This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Tenet Tallies a Settlement

Tenet (THC - Get Report) has found an expensive cure for one of its biggest headaches.

The ailing hospital chain will pay $395 million to settle hundreds of lawsuits that accuse its former Redding Medical Center of profiting from unnecessary heart surgeries. The settlement brings closure to an open wound that has been festering for more than two years.

However, the deal also may trigger some unpleasant side effects. The company has now violated its bank agreement and, given its deteriorating condition, could find capital harder to come by in the future.

Peter Young, a business consultant at HealthCare Strategic Issues, foresees "less funding availability and significantly changed terms" -- along with the possibility of a formal restructuring -- ahead.

By now, Tenet has already paid a record $54 million government fine to settle allegations that Redding performed unnecessary surgeries on Medicare patients. It also sold the hospital, once among its most profitable, for just $55 million after Medicare threatened to stop doing business with the facility.

Now, Tenet can use those proceeds along with some of its $1.2 billion in cash on hand to settle the 750-plus lawsuits at Redding. But the company still faces significant liabilities that, some say, its remaining $850 million will not even begin to cover.

The company -- which hopes to break even, at best, next year -- may need around $1.5 billion to settle numerous government investigations into its business practices, says Caymus Partners analyst Jeff Villwock, who conducts research on behalf of the Tenet Shareholder Committee. It also faces hundreds of millions of dollars of legal exposure at hospitals outside of Redding, he adds.

"Unless Tenet can borrow some more money, it seems to me the writing is on the wall," Villwock says. "There will be a liquidity problem at some point."

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,416.85 +225.48 1.31%
S&P 500 2,021.25 +19.09 0.95%
NASDAQ 4,683.4070 +45.4130 0.98%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs