its global settlement.

There was a time when reputable businessmen would have shunned a company like this - let alone politicians in the public eye. This more than anything else indicates that Tenet has strong establishment support and will be resurrected whatever the costs.

In any other country and at any other time Tenet would have smelt like a polecat and any one with any sense of propriety would have distanced themselves as rapidly as they could. There was an outcry in Australia when politicians even met Brian Burke after his imprisonment. Imagine if the leaders of our political parties were found to be in business with him.

Tenet has employed an army of former government officials and well connected lobbyists. Among many others, that list included:
  • E. Peter Urbanowicz, the company's general counsel and former HHS deputy counsel in the Bush Administration.
  • Ed Gillespie, a lobbyist and former chairman of the Republican National Committee.
  • Cathy Abernathy, a lobbyist and former chief of staff to Congressman Bill Thomas (R-CA) who was the chairman of the House Ways and Means Committee until this year.
  • Amy Jensen Cunniffe, a lobbyist and former Special Assistant for Legislative Affairs for President Bush.
  • Elizabeth Hogan, a lobbyist and former Special Assistant at the Department of Commerce in the Bush Administration; former assistant in the Bush White House Office of Presidential Personnel; former employee at the Republican National Committee.
  • David Hoppe, lobbyist and former chief of staff to then Senate Majority Leader Trent Lott (R-MS)
  • Jack Quinn, lobbyist and former White House counsel to then President Bill Clinton.
  • One of the longest serving Tenet Board members is former U.S. Senator Bob Kerrey (D-NE). While in the Senate, Kerrey was a member of the Senate Committee (Finance) with jurisdiction over federal health programs including Medicare and Medicaid. Kerrey collected more than $850,000 by cashing in Tenet stock options weeks before the scandals erupted and the stock price collapsed
  • Tenet has just announced the appointment of a new member of the Board of Directors - former Florida Governor Jeb Bush.

How Many More Lives and Billions of Dollars Will Be Lost Before the Federal Government Learns Lessons From the Tenet Healthcare Corp. Scandals? Tenet ShareHolder Committee April 24, 2007

What we are looking at is modern market thinking in which stretching the limits of decent behaviour carries no stigma. If you can get away with it you are admired. There is no adequate word for this in English. The Afrikaans word "slim" describes it well. It meant clever but clever in getting away with something which was underhand. Being "slim" was a characteristic of Nationalist Afrikaner politics in South Africa during the 1950s and 1960s - the early apartheid years. It was boasted about and admired in the boys room!

The market also increasingly thinks this way in Australia. The difference in the USA is that politicians, the public and the media shrug their shoulders and accept this uncritically. There is no adverse fall out in these associations for the individuals or their parties. Australia is on the path but not as far down the track - yet.

A major consequence of Tenets radical restructuring and the large numbers of staff changes is that the people terminated will move into other companies. On a previous page I examined the infectivity and the durability of Tenet/NME's thinking and its culture. They knew how to make money and this is what their competitors wanted. I traced the infection into a multitude of aged care and other dysfunctional corporations. We can only wonder at what the broad consequences of such a large infusion of Tenet/NME corporate thinking into the system will be for the health and aged care sectors in the USA.

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Board Changes

Changes to the board were made in response to an outcry from the public, from Senator Grassley and undoubtedly from many investors. They concentrated their criticisms on the board. By 2007 only three of the hard core pre-scandal board members remain. There are however several other pre-scandal staff in senior management positions.

Edward Kangas, an accountant, who had joined the board 3 months earlier replaced Barbakow as chairman in July 2003. This avoided a process of publicly going out and looking for an independent chairman. We do not hear of any prior association of Kangas and Tenet staff but are left wondering.

Kangas, 59, is former chairman and chief executive of the accounting firm Deloitte Touche Tohmatsu. He will chair Tenet's annual meeting Wednesday, when the new board is expected to appoint new heads for the compensation, audit and nominating committees.

The Santa Barbara-based company is continuing its search for a new chief executive officer. Tenet's president, Trevor Fetter, is acting CEO and considered a front-runner for the post.
Tenet Healthcare names new chairman Associated Press Jul 23, 2003

Trevor Fetter too was appointed as CEO in the same way becoming acting CEO and then being appointed over outsiders. He had a long association with Barbakow and with Tenet. Few made much of this and it soon blew over. If anything points to the fact that Tenet's successful thinking is still admired and that it will ultimately revert then this is it. As in the 1990s scandal what happened is considered to be an aberration. People who did the deeds are targeted but the underlying business thinking which made what they did legitimate for them is never challenged. Remember this is ideology! Tenet have been exceptionally successful in making money for their supporters. These supporters would be horrified if Tenet started expressing different views.

What's irking many Tenet shareholders is that the company isn't moving fast enough to clean up the mess. Tenet says it's conducting a CEO search, but it has included acting CEO Trevor Fetter, who was previously the company's CFO, as one of the candidates. "I think they still need to clean house over there," says Rohan Rangaraj, an analyst with Cascade. Adds Lawrence Kohn, principal at Pzena Investment Management: "It's important right now that Tenet puts its distractions behind them." Makes sense. How else is Tenet going to become Wall Street's next big score?
Putting Pressure on Tenet : Many of the biggest names on the Street have bought the hospital giant's stock. Now they want some results. FORTUNE August 12, 2003

While many people view Fetter as a frontrunner for the job, critics look at him and see the Barbakow regime.

For one thing, they say, Fetter shared the office of president with Thomas Mackey -- the company's ousted operating chief -- when Tenet adopted the aggressive business strategies that have since come back to haunt it. And besides, they add, Fetter never really left the company.
M. Lee Pearce, a Florida physician who leads the Tenet Shareholder Committee, has repeatedly called for incumbent executives -- including Sulzbach and the returning duo of Fetter and Focht -- to follow Barbakow out the door.
Tenet's Mr. Outside Has Inside Game Too The Street.Com (Melissa Davis) September 2, 2003

Fetter rejoined Tenet in November 2002, shortly after revelations about the company's high Medicare outlier payments and allegations that two physicians performed medically unnecessary procedures at its Redding (Calif.) Medical Center rocked the company.

Fetter's career has been closely linked to that of Barbakow, who relinquished his spot as Tenet's chairman in July. Barbakow and Fetter worked together at Merrill Lynch & Co. and Metro-Goldwyn-Mayer/United Artists before Barbakow hired Fetter at Tenet in 1995.

