Tenet Settles Suits Over Cardiac Care
Tenet Healthcare Corp. said Tuesday that it would pay $395 million to settle lawsuits alleging that doctors at its former hospital in Redding performed unnecessary cardiac procedures on more than 750 patients.
The settlement, finalized late Monday, requires Tenet to set up a fund by Dec. 31 to compensate patients treated at Redding Medical Center.
In the last two years, the Tenet hospital chain has been rocked with legal problems, including an October 2002 FBI raid of the Redding hospital. Tenet last year paid $54 million to settle federal allegations that the hospital’s former cardiology chief and former chief cardiac surgeon performed unneeded surgeries and other procedures. Tenet sold the hospital this year.
The company, which will move its headquarters from Santa Barbara to Dallas next month, reached the settlement in the suits as lawyers for the plaintiffs were preparing to take depositions for the first 10 cases, which were scheduled for trial in July.
The average patient payout works out to more than $500,000, excluding legal fees. But the final payments will vary based on the severity of injuries, economic losses, the patient’s age and other factors.
Had a settlement not been reached, the suits would have taken years to wind their way through the system.
“It gets [patients] resolution, and it’s going to make a huge difference in the way that an awful lot of them can live,” said Dugan Barr, a Redding lawyer whose firm represented 156 Redding patients.
“We believe this settlement is the fair and honorable way to conclude this very sad chapter,” said Tenet Chief Executive Trevor Fetter, who was appointed to his current post in 2003 as part of a management overhaul.
Tenet may have to pay the full cost of the settlement because its insurers are balking at providing coverage, the company said. Analysts said that could further weaken the company’s deteriorating financial condition.
The Redding settlement was on the high end of analysts’ expectations. More worrisome, they said, was that paying $395 million would cause Tenet to breach bank covenants and force it to renegotiate its credit line at less favorable rates.
Sheryl Skolnick, a healthcare analyst at Fulcrum Global Partners, called $395 million a hefty sum given that Tenet has only $1.2 billion in cash. It “could put a strain on the company’s liquidity,” she said in a research note.
Tenet, unprofitable for eight straight quarters, warned analysts this month that its fourth-quarter charges could exceed $1 billion and that it would do no better than break even in 2005.
Several federal investigations are underway into its Medicare billing practices, doctor recruitment and patient care, as well as patient lawsuits stemming from allegedly poor conditions at one of its Florida hospitals.
In addition, the company is defending itself in a federal trial in San Diego, where two Tenet hospital executives are facing charges of conspiracy and violations of an anti-kickback law.
Overall, analysts believe that the company faces at least $1.5 billion in additional liabilities to resolve its legal problems. Last week Tenet general counsel Peter Urbanowicz acknowledged that the company’s efforts to reach a global settlement were stymied by the San Diego trial.
M. Lee Pearce, a Florida physician and leader of the Tenet Shareholder Committee who has criticized the company for years, said the Redding settlement was “another example of checkbook justice, which does nothing to deter future cases of healthcare fraud and abuse.”
Jeff Villwock, managing partner of Atlanta-based Caymus Partners and a financial advisor to Pearce’s group, took an even grimmer view. If the government imposes heavy fines, Tenet could be looking at bankruptcy reorganization, Villwock said. “This company is in a lot of trouble.”
Tenet’s shares rose 16 cents to $10.59 on the New York Stock Exchange.
