IRS Says Tenet Owes Money
The Internal Revenue Service is asking Tenet Healthcare Corp. to pay $269 million in back taxes and interest, the company said in a filing Monday with the Securities and Exchange Commission.
Santa Barbara-based Tenet, the nation’s second-largest hospital chain, had previously disclosed that the IRS had been examining company income tax returns for the years that ended May 31 of 1995, 1996 and 1997. Tenet said it was disputing the IRS finding.
The IRS demand adds to several government investigations and shareholder lawsuits that have hit Tenet since last fall, when a federal probe was launched into the company’s practice of boosting profit with special payments that Medicare makes for the sickest patients.
Last week, Jeffrey C. Barbakow stepped down as Tenet’s chief executive after a decade in the job. He was the third top executive to leave the company since Tenet’s troubles began in October.
Investors took the latest news in stride; Tenet shares were down 2 cents to $16.67 on the New York Stock Exchange.
However, some analysts said the IRS dispute could be cause for concern.
“We knew that this was an ongoing issue,” said Sheryl Skolnick of Fulcrum Global Partners in New York. “It will be a big deal if they have to pay it.”
Tenet said the dispute with the IRS is partly about the company’s deduction of a portion of a civil settlement that Tenet paid the federal government in June 1994. The settlement was related to the company’s discontinued psychiatric hospital business.
The denial of this deduction would result in additional income taxes and interest, before any federal or state tax benefit, of about $100 million, Tenet said.
The company added that it was anticipating a $70-million after-tax charge in the second quarter related to discontinued operations.
Tenet and the IRS also are disputing the company’s treatment of the timing of the recognition of income pertaining to Medicare and Medicaid revenue.
“We believe our original deductions and methods of accounting were appropriate and we plan to appeal each of these matters,” the company said in its SEC filing.