Fetter was executive vice president and then CFO of Tenet until leaving in 2000 to be chairman and CEO of Broadlane, a Tenet spinoff.
Modern Healthcare Alert September 16, 2003

Wall Street analysts said the appointment of Mr. Fetter, 43, a longtime Tenet executive, was not a surprise. Mr. Fetter, who left the company in early 2000 to run a Tenet spinoff, had been brought back in November as president when accusations surfaced about improper billing and unnecessary surgery at one of its hospitals.
Tenet Healthcare Names Chief The New York Times September 17, 2003

Tenet Healthcare Corp. granted newly appointed Chief Executive and President Trevor Fetter stock options to buy 350,000 shares, according to a filing Monday with the Securities and Exchange Commission.
Tenet Grants Stock Options to New CEO LA Times September 23, 2003

And, in a letter yesterday to Tenet's chairman, Grassley - - - - - - condemned the long-time ties of new CEO Trevor Fetter to Tenet and to the company's former chairman and CEO, Jeffrey Barbakow.
Outside pressure prompts Tenet counsel to resign Modern Healthcare's Daily Dose Sept. 26, 2003

Michael Focht was president of the international division in the 1980s and a director of the Australian operations in the 1990s. He returned to the USA to become COO in 1991 after the first scandal broke and played an important part in Tenet's compliance processes and in getting Tenet past the 1990s fraud. I had grave concerns about him and lodged a complaint with Tenet's ethics committee in 1996 in regard to conduct in which Focht was involved. They ignored it. He subsequently retired but was brought back to help sort out the mess after the 2002 scandal broke. He retired again in late 2003

Tenet Healthcare Corp. Wednesday said Executive Vice Chairman Michael H. Focht, Sr. is retiring again.

Focht, 61, rejoined the troubled Santa Barbara, Calif., hospital chain almost 10 months ago at the board's request to help address the problems facing the company. He initially retired in 1999 after 20 years of service.
While Focht is viewed by many as an elder statesman in the health care industry, his return to retirement does not signify that Tenet's problems are at an end.
Tenet executive vice chairman returns to retirement The Associated Press October 1, 2003


Other board changes
Under strong pressure from Senator Grassley's committee, from Dr Pearce's Shareholder Committee and with an urgent need to show government that it was making changes Tenet steadily changed its board. Three of the recently appointed directors, John Kane, Robert Nakasone and also Monica Lozano decided to go without giving convincing reasons for their early departure. Were they unhappy about what was happening?

Old timers Biondi and Schochet retired. The present board was finalized in 2005. These directors were all re-elected in 2007 with the addition of Jeb Bush, recently retired governor of Florida and president Bush's brother.

Three of the current 2007 directors were present before of during the period of Tenet's dysfunctional practices -1999 to 2003. These include Fetter, Kerrey and Loop, the only doctor on the board. Loop comes from the Cleveland Clinic which had close links to Tenet. Tenet operated some of its hospitals. It seems to be disentangling now.

The changes made included.

John Kane, former vice chairman, president and COO of drug distributor Cardinal Health,
Tenet board adds former drug-distributor exec Modern Healthcare's Daily Dose June 26, 2003

Richard R. Pettingill
Mr. Pettingill has been President and Chief Executive Officer of Allina Hospitals and Clinics since October 2002.

Prior to serving in this role, he served as Executive Vice President and Chief Operating Officer of Kaiser Foundation Health Plans and Hospitals from 1996 to 2002. He served as President and Chief Executive Officer of Camino Healthcare from 1991 to 1995.
Mr. Pettingill received a bachelor's degree from San Diego State University and a master's degree in health care administration from San Jose State University.

Mr. Pettingill has been a director since March 2004.
Tenet Healthcare's web site accessed June 2007

The Rev. Lawrence Biondi, Sanford Cloud Jr. and Robert Nakasone will serve out their terms through the annual meeting. Nakasone, former chief executive officer of Toys 'R' Us, who steps down after one year on the board, did not offer a specific reason for his decision,
Tenet also said director Monica Lozano, who joined the board in 2002, has told the company she may decide not to stand for re-election in 2005
Tenet spokesman Harry Anderson said the remaining eight directors expect to continue recruiting new independent directors, but there is no set number of directors or timeframe.
Tenet proxy details director turnover, CEO pay Modern Healthcare's Daily Dose Apr. 5, 2004

Mr. Unruh has served as Principal of Alerion Capital Group LLC, a private equity firm, since 1998.

Prior to founding Alerion, Mr. Unruh was the Chairman, President and Chief Executive Officer of Unisys Corporation from 1990 until 1997

Mr. Unruh received his bachelor's degree in business administration from Jamestown College and his master's degree in business administration from the University of Denver.

Mr. Unruh has been a director since June 2004.
Tenet Healthcare's web site accessed June 2007

Tenet Healthcare Corp. said Wednesday that Vice Chairman Barry P. Schochet will resign at the end of the year, after more than 25 years with the company, to ``pursue new opportunities in health care investments.''
Schochet, 53 years old, joined Tenet's predecessor company, National Medical Enterprises, in 1979.
Tenet Vice Chairman to Resign The New York Times July 28, 2004

Five new directors were elected on a board of nine.
Tenet faces tough road to recovery. CEO knows his hands are full as hospital chain moves to Dallas The Dallas Morning News January 1, 2005

Brenda J. Gaines
Ms. Gaines served as President and Chief Executive Officer of Diners Club North America, a division of Citigroup, from 2002 until her retirement in March 2004. She also served as President of Diners Club from 1999 to 2002 and held a number of senior management positions within Citigroup since 1988.
Ms. Gaines received her bachelor's degree from the University of Illinois at Champaign-Urbana and her master's degree in public administration from Roosevelt University in Chicago.

Ms. Gaines was elected to the Board in March 2005.

J. McDonald Williams
Mr. Williams served as the Chairman of Trammell Crow Company from 1994 until May 2002. Prior to serving in that role, he was the President and Chief Executive Officer of Trammell Crow from 1990 to 1994 and was managing partner from 1977 to 1990. In addition, he serves as a director of Belo Corp.
Mr. Williams received his bachelor of science degree from Abilene Christian University and his L.L.B. from George Washington University Law School.

Mr. Williams was elected to the Board in March 2005.
Tenet Healthcare's web site accessed June 2007

Tenet Healthcare Corporation (NYSE:THC) announced today that two respected corporate executives with a wealth of management and community experience have been named to Tenet's board of directors, effective March 23.

The new directors are Karen M. Garrison, the recently retired president of the management services subsidiary of Pitney Bowes Inc. (NYSE:PBI), and J. McDonald Williams, retired chairman of Trammell Crow Co. (NYSE:TCC).
Two New Directors Named to Tenet's Board Dallas Dallas Business News March 29, 2005

At the annual meeting, nine current directors will stand for election to one-year terms. They are: Trevor Fetter, Tenet's president and chief executive officer; Brenda J. Gaines, retired president and chief executive officer of Diners Club North America; Karen M. Garrison, retired president of Pitney Bowes Business Services; Edward A. Kangas, Tenet's non-executive chairman and former chairman and chief executive of Deloitte Touche Tohmatsu International; J. Robert Kerrey, president of New School University and former U.S. Senator from Nebraska; Floyd D. Loop, M.D., retired chairman and chief executive officer of the Cleveland Clinic Foundation; Richard R. Pettingill, president and chief executive officer of Allina Hospitals and Clinics; James A. Unruh, principal of Alerion Capital Group and former chairman, president and chief executive officer of Unisys Corp.; and J. McDonald Williams, retired chairman of Trammell Crow Co.

The company also said three current directors have notified the board that they will not stand for reelection and will retire as directors before the annual shareholders meeting. They are Van B. Honeycutt, John C. Kane and Monica C. Lozano.
Tenet Files Proxy Materials for 2005 Annual Meeting Business Wire April 15, 2005

Nine directors were elected to one-year terms on the company's board. In addition, shareholders voted to approve a proposal to amend the company's third amended and restated 2001 stock incentive plan and ratified the selection of KPMG LLP as the company's independent registered public accountants for 2005.
Tenet Shareholders Elect Nine Directors, Approve Amended Stock Incentive Plan BUSINESS WIREMay 26, 2005

Floyd D. Loop, M.D.
Dr. Loop retired as the Chief Executive Officer and Chairman of the Board of Governors of The Cleveland Clinic Foundation in October 2004, a position he held for fifteen years. He currently serves as a consultant to the Foundation.
Dr. Loop has been a director since January 1999.
Tenet Healthcare's web site accessed June 2007

John Ellis "Jeb" Bush
Mr. Bush served as Governor of the State of Florida from January 1999 until January 2007.

Prior to his election as Governor, Mr. Bush worked as a real estate executive and pursued other entrepreneurial ventures in Florida from 1981 to 1998, and served as Secretary of Commerce for the State of Florida from 1987 to 1988.

Mr. Bush was appointed to the Board in April 2007.
Tenet Healthcare's web site accessed June 2007

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Senior Staff Changes
It is interesting to note that at least two of the new senior staff had close links to government. We could argue that this is because they knew what was required. Equally we could argue that they knew the weaknesses in the system and how they could be exploited during settlement negotiations.

Five of the nine people including Trevor Fetter were part of Tenet prior to the breaking of the scandal in October 2002 although Jennifer Daley was new at the time. Newman, Brown, Andrews and Jennings were with the company during the 1999 to 2002 period when things went so very wrong. They are the hard core of Tenet's original staff. Only Fetter was also on the board.

Medical and Nursing. To counter the many accusations of poor care much was made of medical and nursing appointments. Note that Lauren Arnold, the new 2003 Vice President of Nursing had been replaced a year later.

Officials announced the hiring of Dr. Jennifer Daley, who will be the company's senior vice president for clinical quality, and Lauren Arnold, who will be vice president for nursing. Daley is a former quality executive at Beth Israel Deaconess Medical Center and Massachusetts General Hospital, and Arnold formerly worked for the University of Pennsylvania Health System. In addition, company officials said they plan to overhaul the department that ensures compliance with government regulations and have hired D. McCarty Thornton, former chief counsel in the HHS Office of the Inspector General, as an adviser.
Tenet Healthcare Officials Announce New Focus on Quality of Care ??? source July 2003

Santa Barbara-based Tenet Healthcare Corp. said Tuesday its interim vice president of nursing, Garry M. Olney, has been named vice president, nursing and clinical operations.
Tenet plans to build Fort Mill hospital Nov 15, 2004

Dr. Daley, 57, is responsible for the research, development and implementation of Tenet's Commitment to Quality (C2Q), an innovative program designed to enhance the overall quality, safety and productivity of Tenet's care delivery processes. C2Q introduces a series of targeted initiatives to bring about significant improvements in quality of care and patient safety, nursing practice, medical staff governance, hospital capacity and patient flow, and other important areas related to patient care. Dr. Daley also is an Adjunct Associate Professor of Community and Family Medicine at Dartmouth Medical School in Hanover, N.H. She reports to Trevor Fetter, Tenet's President and Chief Executive Officer.

Dr. Daley joined Tenet in July 2002 as Vice President, Clinical Effectiveness, and was promoted to her current position in April 2003. Prior to joining Tenet, she was the Director of the Center for Health Systems Design and Evaluation in the Institute for Health Policy at Massachusetts General Hospital and Partners HealthCare System in Boston, Mass., from 1999 to 2002. She was also Associate Professor of Medicine at Harvard Medical School.
Dr. Daley received her bachelor of arts degree magna cum laude from Brown University and her medical degree at Tufts University School of Medicine. She completed post-graduate training in internal medicine at the New England Medical Center in Boston and her general medicine fellowship at Harvard Medical School.
Tenet Healthcare's web site accessed June 2007

A major problem had been Christi Sulzbach. She had been both chief legal officer and compliance officer. This had been criticized as a conflict of interest. Everything that happened must have had her blessing. She had to be replaced if any restructuring was to be credible.

Christi Sulzbach will step down as general counsel and chief corporate officer of Tenet Healthcare Corp., Santa Barbara, Calif., on Nov. 1.
Chief among those critics is Sen. Charles Grassley (R-Iowa), whose Senate Finance Committee is investigating Tenet. Earlier this month Grassley ripped Sulzbach's compliance oversight and her former dual role as Tenet's general counsel and chief compliance officer.
Outside pressure prompts Tenet counsel to resign Modern Healthcare's Daily Dose Sept. 26, 2003

The chief compliance officer is a key role. The person holding it has the capacity to thwart lucrative business plans. It is interesting that Grassley was critical of the independence of her replacement, Cheryl Wagonhurst. A new appointment, Audrey Andrews was made in Nov 2006 after the CIA was signed. She had been with Tenet for 8 years so was also a member of the old guard.

The company would want someone who thought its way in this position. Examine the information provided about her by Tenet and ask whether she was likely to be involved in past practices and to have approved them?

Tenet named Cheryl Wagonhurst, 43, its chief compliance officer. She will oversee a 40-person team that will include clinicians, accountants and legal experts.
Tenet Moves to Beef Up Compliance Los Angeles Times August 5, 2003

And, in a letter yesterday to Tenet's chairman, Grassley questioned the independence of the company's new chief compliance officer, Cheryl Wagonhurst, - - - .
Outside pressure prompts Tenet counsel to resign Modern Healthcare's Daily Dose Sept. 26, 2003

Audrey Andrews serves as chief compliance officer for Tenet Healthcare Corporation. She will also supervise the company's ethics program and report directly to the quality, compliance and ethics committee of Tenet's board of directors.

Until her appointment as chief compliance officer on November 15, 2006, Ms. Andrews served as vice president and assistant general counsel for regulatory affairs. In that position, she led the law department regulatory group, handling Medicare reimbursement, quality of care and other regulatory issues.

