Tenet Still Unsettled

A big Medicare settlement has sparked fresh hopes for ailing Tenet (THC Quote).

Federal prosecutors said Thursday they have fined a major not-for-profit hospital system $265 million for collecting excessive bonus payments from the Medicare program. The settlement, which amounts to 40 cents on the dollar based on what the government originally sought to recover, is the first involving alleged abuse of so-called outlier payments.

Some experts now believe that Tenet could follow up with a similar deal soon. But at least one veteran health care analyst believes resolution remains far off for Tenet.

"It's an interesting data point," says Sheryl Skolnick, senior vice president of CRT Capital Group, who has a sell recommendation on Tenet's stock. "But the alleged facts in these cases are very, very different."

Like Tenet, New Jersey's Saint Barnabas health system allegedly manipulated a loophole in the Medicare program that allowed it to collect far more in outlier payments than it should have. But Skolnick says the similarities in the two cases begin and end there.

Saint Barnabas is a not-for-profit system. As such, Skolnick says, the hospital has no access to the equity markets, limiting its means to finance a huge penalty.

Moreover, she stresses, Saint Barnabas has not been operating under a so-called "corporate integrity agreement" like Tenet has in the past.

In contrast, Skolnick notes, Tenet is a for-profit hospital company with ready access to the capital markets for needed financing. The company also faces multiple investigations, she says, with the outlier probe simply being the largest. Finally, she adds, Tenet has violated government rules in the past and therefore stands out as a two-time offender.

Thus, Skolnick believes, Tenet could wind up on the hook for more of its alleged outlier overcharges -- which total an estimated $1.6 billion -- and have to sell some hospitals as an added form of punishment to boot. Already, she points out, the government has forced the company to sell two of its hospitals targeted by investigations.