Crescent City Cools to Tenet Healthcare

Until recently, even Tenet Healthcare's THC harshest critics had come to wonder if anything short of a so-called act of God could bring the company's stock down.

For years the Dallas-based hospital chain has attracted plenty of skeptics. Tenet has been bleeding red ink ever since it gave up an aggressive pricing strategy, and some government probes tied to those practices remain unresolved. Yet Tenet shares spent the better part of 2004 and 2005 holding steady in the low teens, as management insisted that a long-promised turnaround was at hand.

But then Hurricane Katrina smashed ashore this summer in New Orleans, saddling the hospital chain with a revenue slowdown, a raft of hefty repair bills and a bushelful of questions about its stewardship during the city's trying times. Tenet committed itself to rebuilding its presence in the Crescent City, but some observers wonder if New Orleans even wants the company back.

After all, employees at Tenet's Memorial Medical Center are fielding questions about 45 deaths there in the wake of Katrina. What's more, local officials are trying to seize another Tenet hospital in the region based on charges that the company abandoned the facility while it was still operable.

For its part, Tenet has denied any wrongdoing, joining others in applauding the efforts of its New Orleans workers. Even so, the company looks newly vulnerable -- and its stock, which has lost more than a third of its value in the space of two months, is showing the strain.

The shares dropped a dime Wednesday to $7.43, hovering near lows last seen 12 years ago.

Bailing Out

Before the hurricane, Tenet operated five of its 69 core hospitals in the New Orleans region.

The company's two downtown New Orleans hospitals, including Memorial, suffered extensive flood damage and remain shuttered even now. But nearby Meadowcrest Hospital, which fared much better, faces an uncertain future as well.

Competing West Jefferson Medical Center, a nonprofit controlled by the local parish government, began proceedings back in September to seize control of Meadowcrest after the hospital allegedly "abandoned" the facility and skirted its responsibilities to the public. In response, Tenet has sued the nearby hospital for allegedly making a lowball offer for a facility that will give it an unfair monopoly in the area.

Chill Wind Tenet tanks after Katrina

West Jefferson has, in turn, countersued.

"As a result of Hurricane Katrina's landfall," the parish's lawsuit claims, "Meadowcrest Hospital had no flood damage and, as set forth above, had sufficient and adequate electrical power to operate. In fact, all conditions at Meadowcrest Hospital were improving during the abandonment period. The one constant," the complaint adds, "was the presence of indigent patients in the community."