Ms. Andrews, 40, joined Tenet in 1998 and served as operations counsel for Tenet's hospitals located in its Central States Region. Ms. Andrews joined the compliance section of the Law Department in 1999 and began providing legal advice on issues raised through Tenet's compliance program.

Ms. Andrews earned her bachelor of arts degree in government in 1989 and a juris doctorate from the University of Texas at Austin in 1991.

Ms. Andrews is a member of the Dallas, Texas and American Bar Associations and the American Health Lawyers Association. She serves on the Quality Committee and Law and Operational Policy Committee of the Federation of American Hospitals.
Tenet Healthcare's web site accessed June 2007

With Sulzbach, head of the legal department gone, and that department tainted by what it had approved, major changes were needed. The choice of Mac Thornton to assist with compliance and E. Peter Urbanowicz as general counsel raised some eyebrows. Urbanowicz had been close to George Bush's two key health care advisers Thomson and Scully. Scully and Tenet had been close when he headed the Federation of Health Care Systems. Both knew the weaknesses of the government's position very well. Thornton was the government official who had pursued Columbia/HCA in its US $1.7 million fraud settlement.

This also makes one wonder about the closeness of Tenet to one hand of the government while the other hand was prosecuting it. One wonders about the purpose of the many appointments from government. This sort of acceptance and support suggests that the establishment has no intention of letting Tenet go under. It gives it a credibility its conduct does not deserve.

The company also said it had hired D. McCarty "Mac" Thornton as special advisor to its compliance department. Thornton was formerly chief counsel to the Office of Inspector General of the Department of Health and Human Services.
Tenet Moves to Beef Up Compliance Los Angeles Times August 5, 2003

In recent days, the beleaguered hospital chain has created a buzz by hiring legal heavyweight Mac Thornton -- who led the government's massive investigation of HCA -- to guide it through its own regulatory minefield. But the company has quietly enjoyed powerful ties for years.
Untangling Tenet's Ties to Watchdog The Street.Com (Melissa Davis) Aug 7, 2003

Tenet Healthcare Corp., Santa Barbara, Calif., will name HHS Deputy General Counsel E. Peter Urbanowicz as its general counsel, Modern Healthcare has learned.
Urbanowicz, who was appointed to his current position in November 2001, has been mentioned as a possible successor to replace departed CMS Administrator Tom Scully, who announced his hiring by Washington law firm Alston & Bird. At HHS, Urbanowicz advised HHS Secretary Tommy Thompson and Scully on Medicare and Medicaid issues and oversaw the work of the 400-attorney staff, reporting to HHS General Counsel Alex Azar II.
Tenet to hire HHS lawyer as counsel Modern Healthcare's Daily Dose Dec. 19, 2003

Urbanowicz, 42, was charged with negotiating the settlement with the government. He says that his experience at Health and Human Services was one of the reasons he was hired at Tenet: "I think the board wanted someone who knew the rules [at HHS], and knew them very clearly".

After he arrived at Tenet, Urbanowicz made sweeping changes to the legal department. He streamlined the staff, reducing the number of lawyers from about 60 to around 40 today. He also severed relationships with several outside counsel in a quest for a fresh viewpoint, and hired a defense team headed by Latham & Watkins.

David Schindler, a Latham partner who worked on the agreement, says that the biggest challenge for Tenet was establishing trust with the government prior to and during the negotiations. The government was "particularly skeptical", he says. Tenet‚s lawyers had to persuade [the government‚s lawyers] that the company that lives today bears no resemblance to the old one.

But the organizational changes weren‚t the only steps Tenet took. Urbanowicz also moved the corporation‚s compliance program outside the legal department to encourage transparency. He helped develop a new position "independent compliance officer" who reports directly to the board. At Urbanowicz‚s urging, Tenet‚s compliance department has grown from just three staffers to more than 100 full-time employees (there‚s one in almost every one of the company‚s hospitals).

In Urbanowicz‚s view, it was especially important for Tenet to figure out a way to cure itself. "It‚s not like a number of other companies [in other fields] where someone else could pick up the slack," he explains. "In many cases we [operate] the only hospital in town." Thanks to the settlement, those hospitals are staying in business.
Tenet Looks for Way to Cure Itself‚ Corporate Counsel October 19, 2006

Reynold J. Jennings, although now Vice Chairman is not listed as being on Tenet's board. Perhaps this is because, apart from a break with Australian company, Ramsay Health Care's US operations in the 1990s, he has been with Tenet since before 1983. He is one of the remaining core of Tenet's once successful executives. He became COO in 2004 and then Vice Chairman.

Tenet Healthcare Corp., Santa Barbara, Calif., completed its senior management team by naming eastern division chief Reynold Jennings as its chief operating officer.
Tenet names COO to complete senior management Modern Healthcare's Daily Dose Feb. 9, 2004

Reynold J. Jennings serves as Vice Chairman of Tenet Healthcare Corporation.

Jennings, 60, is involved in Tenet's various growth initiatives, including its physician sales and service program and its physician alignment efforts and works closely with COO, Stephen L. Newman, MD.

Jennings has had extensive experience as a hands-on hospital operating executive for nearly 32 years. Before being named Vice Chairman in 2007, he was promoted to COO of Tenet in February 2004. He has also served as President of the company's former Eastern Division, which consisted of 48 acute care hospitals and other facilities in 11 states. Prior to that, Jennings was Executive Vice President of Tenet's former Southeast Division, where he was responsible for the overall management of 34 acute care hospitals and specialty facilities in Alabama, Georgia, Florida, Louisiana, Mississippi and the Carolinas. Jennings joined Tenet in 1999 as Senior Vice President of the company's Gulf States Region.
In 1991, he was promoted to Senior Vice President responsible for the company's acute care hospitals in Texas, Missouri and West Florida. In 1993, he left Tenet to join Ramsay Health Care Inc. as a senior executive and played a key role in stabilizing the financial performance of that New Orleans-based hospital company.
Jennings is a fellow of the American College of Healthcare Executives and a board member of the American Federation of Hospitals. He currently serves as Chairman of the Board of two Tenet affiliate corporations - Tenet Choices Inc., a Medicare HMO, and the Cleveland Clinic Hospital in Weston, Fla., which is jointly owned by Tenet and The Cleveland Clinic Foundation. Additionally, Jennings is a past Chairman of the Florida League of Hospitals and the St. Petersburg, Fla., Hospital Council.
Tenet Healthcare's web site accessed June 2007

The new chief financial officer, Stephen Farber, appointed in 2003 lasted eighteen months. He was replaced by an outsider Biggs C. Porter, an accountant who started with Arthur Young and Co before a career spanning a string of corporate positions.

 - - - and that its chief financial officer intends to leave the company after just a year and a half on the job
It also said Chief Financial Officer Stephen Farber was resigning to resume his career on Wall Street.
Tenet Healthcare loss widens, gets new subpoena Reuters Aug 3, 2004

Biggs C. Porter serves as Chief Financial Officer of Tenet Healthcare Corporation. Porter, 52, is in charge of the company's finance, accounting, investor relations and related functions. He reports to Trevor Fetter, Tenet's President and Chief Executive Officer.

