Tenet Reveals Informal SEC ProbeNov 18, 2002 | AP
Tenet Healthcare Corp., already under federal scrutiny for Medicare payments, notified shareholders Monday that the Securities and Exchange Commission has opened an informal file on the hospital operator.
Tenet said that company officials met last week with SEC representatives to discuss special Medicare payments known as outliers as well as the unusually high amount of trading in Tenet stock over the past few weeks.
"We don't know whether the SEC intends to launch a formal investigation," Chairman and Chief Executive Jeffrey C. Barbakow said in an open letter to shareholders. "We will work closely and cooperate with them," he said.
Santa Barbara-based Tenet's troubles began to emerge a few weeks ago when management acknowledged that its unusually large outlier billings were attributable to aggressive pricing tactics that it intended to temper in the future.
The FBI is also investigating allegations that two doctors at a hospital owned by Tenet performed unnecessary surgeries.
In addition to the billings disclosures, Tenet on Nov. 7 reported the departure of its former chief operating officer, Thomas Mackey, and its chief financial officer, David Dennis. Mr. Barbakow said Monday that some people have wondered whether the departures were a signal of some deeper, undisclosed problem. "The answer is no," he said.
Nevertheless, the spate of recent news has crushed Tenet's shares, which closed at $16.33 on Friday on the New York Stock Exchange, off 69 percent since hitting a 52-week high of $52.50 on Oct. 3.
In midday trading Monday on the Big Board, Tenet were up $1.63, or 10 percent, at $17.96.
"The speed and extent of the devastation to Tenet's stock value and its reputation in less than three weeks has been shocking," Barbakow said in his letter to shareholders, and he attempted to "clarify the facts" that led to the recent slide.
First, he said, the pricing strategies that resulted in larger outlier payments to some hospitals applied equally to all payor groups, and "we have no reason to believe that the rules and regulations governing Medicare were not followed."
Second, he said, allegations against two physicians who practice at a Tenet hospital in Redding, Calif., have not been proven. Mr. Barbakow noted that the physicians aren't employees of the hospital, but rather independent practitioners who bill for their own services.
The federal Department of Health and Human Services is conducting an audit of Tenet's outlier payments, a process that may take several months. Tenet also expects additional regulatory scrutiny of its affairs, Mr. Barbakow said.
The company's new management team is reviewing Tenet's pricing strategies.
"Tenet's board of directors and management are committed to resolving promptly the issues that have impacted our company over the past three weeks," he said.