Tenet Plays Scrooge in Philly - TheStreet

Tenet Plays Scrooge in Philly

The big chain tells union reps it's closing their hospital the day of the Christmas party.
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Tenet

(THC) - Get Report

has transformed itself from Santa Claus into Grinch in less than a day.

The giant hospital chain stole the holiday joy away from 1,000 employees who will lose their jobs in a matter of months. The company plans to shut down its Medical College of Pennsylvania, where nurses were poised to end a six-week strike, by the first of March.

Although Tenet publicly announced the closure on Thursday, it alerted union representatives late Wednesday, shattering a particularly festive mood. The news came at the end of a big Christmas party where nurses had been celebrating a new labor contract, set for a vote today. After striking for weeks around the clock -- often in sleet and snow -- the nurses had finally convinced the hospital to put an end to mandatory overtime shifts that could stretch for 16 hours and diminish nursing care.

"Everybody was in a great mood," recalls Jane Wilson, an intensive care nurse who's spent nearly a decade at the 153-year-old hospital. "This is the biggest kick in the stomach we could have experienced. It's unbelievable to me that these corporate devils could get away with this."

Tenet described its decision to close the hospital, a Philadelphia landmark that began as the nation's first female medical school, as a "very difficult" one. But it said the hospital, which it bought on the cheap out of bankruptcy, has seen its losses explode to more than $5 million a month.

"The Tenet team worked extraordinarily hard for more than five years to revive MCP hospital after years of neglect and decline under previous owners," Phillip Schaengold, vice president of Tenet Pennsylvania, said on Thursday. "However, losses of this magnitude simply cannot be sustained."

Tenet bought the hospital, along with seven others in the city, after previous owner Allegheny Health tumbled into bankruptcy beneath a $1.5 billion mountain of debt. The for-profit chain, viewed back then as a savior, paid a modest $345 million for the troubled nonprofit and then launched a massive campaign to "let the healing begin."

But local critics soon began to accuse Tenet of breaking promises -- particularly about caring for the uninsured -- and even Wall Street remained cool on the deal. Following a few quarters of disappointing results, Tenet shed its first Allegheny hospital just over a year after buying it. The company went on to close a second Allegheny hospital and, in recent months, arrange the sale of another.

Tenet's decision to further pare its Philadelphia holdings, viewed as underperformers by Wall Street, clearly cheered the market. Tenet shares, which barely budged a day earlier on news of a big labor settlement, jumped 3.1% to $15.21 in early afternoon trading.

"A tough payer market, the medical malpractice insurance crisis, state budget constraints, as well as other factors, lead us to this action," Schaengold explained.

Loophole Closed

But the loss of Medicare "outlier" payments -- generous bonuses for treating especially sick patients -- could be the real culprit.

Until this year, Tenet relied on aggressive outlier billing to boost profits at some of its most successful hospitals. But the loophole that allowed that practice has since been closed. And Tenet has gone on to watch some of its star performers, such as Redding Medical Center in northern California, slide into the red.

Tenet has, in fact, announced plans to shed the Redding facility already. The hospital, which paid a record-breaking fine for allegedly profiting from unnecessary surgeries, faced the loss of crucial government funding if it remained under the Tenet umbrella.

Like Redding, Tenet's MCP facility has picked up some outsized Medicare payments in the past. Of Tenet's 100-plus hospitals, MCP -- along with two other facilities -- ranked among the top 11 collectors of outlier payments last year.

Up to now, MCP revenues had also been skyrocketing. In 2000, just a year after its purchase by Tenet, MCP saw its sales more than double to $152 million. Although revenues slid a bit in 2001, they recovered that lost ground -- and went on to peak at $169 million -- the following year.

Even so, Tenet claims the facility lost $6 million in 2002 and is now losing nearly that much every month. To be sure, MCP has been struggling. With its staff nurses on strike, the hospital has found itself paying expensive replacements -- even as it slashes admissions -- just to stay open.

Even MCP nurses recognize that the hospital is bleeding. But they also believe that the hospital's freshest wounds, triggered by the current strike, are purely self-inflicted.

"Our contract was up six weeks ago," Wilson said. "And then they offered us a new contract that they knew nobody --

nobody

-- would approve."

Feeling Betrayed

The new contract, nurses say, originally called for a tiny raise, smaller benefits and -- most importantly -- continued overtime known as "mandation."

Tenet later offered a bigger raise, but nurses wanted the mandation lift far more. They even cited a sleep study, performed by the hospital's own doctors, that showed a sharp decline in clinical skills after 12 hours of work. Still, Tenet didn't budge.

Then suddenly, as negotiations continued on Tuesday, the company finally gave in. It promised to limit mandation for the next six months, after which it would end the practice entirely.

"Everybody was so happy," Wilson said. "We thought that maybe last night would be our last night to strike."

Hours later, nurses woke up to news that MCP was closing down instead. They felt outraged and betrayed.

"Tenet has been blatantly lying to our negotiating team," said Ginny Holzwitz, another veteran ICU nurse at the facility. "They had just said they had no plans of closing. ... That's bargaining in bad faith."

Now, MCP nurses are left to vote on a contract that promises to end mandation only after the hospital is scheduled to close. Holzworth, for one, plans to approve the deal now and fight for the hospital later. Indeed, she is among many MCP nurses who have chosen to celebrate the new contract as a "major victory" over the company.

She questions whether Tenet will even be allowed to close the landmark hospital, which she describes as a "spectacular Level 1 trauma center ... that serves a very needy community." She and her colleagues plan to seek political help -- and have already gained support from the city councilman who doubles as an MCP director -- in an effort to keep the hospital open.

She said the local leader has vowed to launch a "full-scale investigation" of the Tenet-owned facility.

"Tenet's a corporate giant," Holzworth said. "They don't do things by mistake. They do it by plan. ... We need to bring to light what the company has really done."

Both Holzworth and Wilson are convinced that Tenet has misled their city -- which originally welcomed the company as its first for-profit hospital operator -- by placing financial gains ahead of patient care from the start. But Wilson, for one, has expressed doubts about whether the company will ever feel the justice she believes it so deserves.

"Tenet couldn't give a damn whether a cut receives a Band-Aid, much less whether a patient lives or dies," Wilson said. "They would rather pay fines than actually play by the rules. They think they're above the law -- and they consistently prove that they are."