This web page describes the way Tenet raised
prices many times what it actually cost to provide them and often
more than double the prices charged by competitors. An activist
eventually rallied the uninsured and often unemployed Latinos who
were charged inflated prices and then pursued aggressively for
payment by Tenet. They fought back eventually gouging Tenet's
reputation and its credibility. The nursing unions initiated a series
of studies looking at available pricing information. They published
the results and presented at several inquiries into Tenet's practices
shredding the company's credibility and savaging share prices
further. The extent of the price gouging and its impact on citizens
is illustrated by a number of extracts from press reports.
The nurses found that Tenet targeted orthopaedic surgery,
particularly spinal surgery, most of which was covered by workman's
compensation which paid 50% more than competitors. These areas and
workmen's compensation had been a target of Tenet's complex care
strategy and its price gouging. Monitoring processes at workers
compensation were absent and it was impossible to tell the extent to
which fraud, outlier payments or needless surgery had occurred. The
figures needed to assess this were not available. Tenet strongly
denied these assertions.
Tenet's conduct is a prime example of the failure of market forces to
either contain costs or to maintain quality. In fact the company
thrived by compromising both. It was the community and the nurses,
not the market, who addressed the problem
Introduction
Price Gouging
the Uninsured
Price
Increases in Tenet Hospitals
Other
Investigations
Workman's
Compensation and Orthopaedic procedures
Community groups concerned at the
consequences of not for profit takeovers, nurses worried about their
patients, and groups helping the uninsured have all been acutely
aware of the problems in Tenet. They were not part of the
establishment. They had little credibility and so no obvious impact
on the share market or public perceptions. One would reasonably
expect analysts, and regulators dealing with a sector so mired in
controversy and fraud to be looking for red flags and to respond
rapidly.
We should understand they are all part of an establishment wedded to
market ideology. They can be expected to use labelling strategies to
discount information which is challenging. In almost every instance
it has required enormous effort by whistleblowers and community
groups to expose aberrant practices. It usually requires something
startling to trigger it. In this instance the revelation that Tenet's
profits were manufactured by manipulating the system and operating on
people who did not need surgery.
The uninsured were among the first to suffer from Tenet's high prices
and band together to respond. America's Medicare system only pays for
the elderly and vast numbers of citizens must pay for care
themselves. Large medical bills are one of the major causes of
bankruptcy.
A Hispanic group, Consejo de Latinos Unidos
initaited and organised by K.B. Forbes took up the plight of the
uninsured, particularly the poor often unemployed Latino's who were
the most disadvantaged. He went to the courts to find out who Tenet
were suing, contacted them and organised the protests.
Tenet had ramped up its prices for the uninsured who were asked to
pay many times the charges which HMO's paid. It then pursued these
patients for payment very aggressively placing bonds on their houses
and ruining them. Probably the main benefit of this to Tenet and the
reason for the exercise was the state Medicaid system's DHS payments.
These compensated hospitals for the care they provided to these
citizens. The payments used a formula based on the hospitals
charges.
Forbes made every effort to publicise the issue and expose Tenet's
practices. He assisted the Latino's to mount a series of court
actions alleging price gouging against Tenet. He encouraged the
Latino groups to band together and act in the community to block
Tenet's purchases and Mergers with not for profit groups. The policy
backfired badly when the other problems in Tenet emerged in October
2002. Forbes was able to ride on the back of the very public anger.
Tenet soon settled all the actions. Its very publicly announced a new
policy including an undertaking to charge disadvantaged underinsured
patients the HMO rates. It promised not to threaten patients homes in
pursuing payments. Its credibility had been badly dented.
In addition to the Latino's actions, groups of seniors have taken to
the courts accusing Tenet of predatory pricing. Another lawsuit by a
group of citizens claims Tenet reneged on a not for profit takeover
agreement that it would charge fair prices.
The full extent of the problems and their glaringly avaricious nature
are best appreciated by reading the press reports.
"We are representing the people who have no voice -- the humble working poor who have been manipulated and abused."
In California, says Forbes, Consejo brought the lawsuits against Tenet as a result of information gathered over nearly a year. Forbes says Consejo investigated the cases of 127 patients in 53 California hospitals.
According to Forbes, Tenet was billing uninsured patients as much as seven times more than those with insurance. In addition, Forbes alleges that Tenet used heavy-handed collection tactics, refusing to negotiate lower payments, despite some patients reportedly offering thousands of dollars in cash to settle their accounts.
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All of the suits, says Forbes, allege that Tenet uses a two-tier billing scheme that greatly inflates medical costs for uninsured patients -- mostly Hispanics. Forbes claims the "bad debt" was then used by Tenet to secure greater reimbursements through the Medicaid Disproportionate Share Hospital (DSH) Payment Program. DSH provides state and federal funds to hospitals for taking on a greater load of indigent patients.
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Forbes says Consejo's mission is about seeking justice for the uninsured. The geographic scope of the group, he adds, also is about to expand as further investigations have led Consejo to look outside of California.
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He adds, "We're piloting a program and launching it next month, targeting the largest hospital systems and health care organizations that have sued (patients) over failure to pay," says Forbes about the Hospital Victims Project.
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The plan in Texas, he says, is to monitor and survey filings by Tenet and other large hospital systems against its patients. "We will survey and compile the data. We will then look at individual cases that warrant it."
He adds, "Once we survey and interview these people, we will secure legal assistance. Health care companies have to prove that their charging practices are fair and equitable." Baptist suitor in sights of litigious Calif. Group :: Tenet accused of overcharging Hispanics American City Business Journals Inc. June 7, 2002
"They are as aggressive in collections as they are in pricing," said K.B. Forbes, Tenet Under Closer Exam :: Pricing policy may have resulted in excessive Medicaid payments, some analysts say. LA Times November 11, 2002
That scrutiny includes a lawsuit filed by Hispanic patients in Orange County (Calif.) Superior Court that alleges Tenet gouged uninsured patients and then failed to offer payment plans in a scheme to increase its disproportionate-share payments. Stormy weather :: Echoes of Columbia/HCA heard as Tenet overhauls management amid scrutiny of outlier payments and investor protests Modern Healthcare November 11 2002
Tenet Healthcare Corp., Santa Barbara, Calif., announced new billing and collection procedures for self-pay patients, largely conceding the claims of a Latino advocacy group that had accused Tenet of price-gouging uninsured patients. K.B. Forbes, executive director of the group, Consejo de Latinos Unidos, Los Angeles, hailed Tenet's "Compact with Uninsured Patients" as "everything that we wanted." Tenet also said it has settled a group of lawsuits, - - -
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Under Tenet's new policy, the hospital chain will no longer pursue collections lawsuits against patients who are unemployed or whose only significant asset is their home.- - - - - offer self-pay patients the same rates received from managed-care plans (subject to regulatory approval). Yielding to group, Tenet revises self-pay policy Modern Healthcare January 28, 2003
At a meeting this year with top brass at Tenet Healthcare Corp., the country's second-largest hospital chain, K.B. Forbes pulled out some snapshots. One showed a middle-age Hispanic woman standing in front of a tumbledown mobile home. "You have a lien on this property," Mr. Forbes told a startled executive. "You got it when this woman couldn't pay her hospital bill." Using hardball tactics such as these, Mr. Forbes, a 36-year-old political maverick, has emerged as a rare breed: a successful crusader for the uninsured.
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Shortly after that January meeting, Tenet made a dramatic reversal.
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All the plaintiffs agreed not to settle individually, since Mr. Forbes says the goal wasn't to win a financial windfall, but to seek "fundamental policy change" at Tenet. Mr. Forbes goes national; A major shift at Tenet The Wall Street Journal June 19, 2003
A senior citizens group also is suing Tenet for alleged price gouging. Tenet reveals new U.S. probe :: Medicare payments at issue, hospital says San Francisco Chronicle January 3, 2003
- - - - this time a lawsuit in South Carolina. A class-action lawsuit on behalf of patients was filed yesterday against Tenet's 276-bed Piedmont Healthcare System, Rock Hill, S.C.
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The lawsuit quotes a 1996 amendment to the sales agreement that requires Piedmont to price its services "at reasonable competitive levels" compared with nine other hospitals in the region. The lawsuit contends that as of Jan. 1, 1997, Piedmont's prices were the highest among the hospitals and that Piedmont failed to notify York County of the fact. Tenet S.C. hospital sued over charges Modern Healthcare June 20, 2003
Attorneys for a former patient said patients at Piedmont Healthcare System were billed fees as much as 90% higher than those of other area hospitals. Suit claims over billing LA Times June 21, 2003
Starting in 1999 Tenet steadily increased its
prices so that by 2002 it was charging much more than its
competitors, sometimes more than double. It marked up it prices for
drugs to 8 times costs compared with 4 times by other hospitals.
Tenet and corporate advocates emphasised that almost no one paid
these high prices, but this is not true. Their clear intention as
publicly stated on multiple occasions after 1999 was to increase
profits by charging more. Its enormous success shows that individuals
and the whole system was ultimately paying more - much more. This was
not negotiated and was unrelated to the quality of services provided.
