warned Tuesday that it won't meet its financial targets for fiscal 2003 and 2004, and said it had wrapped up an internal business review.
Tenet's billing practices have been the subject of a government audit of the way it handles expensive procedures that require reimbursement above what Medicare generally covers. The company's new management team released the results of an internal review of those practices, the findings of which will be discussed with analysts and investors at meetings Tuesday and Wednesday in New York.
"The company's charging practices, combined with the formula prescribed by the Medicare program, in large part caused Tenet's total outlier payments to exceed industry averages," said Tenet's chief executive, Jeffrey Barbakow, in a press release. "Our new approach is designed to de-emphasize the role of gross charges and refocus on actual pricing." Gross charges differ from actual prices in that they are essentially retail list rates and are required by Medicare to be uniform for all patients.
In light of the new pricing model, the Santa Barbara, Calif.-based company pared its earnings forecast for the next two years. It now sees full-year 2003 earnings in the range of $2.38 a share to $2.78 a share, lower than the previous estimate of $2.93 a share. Wall Street analysts had pegged the company's full-year earnings at $2.87 a share, according to Thomson Financial/First Call. For fiscal 2004, Tenet expects to earn roughly $2 a share, compared with analysts' consensus estimate of $2.93 a share.
"I recognize the very real skepticism and anger among investors," Barbakow said. "We intend to earn back their trust through hard work and solid results."
The shares were down 69 cents, or 3.9%, at $17.10 in after-hours trading on Island.