Porter joined Tenet in June 2006 from Raytheon Co. where he served as Vice President and Corporate Controller. He also served as Raytheon's principal accounting officer.
A certified public accountant, Porter holds a bachelor's degree in accounting from Duke University and a master's degree in accounting from the University of Texas, Austin.
Tenet Healthcare's web site accessed June 2007

Dr Stephen Newman, a pediatric gastroenterologist turned hospital administrator was with HCA during the final years before and after its fraud scandal became public in 1997. He joined Tenet in 1999 so is part of its team from the past. He is now Chief Operating Officer responsible for what happens in its hospitals.

Stephen L. Newman, M.D., serves as Chief Operating Officer of Tenet Healthcare Corporation. Dr. Newman, 57, is responsible for operational oversight of Tenet's 55 core acute care hospitals and other facilities in 12 states. He reports to Trevor Fetter, Tenet's President and Chief Executive Officer.

Dr. Newman is a pediatric gastroenterologist who taught and practiced medicine for 12 years before becoming a hospital administrator, and then a corporate executive beginning in 1990. From March 2003 until his promotion to COO in January 2007, Dr. Newman served as Senior Vice President of Tenet's California operations for which he led a significant and successful turnaround.

Dr. Newman joined Tenet in February 1999 as Vice President, Operations, of Tenet's Gulf States Region in Alabama, Louisiana and Mississippi. In June 2000, he was promoted to Senior Vice President, Operations.
Dr. Newman has a bachelor of arts degree from Rutgers University, a master's degree in business administration from Tulane University, and a medical degree from the University of Tennessee.

Cathy Kusaka Fraser, Senior Vice President is an recent outside appointment

Fraser, 42, joined Tenet in Sept, 2006 after serving as a management consultant with McKinsey & Co. Inc., the international consulting firm. In that role, Fraser counseled senior executives at a number of large companies on organizational design, talent management and retention strategies, recruiting, and related human resources topics.
Fraser holds a bachelor's degree in business administration from the University of Washington in Seattle, and master's degree in business administration from the University of Michigan

Stephen F. Brown is Chief Information Officer. He came to Tenet when it purchased American Medical International in 1995 and has held this position since then.

Brown, 51, is responsible for establishing the strategic direction and providing management leadership for Tenet's information and telecommunication systems. He also is responsible for identifying high-value opportunities to advance the company's business interests through the application of information technology. Brown has maintained Tenet's comprehensive technology outsourcing relationship with Perot Systems Corporation since 1990. He reports to Trevor Fetter, Tenet's President and Chief Executive Officer.

Brown has served as CIO of Tenet since 1995. Prior to his position with Tenet, he was CIO of American Medical International, one of Tenet's predecessor companies.
Tenet Healthcare's web site accessed June 2007

Daniel Waldman, president of government relations is not listed among Tenets Principal Management but this is clearly an important position as Tenet has close relationships with government and there seems to be a revolving door between them.

Tenet Healthcare Corp., Dallas, hired Daniel Waldman away from Johnson & Johnson to become vice president of government relations as of June 8. Waldman, 37, handled federal affairs and reimbursement at J&J, New Brunswick, N.J., for the past two years and previously worked in government affairs at Medtronic, Minneapolis, and as reimbursement counsel to the Medical Device Manufacturers Association.
Tenet names government relations chief, hired from J&J Modern Healthcare June 2, 2005

Tenet's web site in 2007 lists the following under "Principal Management". These are the people who will bear the burden of Tenets business recovery over the next few years.

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Changing middle management

Middle management took a big hit with about 90% departing. Only some of these would have been replaced. Tenet claimed to have removed a whole layer of management. These are the people who might be carrying the secrets of squeezing money from care and from payers with them into the rest of the sector.

Tenet is also shedding layers of management and taking other steps to make up for steep reductions in Medicare revenues.
Tenet's Problems Fixable, CEO Says LA Times March 17, 2004

About three-fourths of the 90 executives listed in the company's 2002 annual report resigned, retired or were replaced.
Tenet faces tough road to recovery. CEO knows his hands are full as hospital chain moves to Dallas The Dallas Morning News January 1, 2005

In addition to bringing on several new executives and directors, about 80 of the 97 vice presidents who were at Tenet prior to January 2003 are now gone. The shake-up was one of several major reforms that the company has implemented over the last few years.
The sweeping personnel overhaul at Tenet was "uncommon," says Peter Henning, a former lawyer in the criminal division of the U.S. Department of Justice. Now a law professor at Wayne State University, Henning adds, "When you get down a couple of levels into management, that‚s a substantial change and one that rarely happens".
Tenet Looks for Way to Cure Itself‚ Corporate Counsel October 19, 2006

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Moving headquarters from California to Dallas

 Tenet;s headquarters had been located in Santa Barbara in California when most of its operating staff were in Dallas. This had been purely to please Barbakow and other senior managers who lived in California. It was needlessly expensive and had been criticized. Fetter moved it to Dallas.

For the first time, Tenet Healthcare Corp. is acknowledging that it may make sense to close the company's Santa Barbara, Calif., headquarters and consolidate operations at another corporate office.
Tenet declined to release the memo, but Tenet spokesman Steven Campanini confirmed that Fetter's memo noted that the Santa Barbara location was chosen largely for the convenience of the company's previous management team, led by former Chairman and CEO Jeffrey Barbakow.
Shrinking Tenet may say goodbye to Santa Barbara Modern Healthcare's Daily Dose Mar. 25, 2004

Bowing to shareholder pressure, Tenet Healthcare Corp. is expected to announce today that it is moving its headquarters to Dallas from Santa Barbara in the next year.
Shareholders have complained about the cost of running Tenet's corporate headquarters. Among other things, the company needed to own several jets to transport executives to meetings in Dallas, where Tenet houses its 750-employee business operations unit.
Tenet to Move Its Headquarters to Dallas LA Times May 6, 2004

On Monday, he (Fetter) and a team of executives make their official move from Santa Barbara, Calif., to the 16th floor of Tenet's Noel Road office building in Dallas.
Tenet faces tough road to recovery. CEO knows his hands are full as hospital chain moves to Dallas The Dallas Morning News January 1, 2005

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Changing accountants

In the majority of the major fraud scandals it has been apparent that accountants at the least cast a blind eye to what was happening, even though they could not be convicted. At the worst some lent assistance and even participated. They tried to find scapegoats when it was exposed. The companies typically change accountants after a fraud scandal. It is worth noting that Tenet's new chairman Kangas comes from Deloitte & Touche.

