Well Running Dry at Tenet

Weakley pointed to high gross charges -- rather than patient acuity, or sickness -- as the reason behind HMA's deviance. He then went on to highlight high prices -- and resulting outliers -- at some of HMA's Mississippi hospitals, in particular. He singled out Central Mississippi Medical Center in Jackson first. There, he said, gross charges are 50% higher than average -- and outlier ratios have rocketed from 13.5% to 32.2% in just four years.

At Rankon Medical Center in Brandon, he found, outlier ratios jumped from 7.3% to 10.6% in a single year despite a substantial decline in a measure of patient sickness. At River Oaks Hospital in Jackson, he noted, outlier ratios have stopped falling and starting inching back upward instead. Indeed, Weakley discovered, HMA's Mississippi hospitals in general seemed to be posting higher outlier ratios along with their higher prices.

"The average Medicare outlier ratio in the state for HMA in 2004 ... is expected to surpass 10% -- more than double the national average," he wrote. "HMA's assets in Mississippi appear to have witnessed a surge in Medicare outlier revenues ... over the past few years."

Weakley conceded that HMA's outlier ratios at some hospitals outside the state seem to be lower than average and, in some cases, actually falling. But he remains concerned about HMA's pricing strategy in general. He says the company's prices are now more than four times its actual costs. In comparison, he noted, most of HMA's rural competitors charge triple -- and sometimes just over double -- their own costs.

As a result, Weakley worries about the sustainability of both HMA's pricing and its generous outlier payments.

"With ... numerous stage agencies all initiating efforts to explore hospital billed charges, the lack of transparency that had characterized hospital gross charges in the past could change going forward," he cautioned. "The results at HMA, while not nearly as striking as what we witnessed at THC, still suggest at the very least that HMA's outlier ratio deserves some careful scrutiny by investors."

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