Instead there were complaints of poor care and needless very
expensive and risky surgery.
While HMO's and Medicare still negotiated much lower prices with HMOs
this extreme pricing schedule must have influenced the negotiations.
Their main benefit was in increasing outlier, stop-loss and a similar
payment to Medicare, HMO's and Workers Compensation. But not all
payments were made in these ways. The uninsured and people insuring
independently paid full inflated rates. Patients who were covered by
HMO's who did not have contracts with Tenet and who were admitted to
a Tenet hospital as an emergency were billed for the large extra
amounts and had to pay this themselves.
Many of the reports describing the extent of price gouging came from
studies conducted for the nursing unions. Instead of addressing their
figures Tenet responded by attacking the messenger claiming that the
unions were self serving which is certainly true but this does not
invalidate the unchallenged results. In the end Tenet had to settle
with the unions increasing their costs and pushing share prices down
further. Tenet's earlier aggressive tactics were not forgotten by the
unions and Tenet now had to get them off its back.
Tenet's headquarters and a large number of its hospitals are in
California and much of the action occurred in this state.
The extent of the overcharging is revealed in extracts from some of
the reports
The analysis by the nurses (California Nurses Association) suggests that Tenet hospitals were much more aggressive than other hospitals in charging for drugs. Hospitals nationwide marked up their costs by about four times, on average, while Tenet hospitals charged more than eight times their costs, according to the analysis.
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(This) is "a principal driver in their overall charges," the list prices that resulted in the higher Medicare payments, said Don DeMoro, the executive director of the Institute for Health and Socio-Economic Policy, the group that conducted the study. Nurses' Association Says in Study that Big Hospital Chain Overcharges Patients for Drugs New York Times November 24, 2002
Separately, the California Nurses Assn. on Monday released a report claiming that Tenet inflates drug charges at its hospitals by 736% above costs, or more than double the national average. Tenet's Medicare Loophole to Close Soon, Analyst Says Hospital firm received $763 million last year in outlier payments, which a report says the agency will clamp down on. LA Times November 26, 2002
In California, where Tenet owns 42 of the state's 450 hospitals, the hospital chain charges far more than rivals for identical medical procedures.
In 2000, for example, Tenet's California hospitals charged an average of $73,038 for pacemaker implants, 81 percent more than the $40,452 charged by non-Tenet hospitals, according to state government figures analyzed by the Service Employees International Union. Tracheostomies, at $569,672, were 69 percent higher at Tenet than in the rest of the state, where they average $336, 579. "Tenet is engaged in turbocharging," said Steve Askin, health care research coordinator for the union in Los Angeles.
"Tenet's gross charges in California average between six and seven times its actual cost of delivering care," said Askin. For every dollar Tenet hospitals billed, he said, their actual cost was about 16 cents, according to state records. California's non-Tenet hospitals had an actual cost of about 36 cents for every dollar billed.
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Tracheostomy charges increased 38 percent from 1999 to 2000 at Tenet hospitals, versus 13 percent at other California hospitals. Respiratory treatment with ventilator support increased 47 percent at Tenet facilities, compared with 22 percent at non-Tenet hospitals.
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"Many of the charges for various cases and DRGs (diagnostic-related groups) are double for what everyone else is charging. That's an enormous red flag."
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Redding Medical Center's average charge per in-patient day in 2001 was $15, 636. Mercy's average was $6,407 -- almost 60 percent lower.
Neither hospital actually collects those full charges, but, thanks to its higher markup, Tenet's Redding Medical Center makes out far better than its rival.
Redding Medical Center collected an average of $3,182 per in-patient day, while Mercy received $2,088. So the center's take for every day a patient spends in its hospital is 50 percent higher than that across town at Mercy.
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"Higher charges have been a part of our managed-care pricing strategy, particularly in California," said Tenet CEO Jeffrey Barbakow.
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An analysis of state data by the service employees union shows that Tenet's charges in Shasta outpace its rivals by big margins. For a coronary bypass with cardiac catheterization, Tenet's Redding Medical Center charged $228,793 in 2000 -- 184 percent more than the average $80,500 charged by the other four hospitals in Shasta County. ------------ Profiting from health care :: Hospital chain's steep prices blamed for raising costs for all San Francisco Chronicle November 14, 2002
The median charge at Tenet hospitals in California for cardiac valve and catherterization procedures is $221,399, while non-Tenet hospitals charge $104,520, according to state data analyzed by the Institute for Health and Socio-Economic Policy, a research group that works with the California Nurses Association.
