Tenet Seeks Buyer for Hospital

Under pressure from regulators, Tenet Healthcare Corp. said Thursday that it would sell a Northern California hospital where doctors allegedly performed unnecessary heart surgeries.

Santa Barbara-based Tenet agreed to sell Redding Medical Center under terms of a deal with the Office of Inspector General in the Department of Health and Human Services. The agency told Tenet in September that it was taking steps to pull the plug on the hospital’s participation in Medicare, Medicaid and other federal health-care programs.

In August, Tenet agreed to pay $54 million to settle Justice Department allegations that two doctors at the Redding hospital subjected patients to unnecessary bypass operations and other cardiac procedures. Both the OIG and the Justice Department are conducting criminal investigations of individuals involved in the alleged misconduct at Redding. Tenet and its hospitals are the subject of other government investigations.

Under the agreement announced Thursday, the OIG said it would halt efforts to disqualify the Redding hospital from federal programs and reimbursement payments, provided that Tenet sells Redding to an unrelated third party and meets other terms of the pact.

Sheryl Skolnick, managing director at Fulcrum Global Partners in New York, said she was unsurprised that Tenet had been pushed to the point of selling the hospital. “It would be absolutely impossible, economically, to survive if it was barred from federal programs,” she said. “It was ‘sell it or it dies.’ ”

Tenet agreed to sell the Redding hospital “very reluctantly,” said company spokesman Steven Campanini. Exclusion from federal health reimbursements “would have been catastrophic for the hospital and could have caused the hospital to close.... Given our choices, it was the right thing to do for the employees, the patients, the doctors and the community.”

The 269-bed Redding hospital posted a pretax profit of $92 million in 2002 on net patient revenue of $257 million, much of that from Medicare, according to company filings with the state. After an FBI raid of the hospital and two surgeons’ offices in late 2002 and subsequent disclosure of the investigations, patient revenue plummeted and the hospital cut back staffing.

Tenet, which operates 101 hospitals in nationwide, said the Redding facility could be sold by mid-2004.

Skolnick, however, said a sale would be complicated by the barrage of private lawsuits filed against the hospital.

“It will be up to Tenet to indemnify the buyer against any future judgments,” said Skolnick, who has a “sell” rating on Tenet shares. “That’s a financial concern.”

Tenet shares rose 24 cents to $14.74 on the New York Stock Exchange before the OIG agreement was announced.