Tenet Healthcare Corp., Dallas, said it is replacing KPMG as its independent auditor with Deloitte & Touche, effective after the audit of Tenet's 2006 financial statements. KPMG and its predecessors have conducted independent audits for Tenet and its main predecessor company, National Medical Enterprises, since at least fiscal 1994, according to securities filings. At deadline, KPMG had not responded to a request for comment. Last January, Tenet was required to restate financial results for fiscal 2000-03 because of incorrect accounting for managed-care contractual allowances. Meanwhile, in March 2006, the Securities and Exchange Commission charged three KPMG accountants with altering audit working papers after questions were raised about Tenet's Medicare outlier payments.
Tenet dumps longtime auditor KPMG Modern Healthcare's Daily Dose January 10, 2007

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 Marketing a new image

Tenet from its earlier days has been concerned with its image and credibility. As with HCA marketing has been a key to its success. Every member of then NME's staff was expected to make phone calls to market the company every day. In 1991 it saw what happened as an image problem related to sensationalism by the press. Senior staff rushed to PR firms instead of to its hospitals. These people seemed to believe their own marketing over the evidence from their own reports. In both scandals senior staff did not understand what they had done wrong.

The question that must now be asked is whether Tenet has made real changes or is it once again depending on marketing to rebuild its image and restore its fortunes. Is this really about caring for patients or is it about giving the impression that it is caring for patients so that the company can recover and make more money out of them.

No one can deny that Tenet has made very radical changes but the changes involve people who are lawyers, accountants, managers and others who have a wealth of corporate experience outside health care. Those doctors involved are those with credibility in the marketplace and with experience there. The primary goal is marketplace recovery, debt repayment, securing investment, growth and corporate success for shareholders. Their goal is to make the market work. If ensuring that care is seen to be good is essential for this then it will see to it that it is "seen to be". We should not doubt the intention. As we have seen repeatedly with Tenet/NME, in aged care and with the JCAHO there can be a huge difference from being "seen to be good" and actually providing good health care.

If as Barlett and Steele, myself and others have pointed out, the market is the real problem, then the harder they try to implement market practices and make them work, then the stronger the adverse forces, and the less likely it is that good care will be provided and that the system will function effectively.

Robert Kuttner has summed up a key problem in market thinking; the argument that if anything is wrong it "must be insufficiently market like". As he points out "This is a no-fail system for guaranteeing that theory trumps evidence." and "It does not occur that the theory mis-specifies human behaviour." This is what has happened in health and aged care.

Nothing that Tenet has done suggests that it thinks any differently about providing care. It is remaking itself as a successful business in the market. Its institutional investors will not allow it to do anything else. The argument is that failure is built into its efforts if success is defined in terms of care rather than profitability.

We should remember that Tenet in both of its scandals has done no more than believe in market practices and market management. Its strategies and practices are standard market practices. Like most market practices they were inappropriate for the sector but Tenet was blind to this.

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Mea culpas

 In this scandal a positive image was important for the public, for politicians and in order to secure a settlement. Given the glaringly apparent things that had happened they had no choice but to make some admissions. The market of course were not interested in any of this. They were watching for signs that Tenet was doing something to recover. They wanted to be the first in there to buy shares and then make a killing when Tenet soared back to its former glory. For them it was an opportunity.

The new chief executive of Tenet Healthcare Inc. acknowledged Tuesday that "something had gone very wrong" at the company, but said Tenet's troubles were caused by its former executives, not the company's hospitals.

Speaking to financial analysts after Tenet released disappointing third-quarter earnings, Trevor Fetter said that in recent years, the company "confused what is legal for what is right," and was arrogant in its dealings with regulators, unions and insurers.
Tenet CEO admits troubles Associated Press November 11, 2003

"Some people have said that in the past, Tenet was an arrogant corporation and often acted with disdain toward those who had a dispute with it,'' Fetter said. ``This is true -- not of our hospitals, but of the corporation -- and now the corporation is paying the price for that.''``
It's like the adage of an alcoholic having to admit to having a problem before he can fix it,'' Dirnagl said, noting that Fetter needs to follow through on his comments.
Tenet CEO Says He Wants to Set New Course The New York Times November 11, 2003

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 Claims of a new direction

As in the period 1991 to 1994 Tenet has insisted that it is a new company and that it has changed completely. Senior staff have been publicly recognized for their efforts to do so by the business community. As we now know they did not do so last time even though Barbakow was similarly praised and recognized for his efforts in saving Tenet's predecessor NME. The business community has certainly demonstrated its support for Tenet's survival.

They may in fact truly believe that this is so, but can that be so while it remains a company that is above all else driven by its desire to reform itself as a corporate giant in this dysfunctional marketplace. The market praises and rewards those who do what it admires.

Can we afford to believe them in the face of what we know about how the market works and its history?.

Many of Tenets claims to reform are scattered through these web pages. Here are two. The first made in 2004 looks decidedly shaky given what has happened since.

Tenet Healthcare Corp. Chief Executive Trevor Fetter on Tuesday sought to dispel any idea that the nation's second-largest hospital chain faced a liquidity crunch and said its financial problems could be repaired.
Tenet's Problems Fixable, CEO Says LA Times March 17, 2004

But Fetter told investors in March that the organization is radically different now and being run with fresh leadership while trying to correct its problems.
Troubled times for Tenet: Company's future in doubt : The nation's second largest hospital chain is in deep debt and deep trouble. Will it survive? And will physicians get hurt if it doesn't? AMNews April 19, 2004.

Tenet Healthcare Corporation (NYSE: THC) announced today that its chief financial officer, Biggs C. Porter, has been named among the "100 Most Influential People in Finance" by Treasury & Risk magazine, a trade publication for senior financial executives. Porter is recognized in the "The Financial C-Suite; the Keepers of the Fiduciary Trust" category of the list, along with 16 other CFOs. Porter was recognized last year in the strategic treasurers and controllers category.
The magazine's editorial team selected the honorees based on recommendations made by executives throughout the financial community.
 Tenet's CFO Honored Among Treasury & Risk Magazine's 100 Most Influential People in Finance Press release June 4, 2007 Tenet Healthcare's web site

Tenet Healthcare Corporation (NYSE: THC) announced today that its non-executive board chairman, Edward Kangas, has been recognized as a 2007 Outstanding Director by the Outstanding Directors Exchange (ODX). The annual award honors corporate board members who have been recognized by their peers for making a courageous or valuable contribution to the companies on whose boards they serve. Recipients are selected based on eight criteria:
  • Has consistently made strong contributions to corporate boards
  • Has been a key player during important periods in a company's growth or transition
  • Has a deep interest in the company's business; demonstrates business savvy
  • Devotes time to the job, both inside and outside the boardroom
  • Is compatible but forthright; speaks up to challenge management's assumptions
  • Demonstrates judgment and discretion that the chief executive officer trusts and respects
  • Is admired by fellow directors for courage, integrity and consensus-building skills
  • Is clearly aligned with interest of shareholders

