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The
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The Struggle to Survive
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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.
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 TheStreet.com (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.
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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 Street.com (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.
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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."
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"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 Thestreet.com (Melissa Davis) Jun 14, 2005
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 Street.com (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.
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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 http://www.smartmoney.com 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
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
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 Street.com 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
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.
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 Thestreet.com (Melissa Davis) Jun 14, 2005
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
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.
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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 Street.com (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, - - - .
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The Tenet hospitals had a combined occupancy rate of 53 percent, compared with 63 percent for all South Florida hospitals combined.
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"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.
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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
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.
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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
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.
2003
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 thestreet.com November 11, 2003
2004
"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.
2005
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."
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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.
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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.
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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.
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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.
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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 Street.com (Melissa Davis) August 23, 2005
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 Street.com (Melissa Davis) December 9, 2005
2006
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
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
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
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.
Tenet's poor performance continued through to 2006. The reports speak for themselves.
2003
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
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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.
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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.
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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 thestreet.com November 11, 2003
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.
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"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.
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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.
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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.
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"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 thestreet.com 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 www.fool.com 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
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.
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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 Thestreet.com (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
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 street.com (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.
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"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 street.com 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 http://wsj.com/try30/morningstar 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.
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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
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.
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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.
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At the same time, the rating agency changed its outlook on Tenet to stable from negative, citing the hospital operator's improved financial performance.
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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
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.
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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.
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"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.
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"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."
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"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."
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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 TheStreet.com (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 TheStreet.com (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.
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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.
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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 Street.com (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
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.
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.
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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 TheStreet.com (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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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 TheStreet.com (Melissa Davis) Jan 27, 2004
Those in California had another problem. Government had introduced new costly earthquake upgrade requirements as well as staffing requirements.
2004
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.
2004
Correspondence obtained by TheStreet.com 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.
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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.
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"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 Street.com (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.
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