A complicated case of pneumonia cost $30,500 on average in a Philadelphia Tenet hospital and $18,614 at non-Tenet hospitals, state data analyzed by the Service Employees International Union show. Tenet Healthcare under informal SEC probe USA TODAY November 18, 2002
In the 10 California counties where Tenet operates, its average charge for a hospital stay was $33,547, 63 percent more than at other state facilities, according to patient discharge data from the California Office of Statewide Health Planning and Development as analyzed by the Service Employees International Union.
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Between 1999 and 2000, Tenet's average charges in Contra Costa County, where it operates three hospitals, rose by 123 percent, while the other six hospitals in the county raised their average charges by 13 percent.
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In Riverside and Los Angeles counties, where Tenet operates about one out of every five hospitals, it raised charges two or three times as much as rivals. Tenet raises prices more quickly than competitors :: Union asks state to look at charges San Francisco Chronicle November 20, 2002
In 2000, for example, Tenet's California hospitals charged an average of $73,038 for pacemaker implants, 81 percent more than the $40,452 charged by non-Tenet hospitals, according to state government figures analyzed by the Service Employees International Union. Tenet reveals new U.S. probe :: Medicare payments at issue, hospital says San Francisco Chronicle January 3, 2003
Tenet Healthcare Corp., Santa Barbara, Calif., and HCA, Nashville, own 44 of the nation's 100 most expensive operating rooms, according to a report by the California Nurses Association and the Institute for Health and Socio-Economic Policy, Orinda, Calif. Other for-profit companies accounted for an additional 17 of the most-expensive ORs, meaning that for-profit companies owned 61 of the 100 most-expensive ORs, the report said. - - - The report was based on a comparison of federal Medicare cost reports for about 4,500 U.S. hospitals for fiscal 1999 and 2000. In addition, - - - - for-profit hospitals accounting for nine of the 10 ORs with the highest markups. Criminality in Managed Care AP Newswires May 23, 2003
Nine Texas hospitals were among the 100 most expensive hospitals in the country in a survey released Wednesday, and embattled Tenet Healthcare Corp. owns eight of them.
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The survey monitored all charges for inpatient and outpatient services and other financial categories, and found that the nation's 100 most expensive hospitals mark up their gross charges by an average of 525 percent over their costs. Tenet Healthcare owns eight of nine Texas Hospitals labeled most expensive The Dallas Morning News June 12, 2003
Nine of the 100 most expensive hospitals in the United States are in South Florida, and all but one are owned by Tenet Healthcare Inc., according to a study released on Wednesday by the California Nurses Association. - - - It found that Tenet owns 64 of the highest-cost hospitals, including those ranked 1-14 on the list.
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The report indicated that chain hospitals generally charge far more than independent hospitals and those run by nonprofit groups Tenet hospitals are priciest, study says South Florida Sun-Sentinel June 12, 2003
A study for the California Nurses Association said that investor-owned hospitals account for 82 of the top 101 acute-care hospitals as ranked by charge-to-cost ratio, including 64 hospitals operated by Tenet Healthcare Corp For-profits lead in charges exceeding costs: CNA Modern Healthcare June 11, 2003
A large number of other agencies including Medicare and Medicaid, the California Assembly Health Committee, California Department of Health Services, Workers Compensation, the California Public Employees Retirement System, and legal firms all focussed their investigations on Tenet's pricing. The press looked at publicly available information and spoke to people who had examined their bills. They told of the avalanche of bills.
But when Dresser, who used to price medical supplies for a living, got an itemized bill, he was stunned: The charges exceeded $50,000. A single coronary stent, a small tube inserted in a heart valve or artery, was listed at $12,000 -- about 10 times the actual cost to hospitals. Among other charges: $21 for one aspirin.
"The markup is too much," Dresser complained.
But by its own admission and public filings, Tenet pushed the envelope further than most. In the last year alone, company insiders say, Tenet hospitals raised their prices twice.
Although hospitals closely guard the retail rates for procedures and supplies, public records show how rapidly prices have been rising at some Tenet hospitals.
At the 384-bed Centinela hospital, for example, the retail charge per patient per day totaled $12,186 in the second quarter of this year. That was up 72% from the same quarter two years earlier, - - - - the average retail charge per patient per day rose 33% in that same two-year period, to $5,389
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Centinela's operating margin -- or the percent of revenue that is kept as income after expenses -- was 34% in the second quarter. That was 10 times the average for 436 for-profit and nonprofit California hospitals.
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His (patient) retail charges came to $57,833. About $23,000 was for medicine, which, Rosefsky's physician told him, was five times what it actually cost the hospital.
