Skip to main content

By now,


(THC) - Get Tenet Healthcare Corporation Report

knows how to make big promises. But some critics are beginning to wonder if the company knows how to keep them.

After all, Tenet has already promised once -- in an official deal with the federal government -- that it would not bill Medicare for unnecessary services. Now, roughly a decade later, the company

stands accused of essentially doing just that.

Granted, Tenet's original deal with the government expired in 1999, just before the company rolled out a new growth strategy dependent on generous "outlier" payments from Medicare for complicated procedures. But given the company's latest scandal -- and its familiar feel -- some people are starting to question whether Tenet ever really changed its ways at all. Indeed, the company's harshest critics now believe that Tenet began testing its signed deal with the government long before the pages of the contract had yellowed -- when the ink had barely dried, they say.

Palm Reading

In early 1995, within months of Tenet's pledge to the government, the company snatched up a sleepy Florida hospital as part of a multibillion-dollar merger. Then it cranked up the hospital's growth.

In 1996, its first full year under the Tenet umbrella, Palm Beach Gardens Medical Center delivered a 49% jump in annual revenue. The hospital would go on to nearly triple its annual sales after just five years in the Tenet chain.

Tenet attributes the hospital's growth to expanded services and a surge in the local population. But critics just scoff, saying that a look at some pending litigation better explains the real reason for that growth. (See a

related piece on the wave of lawsuits building at Tenet.)

Right now, Palm Beach Gardens faces roughly 100 lawsuits -- including 20 for wrongful death -- that accuse the hospital of performing open-heart surgeries in unsanitary conditions that triggered serious infections. One of the biggest lawsuits claims that dozens of patients suffered horrific consequences because the hospital was unwilling to invest proper resources in an infection-control program that generates no money.


patients suffered open, necrotic, draining chest wounds, which necessitated radical reconstructive surgery, including the complete or partial removal of the patient's sternum and advancement of muscle flaps to fill the large hole left in the patient's chest," states the complaint, filed on behalf of the survivors of deceased patient Michael Lebedeker. "Many infected patients died before these procedures could be performed."

While Palm Beach Gardens has denied any wrongdoing, statistical records show that the hospital's mortality rate for open-heart surgeries exceeds both local and national averages. Moreover, the federal Centers for Medicare and Medicaid Services, or CMS, actually threatened to shut the hospital down if it didn't clean up its act.

Faced with the potential loss of government funding, Palm Beach Gardens set out to correct its problems and -- less than three months ago -- finally secured a clean bill of health from CMS. Since then, the hospital's CEO has been shuffled to another position and replaced by a popular executive who helped steer Palm Beach Gardens during its early growth spurt under the Tenet name.

TheStreet Recommends

By returning to Palm Beach Gardens, incoming CEO MaryJo Gregory is giving up the top spot at two Tenet hospitals accused of price gouging in California. Gregory's exit from the hospitals coincides with yet another CEO change in Tenet's home state. Last month, the CEO of Tenet's troubled San Ramon Regional Hospital resigned after less than two years on the job. She is being replaced by a Tenet executive who's no stranger to controversy. Gary Sloan comes to San Ramon from nearby Doctors Medical Center, where nurses are striking and county officials are complaining about alleged price gouging.

But Sloan's biggest headaches could still lie ahead.

Citation City

Last week, Tenet revealed that San Ramon is among five company hospitals being targeted with subpoenas in a new investigation about physician contracts. Still, the company was quick with its normal reassurance.

"Civil subpoenas for information from the

Office of Inspector General are not uncommon in the highly regulated health care industry," Tenet general counsel Christi Sulzbach said in a press release issued after last week's close for the Easter holidays. "We will cooperate fully so that the agency may complete its inquiry in a timely fashion."

For Sloan, the new investigation only adds to the list of challenges that await him at San Ramon. Last October, San Ramon nurses voted to join an organized union that -- since the big blowup at Redding -- has emerged as one of Tenet's loudest critics. Within months, the union had found a headline-grabbing cause. San Ramon was planning to bring pediatric patients into its medical/surgical unit. But it was not necessarily going to hire pediatric nurses to handle all their care. Instead, the hospital intended to train regular nurses -- in roughly seven hours -- how to treat sick children.

All but seven of San Ramon's 42 medical/surgical nurses officially complained in a petition to the hospital CEO.

"It is not safe to have adult medical/surgical nurses, even on occasion, taking care of medically unstable pediatric patients without full pediatric training," they insisted.

While Tenet claims it resolved the dispute, state inspectors still cited San Ramon for failing to conduct age-specific assessments of neonatal and pediatric patients during a recent evaluation. The nurses union immediately pounced on the inspection results -- which cited widespread violations -- to bolster its argument that Tenet cuts too many corners and jeopardizes patient care.

But hospital executives claim the union, which represents scores of striking nurses, is exaggerating the problems at San Ramon. In an interview this month with local reporters, the hospital said that inspectors identified only routine deficiencies in their 125-page complaint. The hospital went on to describe the violations as bookkeeping problems that do not compromise patient care.

Palm Beach Gardens made similar claims -- saying it never really had an infection problem -- despite the rare crackdown by CMS.

Tenet also glossed over issues raised during the recent inspection of 19 company hospitals. While Tenet stressed that all 19 hospitals retained their accreditation, the company failed to point out that the inspections -- launched after the fiasco at Redding -- triggered 102 citations and left 12 hospitals with weaker ratings than they began with.

Lee Pearce, a Tenet shareholder who's leading a crusade to oust top management, attacked the company for trumpeting the inspection results as strong.

"If you practice Wall Street medicine, it is victory that your hospitals simply remain accredited to continue to earn money," Pearce said. "If you practice quality health care, then this report should cause

Tenet executives and the Tenet board of directors to hang their heads in shame."

Since then, Tenet has filed a lawsuit against Pearce, accusing him of violating federal securities laws with his public attacks on the company. Some Tenet insiders view the company as vengeful and fear backlash if they report abuses through an internal hotline or the media. At least one former executive, who left the company voluntarily, insists that Tenet is far more interested in hiding its problems than it is in solving them.

"This culture encouraged the Redding, Calif., hospital to engage in practices that cost patients their lives and the Medicare system millions of dollars," he said. "It signifies a pattern of behavior whereby Tenet executives have a blatant disregard for ethical conduct."

Tenet -- which axed two top executives over the outlier issue -- has publicly stressed that it will tolerate no internal abuses or retaliation against people who report them. Meanwhile, it has consistently maintained that the company itself is innocent of any wrongdoing.