Tenet's Dicey Rehab

But Tenet's condition has deteriorated significantly since it stopped collecting those outsized Medicare payments, leaving it unable to cover a much larger fine and still adequately fund its operations. Indeed, Tenet has decided to sell more of its money-losing hospitals -- scaling back in the tough markets of New Orleans and Philadelphia -- so that it can spend extra money on facilities that seem to hold more promise. The company needs that investment to pay off with decent admissions growth, during a widespread industry downturn, in order for it to execute its ambitious recovery plan.

Investors, their hopes dashed time and time again, clearly have their doubts. Their celebration of the company's settlement proved short-lived -- good for a fleeting 9.2% stock gain -- as they starting digesting the serious challenges that lie ahead. The shares, down a penny to $6.52 on Thursday, have now sunk beneath the lows they set before the settlement was announced.

Many analysts believe the shares could drop even further.

Shrink to fit

Following a fresh round of asset sales, Tenet will soon be operating fewer than 60 hospitals -- about half the number it boasted before trouble first engulfed the company four years ago. At the same time, Tenet finds itself burdened with the same kind of hefty debt load that it carried around as a much larger company.

Eddleman estimates that Tenet's remaining hospitals will now be weighed down with nearly $90 million in debt apiece. Moreover, many of those hospitals face expensive operational challenges.

In California, Tenet's largest market, labor costs run much higher than they do in other areas. Florida and Texas, also major markets for the company, suffer from the highest uninsured rates in the nation. Meanwhile, the company's teaching hospitals, including the two facilities that it will continue to operate in Philadelphia, attract seriously ill patients who are very expensive to treat. As a result, they have been hit especially hard by the loss of bonus Medicare payments meant to cover the excess costs of such cases.