Tenet Says Trial Poses Hurdle to Settlement

Tenet Healthcare Corp. said Wednesday that a trial in San Diego accusing the company of violating physician recruitment laws was thwarting its efforts to reach a settlement of other government investigations into its business and medical practices at other hospitals.

In the trial, which is expected to run through February, the nation’s second-largest hospital chain is fighting charges that executives at its Alvarado Hospital Medical Center in San Diego made $15 million in illegal bribes to 99 doctors to steer patients to the struggling 311-bed facility.

The trial began Oct. 26 after Tenet was unable to reach an out-of-court settlement of the criminal kickback charges.

“As a practical matter, while the government is trying to convict our hospital and CEO in San Diego, it makes settlement discussions with them on other matters difficult,” Tenet general counsel Peter Urbanowicz told investors at a conference.

Urbanowicz, a former deputy general counsel at the Department of Health and Human Services who joined Tenet a year ago, heads the company’s efforts to seek a broad settlement with the government. Authorities are looking into possible doctor kickbacks at Tenet hospitals in other cities, cardiac procedures at three Los Angeles hospitals and Tenet’s method of billing Medicare for the sickest patients.

Tenet also was negotiating with lawyers to settle patient lawsuits over allegations that surgeons at its Redding hospital performed hundreds of unnecessary heart surgeries.

Investors and others had speculated that Tenet was near a deal. But Urbanowicz confirmed the pessimism of some analysts that a resolution was unlikely while the company was in trial in San Diego.

Federal prosecutors have put about 30 witnesses on the stand in the kickback case and have signaled that they could put on dozens more before the company presents its defense.

Tenet held the investor conference in Dallas, where on Jan. 3 it will establish its headquarters after moving from Santa Barbara.

On Monday, the company warned that fourth-quarter charges could surpass $1 billion, resulting in a greater loss than in the previous three months, and that it would be lucky to break even in 2005.

Tenet said Wednesday that the company, which has posted losses for eight consecutive quarters, would initiate new cost-cutting measures in January. Those steps will include job cuts and an expanded use of contract labor.

The company employs 98,000 people and operates 85 hospitals. In an effort to restore profitability, Tenet has divested 11 hospitals this year and has deals pending to drop another 11 from its roster. The company still hopes to find buyers for five more hospitals, all in Southern California, by the end of the year.

Tenet shares fell 6 cents Wednesday to $10.84 on the New York Stock Exchange.