"Ed has been instrumental in helping Tenet resolve its many issues over the previous several years," said Trevor Fetter, Tenet's president and chief executive officer. "In his four years as chairman, Ed has recruited a sophisticated and active board, driven the company to outstanding corporate governance and held management accountable for measurable progress against its challenges. He is very well-deserving of this honor."
Tenet's Chairman Honored Among 10 Outstanding Directors for 2007 Press release June 15, 2007 Tenet Healthcare's web site

Tenet's future depends on persuading doctors and patients that the care provided is excellent and it has devoted a great deal of effort to this. It has enrolled its hospitals in a number of quality projects and its hospitals have won a number of awards. It has marketed these energetically. There are two issues here. Firstly are these primary business and managerial endeavours. How dependent are they on the corporations and who pays for what they do? Are they government bodies appointed or influenced by government. In other words are they like the accreditation by the JCAHO and not worth the paper on which they are written. One can only speculate about any deals with insurers for instance. What role did other bodies in which Tenet has a major say (e.g. hospital groups) have in the awards.

The second issue is the intent in seeking these awards. Are the awards a true reflection of the overall care provided in Tenet's hospitals or have they been specifically targeted and sought because of their market value. Were the criteria known and did the hospitals divert their resources to meeting this particular set of criteria rather than attending to the overall standards of care. It is seldom necessary to be so critical or so distrustful but in this marketplace and with Tenet it is essential.

As of June 1, 16 Tenet hospitals across the country have been recognized as "Blue Distinction Centers" for cardiac care, bariatric surgery or transplants by Blue Cross and Blue Shield.

The distinction centers are selected through an evaluation of clinical data that provides insight into the facility's structures, processes and outcomes of care.
16 Tenet Hospitals Recognized as "Blue Distinction Centers" Press release June 1, 2007

Tenet Healthcare Corporation (NYSE: THC) announced today that six of its Texas hospitals have received Texas Health Care Quality Improvement Awards from TMF Health Quality Institute, the Medicare Quality Improvement Organization for Texas. TMF established the award program in partnership with Texas Hospital Association, Texas Medical Association, Texas Organization of Rural & Community Hospitals and Texas Osteopathic Medical Association.

The Texas Health Care Quality Improvement Award honors Texas hospitals that are performing quality initiatives aimed at improving outcomes in patient care by recognizing those hospitals that have improved their initial baseline performance on specific national quality measures.

The awards identify hospitals that have improved care related to acute myocardial infarction (heart attack), heart failure, and pneumonia. These clinical areas are designated as national health care priorities by the Centers for Medicare & Medicaid Services (CMS) and the Joint Commission, the nation's predominant independent, non-profit, standards-setting and accrediting body in health care. Out of more than 390 eligible Texas hospitals three Tenet hospitals were among a group of 63 facilities that were presented with the highest award possible, the Award of Excellence, for achieving or maintaining a performance score between 90 and 100 percent on the appropriate care measures.
Tenet Hospitals in Texas Recognized for Quality of Care June 4, 2007 Tenet Healthcare's web site

Tenet Healthcare Corporation (NYSE: THC) announced today that Dr. Jennifer Daley, its chief medical officer, has been named one of five inaugural recipients of the Leadership Excellence Award, presented by the Harvard Business Review and the Stockdale Center for Ethical Leadership at the U.S. Naval Academy.

The award was created to recognize top executives at U.S. companies who consistently exemplify a commitment to personal integrity, fellow employees and business success.
Over the past four years, Tenet hospitals have gained increasing recognition for excellence from a number of third-party evaluators, including major insurers and regulatory bodies. An analysis of the latest data publicly reported by the federal Centers for Medicare and Medicaid Services on its Hospital Compare web site ranks Tenet first among all investor-owned hospital companies on key quality metrics and well above the average for all U.S. hospitals.
Tenet's Chief Medical Officer Receives National Recognition Press release June 19, 2007 Tenet Healthcare's web site

They all seem to be focused on the idea that Tenet with only half its hospitals is going to get back into being a successful company with the income to pay off its debts and then once again support another growth bonanza. An experienced analysts sees it differently.

But Sheryl Skolnick, an analyst with Fulcrum Global Partners in New York, said Wall Street seems to have a problem understanding that hospitals are not necessarily growth businesses, and that misunderstanding puts undue pressure on companies like Tenet.

"The hospitals simply can't generate the year-after-year earnings that Wall Street wants," she said. "I think Wall Street has to realize that these are real estate based, highly regulated businesses."
Troubled times for Tenet: Company's future in doubt : The nation's second largest hospital chain is in deep debt and deep trouble. Will it survive? And will physicians get hurt if it doesn't? AMNews April 19, 2004

In July 2007 Tenet is already looking to buy claiming this will increase its leverage. It has bought a 41 bed acute care money losing hospital in South Carolina where it already owns most other hospitals. This is not a viable size for an acute hospital as the costs of the infrastructure needed to supply good acute care cannot be covered by this number of patients.

This purchase eliminates competition and increases leverage but one wonders how long before the hospital is closed and the services moved to other hospitals. Can Tenet's assurances about keeping the hospital open and increasing its services be believed this time? How many of Tenet's other policies remain unchanged.

Tenet Healthcare Corp. closed the deal to purchase Coastal Carolina Medical Center early Sunday morning in a $35 million transaction that places all major health care facilities in southern Beaufort and Jasper counties under the same ownership
Tenet intends to continue operating Coastal Carolina as a full-service community hospital and to expand services and staff, officials said.
Coastal Carolina is the first hospital acquisition by Tenet in nearly five years.
With the Hardeeville hospital, the company will have its hands full. According to documents submitted to the state, Coastal is projected to lose more than $7 million pre-tax in 2007 and 2008.
Hardeeville hospital has new owner The Island Packet Online July 2, 2007

"Tenet's growth strategy includes leveraging the strength of our current hospitals to grow in key markets where we already operate," said Trevor Fetter, Dallas-based Tenet's president and CEO. "This acquisition ... fits that strategy perfectly."
Now the challenge for Tenet is to grow. It lost money every year between 2003 and 2006, including a net loss of $803 million last year.
Tenet calls S.C. hospital buy a big stepThe Dallas Morning News July 2, 2007

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Where now?

Market theory claims that the market is self correcting. Poor operators will be weeded out and go under. In a pure market of multiple operators that may be so, but not when the conditions necessary for a market to work do not exist. Health and aged care are two examples of the latter. This is why it is often the most successful companies that have been the most dysfunctional. Market theory also takes no account of our humanity, the nature of the establishment, the power structures of societies and the nature of politics and political patronage.

