Tenet Says It Will Restate Earnings

Tenet Healthcare Corp. said Thursday that an internal probe found accounting irregularities that would require it to restate earnings for 2000 through 2004.

But analysts said news that the problems were limited to three of the company’s California hospitals was positive for investors, calling it a sign that the troubled hospital chain had put another problem behind it.

Tenet’s shares increased 4 cents to $7.76.

The restatement is Tenet’s latest effort to clear up legal and financial liabilities that have hampered its ability to post a profit for 11 quarters.

The company said it would restate financial results between 2000 and 2003 to correct the way it accounted for some insurance claims at the hospitals, which it would not identify. The Dallas-based company, formerly headquartered in Santa Barbara, operates 69 hospitals, including 18 in California. Tenet plans to adjust net income for each year up or down by as much as 9%.

Analysts said the net effect of the changes was negligible.

Tenet said it also would take a $47-million tax charge, equal to 10 cents a share, in 2004 to cover the years in which the changes added income.

The company said it could recover some of that money when it posts a profit.

The company still faces significant problems, however, including a government probe into whether Tenet overbilled for Medicare patients.

It also faces criminal charges that administrators at its Alvarado Hospital Medical Center in San Diego bribed physicians in an effort to get them to refer patients.

“There are issues still out there for Tenet that are so much bigger” than the irregularities reported Thursday, said Robert Mains, an analyst with Ryan Beck & Co. “This is all stuff that occurred in the past. Largely it’s just accounting entries rather than anything having to do with cash.”

Chief Executive Trevor Fetter said in a statement that the internal investigation, begun at the request of federal regulators, “did not find any widespread issues with contractual allowances for managed-care accounts across the company.”

Tenet, he said, was continuing “to address the legacy of mistakes made by this company in the past.”

Tenet has agreed to pay about $450 million to resolve a government probe and suits alleging that physicians at a hospital in Redding it once owned had performed unnecessary heart surgeries.

And, last week, it agreed to pay almost $215 million to settle investors’ allegations that the company had misled them about Medicare revenue.

The Securities and Exchange Commission had asked Tenet to investigate a former employee’s allegations about how three California hospitals booked reserves for insurance claims they anticipated being unable to collect.

Tenet hired an independent accounting firm to conduct the probe nine months ago and asked it to scrutinize five years of records at all of its hospitals.

That had prompted concern among some investors that the investigation might unearth another companywide problem, analysts said.