Then there were smaller charges: $250 for one drape sheet, $15 for a disposable glove. Tenet Under Closer Exam :: Pricing policy may have resulted in excessive Medicaid payments, some analysts say. LA Times November 11, 2002
Among hospital chains operating within California, Tenet Healthcare -- the nation's second-largest for-profit health system -- has the highest average charge for injuries and illnesses that most often bring elderly patients to hospitals, a recent Bee analysis of hospital financial data found. Legislators to eye billings by hospitals The Sacramento Bee December 5, 2002
A year ago I had cataract surgery performed in one of Tenet's hospitals, and when I asked for a statement I was shocked. I had two eye drops delivered before surgery, and the pharmacy bill was $2,223.90. I was awake at all times. They charged $134.90 for oxygen, which I never had. For a period of 15 minutes in the operating room, they charged $3,859. LETTERS :: Tenet Policies Continue Overpricing Cycle LA Times: December 22, 2002
The Californian Senate Industrial Relations
Committee held hearings into the possible abuse and misuse of the
Worker's compensation system by Tenet. The nursing unions in their
submission drew attention to the absence of any system for recording
and monitoring payments and the absence of any clinical monitoring,
contrasting it with Medicare. There was no way of determining whether
there had been overcharging or what they called "utilization
manipulation". They urged changes, and an urgent review.
They described the way in which Tenet targeted complex orthopaedic
procedures like spinal surgery, the large number which were Workman's
Compensation cases and the major complications of such surgery.
Workman's compensation paid nearly 50% more than competitors for
spinal procedures, They pointed to what had happened in Redding
hospital with Cardiac procedures and implied that the same may have
happened in orthopaedics. Tenet in its submission strongly disagreed
with the findings and criticised the methodology.
Separately on Wednesday, state Senate President Pro Tem John Burton (D-San Francisco) called for an investigation into allegations that Tenet overbilled for workers' compensation cases. Dissident Urges Tenet Management Change LA Times December 12, 2002
My testimony will focus on Tenet Hospitals and utilization manipulation. This is one of the three principal strategies Tenet Healthcare Corporation has employed to maximize profit by increasing revenues while cutting costs to the bone.
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Every dishonest provider knows that, any day, Medicare investigators might come calling. Yet, even though the Workers Compensation payment system is susceptible to outlier manipulation in the same manner as Tenet has admitted manipulating the Medicare outlier system, no such program exists in the Workers Comp. system.
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Inpatient hospitalization in Workers Compensation is primarily for orthopedic surgery. Fully one-third of inpatient hospitalizations in California paid for by Workers Comp are for just five diagnoses (DRG) related to spinal and back surgery. Orthopedic procedures as a whole &emdash; including spinal cases - account for more than 60% of all Comp. hospitalizations and more than two-thirds of Tenet Workers Comp hospitalizations in California. Both statewide and especially in the Los Angeles-Orange County area where Tenet’s Workers Compensation business is concentrated, orthopedic cases account for a larger percentage of Tenet than non- Tenet Workers Compensation cases. Since studies have shown that spinal surgery involves a very high rate of complications and failures, any system of care in which it holds such a predominant place should be especially watchful to ensure that patients are not being subjected to unnecessary or inappropriate treatment
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The second fact &emdash; the high rate of orthopedic surgery in the Workers Comp system &emdash; is of even greater concern, because patient safety as well as costs are at stake.
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But for spine-related admissions aggregated, Workers Comp pays an average of 50% more per admission. Tenet officials have proudly described to investors the ways in which they "aggressively worked to grow high acuity services," and the central role of orthopedics in that effort.
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Chief Operating Officer Thomas Mackey, and other senior officials specifically identified ‘orthopedics’ as central to Tenet’s strategy for increasing and sustaining double-digit quarterly earnings growth.
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Surely, we need to determine whether or not similar problems exist in the other key profit center, orthopedics.
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- - - - lend urgency to the need for California’s Workers Compensation Insurance system to conduct independent audits of Tenet hospitals in California Tenet Hospitals and Workers Compensation in California: Utilization Manipulation: Testimony presented to the Senate Industrial Relations Committee January 15, 2003 Tom Moore, Jr., Consultant on Health Policy and Programs Service Employees International Union
An analysis presented to the committee by an affiliate of the California Nurses Association is fatally flawed because of its reliance on gross charges and misleading comparisons between unlike facilities. Gross charges simply do not accurately reflect what hospitals actually receive for providing care to patients, and any attempt to make the case that they do is misleading. Tenet Offers Testimony at California Senate Committee Hearing Company Seeks Regulatory Change to Reduce Influence of Gross Charges From Tenet Healthcare web site January 15, 2003