By any standards this company has been dysfunctional over a period of at least 20 years. Instead of serving the public it has misused them. Market theory says that it should go under. Left alone it would have done so. Most of us would I feel sure like to see the last of it. Powerful forces have twice come to its rescue. A smaller company with less influence would have gone rapidly. It would also have been barred from Medicare ensuring its demise.

Tenet's financial state has been and still is precarious. Given its large debts, its reduced number of hospitals, and its tatty reputation among health professionals and the community you would expect it now to die an agonized death and perhaps it still will but this seems unlikely.

The way the financiers and much of the political establishment has responded and come to support the company indicates that they have no intention of letting this company go under and will support it whatever it costs them. The reason's for this are far from clear. It may be that the financiers already have such a big investment in the company that the cost of walking away is too high. Perhaps those with big holdings hope to make a killing when the company rises to its previous glory and are intent on making this happen. One feels that there must be more to it than this - but what?

Even if Tenet goes under we should remember that it, like Columbia/HCA has simply been a leader in the application of market principles. If it goes then some other company will rise up to fill its shoes and drive aggressive market practices. The essential problem is not Tenet. It is the market in misfortune. Tenet is simply a symptom of the deeper malaise in the system.

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August 2007

Tenet's losses continue but I suspect the big banks will still support it although they may fire Fetter and put in someone else.

While the ailing hospital chain is bleeding far less than it once did, the company - hit by declining admissions and rising bad debts from the uninsured - continues to fall short of even dismal expectations. Setbacks at USC University Hospital, which is fighting to leave the Tenet umbrella, and ongoing challenges in the company's key Florida market continue to cause serious pain.
Throughout 2007, Tenet now expects to generate just $675 to $725 million in earnings before interest, taxes, depreciation and amortization. Until now, the company had repeatedly promised to deliver full-year EBITDA of $700 million to $800 million instead.

Even if Tenet hits the midpoint of its newly lowered range, experts wonder how the debt-laden hospital company can satisfy its hefty interest payments and still keep up its generous capital expenditure program - funding improvements needed to boost admissions - going forward.

"It's highly unlikely that Tenet can continue forward with the cap-ex program that the company discussed at its investor day" earlier this summer, says Peter Young, a business consultant at HealthCare Strategic Issues. "When you look at all of the operating indicators - the core things that make up the hospital business - they're moving in the wrong direction."
By now, however, Tenet investors have clearly lost their patience. After waiting on an elusive turnaround for nearly five years, they have sent the company's stock to its lowest levels in decades.
Tenet shares tumbled another 5.1% to $4.69 following the company's latest miserable update. The stock, once a $50 highflier, now qualifies as a "penny stock" - fetching less than $5 a share - that cannot be purchased by some big-name funds.

Perhaps even more worrisome, Tenet's bonds have been losing ground as well. Bonds rank as a relatively safe investment unless a company faces a liquidity crisis and possible bankruptcy, a fate that Tenet has so far managed to escape.
Bad Debt Trips Tenet : Tenet can't stop the pain The (Melissa Davis) August 7, 2007

August 2008

Has Sulzbach Finally been trapped?

In an interesting development it seems likely that Sulzbach, the lawyer who successfully engineered Tenet/NME's unexpected survival in 1994 and became Tenet's compliance officer during the period of the second fraud and patient care scandal has finally been trapped. Tenet's North Ridge hospital in Florida entered into contracts with doctors which were decidedly dubious. At this time Tenet was still operating under a Corporate Integrity Agreement. It was required to report any infringement of the Stark anti-kickback laws.

A whistle blower Qui Tam lawsuit was initiated in 1997 and was vigorously defended under Sulzbachs direction. Sulzbach had not disclosed incriminating documents showing that she knew about the contracts, knew they were illegal and yet took no action to stop them. She claimed that they were privileged. She had continued under the integrity agreement to certify that all contracts were in compliance. Tenet settled the lawsuit for $22.5 million in 2004. Under the terms of the settlement Tenet was protected from further litigation but its staff were not.

After the US $920 million settlement in 2006 Tenet was required to produce documents. Among these were reports to Sulzbach indicating that the contracts were in fact illegal and showing that she knew this and had not ensured that they were cancelled - or reported this as required by the CIA. These would have had a major impact on the 2004 case.

The prosecutors who had very probably been gunning for Sulzbach for some time pounced.. In late 2007 an action was commenced against her by government claiming treble damages. It should be an interesting exercise. The statement of claim makes a very convincing case and it will be interesting if she can wriggle out of this one. (see United Statesof America vs Christi R. Sulzbach Case Nu 07-61329 Souhern District of Florida)

Yesterday, the Department of Justice brought an action against Christi Sulzbach, Tenet Healthcare Corporation’s former general counsel, under the civil False Claims Act (31 U.S.C. §§ 3729 et seq.). The suit alleges that Sulzbach submitted false certifications to the US Department of Health and Human Services in connection with 1997 and 1998 annual reports filed under Tenet’s corporate integrity agreement, which the government contends allowed Tenet to collect approximately $18 million in reimbursement from the Medicare program that Tenet was not legally entitled to receive.
The government’s allegations focus on Sulzbach’s certifications that Tenet was in material compliance with all federal program legal requirements. The government contends that Sulzbach made these certifications despite knowing that several physician employment arrangements at North Ridge Medical Center, a Tenet-owned Florida hospital, were illegal under the federal physician self-referral law, known as the Stark law (42 U.S.C. § 1395nn). The Stark law prohibits a hospital from billing for referrals from a physician with whom the hospital has a financial relationship unless that relationship strictly complies with an exception.
The documents produced under the 2006 settlement included certain 1997 memos drafted by Tenet’s outside legal counsel, McDermott, Will & Emery, analyzing the North Ridge employment arrangements. Tenet retained outside counsel after a Tenet executive expressed concern that certain physician arrangements at North Ridge violated the Stark law. According to the Complaint, McDermott’s memos concluded that the North Ridge arrangements (i) “[were] in excess of the fair market value for services rendered,” (ii) “[were] tied to the volume or value of . . . referrals” and (iii) “[did] not appear to be commercially reasonable. . . .” As noted by the Complaint, the arrangements would have failed to meet a Stark exception if these assertions were true.
US Sues Tenet Healthcare's Former General Counsel Under the False Claims Act For Knowledge of Stark Violations O'Melveny & Myers LLP September 19, 2007


Complaint filed against Tenet's former general counsel South Florida Business Journal September 19, 2007

US v Christi R Sulzbach Complaint September 18, 2007


Federal Action on Tenet's Ex-Lawyer Seen As Warning Signal to Compliance Officers Health Care Fraud Report Volume: 11 Number: 21 October 24, 2007

From the Sideline to the Front Line: United States v. Sulzbach November 28,2007

Tenet: Chief Compliance and Legal Counsel - Caught in the Cross-Hairs of the False Claims Act Dec. 6, 2007

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This page created July 2007 by
Michael Wynne
Updated Aug 2007, August 2008