Tenet to Shed Unit; 3rd-Quarter Charge Expected

Tenet Healthcare Corp., the second-largest U.S. hospital operator, said Tuesday that it is shedding the money-losing business of managing doctors’ practices and may take a charge against fiscal third-quarter earnings for the move.

Tenet officials wouldn’t say how large the charge would be. Regulatory documents filed in August, when Tenet said it might exit practice management, said the company “would expect to incur significant charges for the disposal of this business.”

Tenet and other hospital operators, such as the largest, Columbia/HCA Healthcare Corp., acquired doctors’ practices when they bought affiliated hospitals. Tenet has sold or allowed to expire practice management contracts for about 100 doctors, or about 10% of its total. Hospitals, like companies focusing solely on doctor practice management, found it difficult to make money without making more acquisitions.

“We lose money on just about every practice, lots of money,” said Paul Russell, a Tenet senior vice president, speaking at BancBoston Robertson Stephen’s medical conference in New York. “As we get further into the process, we will unwind some of the more complex practices, which could be more costly.”

Shares of Santa Barbara-based Tenet rose 65 cents to close at $21.59 on the New York Stock Exchange.

Tenet had anticipated taking the charges in the second quarter ending Tuesday, but exited less difficult markets first, pushing back the need for charges to the third quarter ending in February, he said.