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Tenet Healthcare

(THC) - Get Tenet Healthcare Corporation Report

doesn't expect to drop any more bombs in a scheduled conference call next week, but warned it won't be buying back any shares ahead of that call, despite a 32% plunge in the firm's stock price over the last two days.

The No. 2 U.S. hospital chain held a conference call Friday to field questions about a federal investigation into two physicians at one of Tenet's medical centers in California. News of the probe sent the shares into a tailspin, wiping out about $6 billion in market value in two days. They ended down 8% to $26.50 Friday.

The company will hold another call next week to discuss Medicare outlier payments, or additional payments that Tenet receives for expensive medical procedures.

On Oct. 1, Medicare increased the outlier threshold, effectivelyreducing funding to hospitals. Tenet said it receives a higher-than-average portion of these payments but has already factored some potential cuts into its estimates. Still, it noted that the issue is complex and warned that it would not be buying stock before it has evaluated the full impact on its business.

That said, the company did reiterate financial guidance for 2002 and said it is comfortable with estimates for 2003. Last week, Tenet said earnings per share should grow by more than 25% next year. The company also said it is not close to violating debt covenants, noting that these agreements are not reliant on the firm's stock price or credit rating.

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Tenet said it doesn't believe any more of its doctors are underinvestigation and called the FBI probe an "isolated issue." It also said it would do whatever is necessary to improve compliance controls. The costs associated with such a program and with potential refunds are not known, the firm added.

In a press release Thursday, Tenet said U.S. prosecutors in California are investigating two doctors -- Chae Hyun Moon and Fidel Realyvasquez Jr. -- at its medical facility in Redding, Calif., alleging that they made false billings for unnecessary coronary bypasses and other heart procedures.

Several analysts downgraded the stock Friday, citing the allegations. Goldman Sachs, Raymond James and Prudential Securities all cut their ratings.

"Although neither Tenet nor Redding Medical Center are a target in the investigation, we believe the investigation creates many unknowns for Tenet to the point that it significantly clouds earnings visibility," Prudential analyst David Shove said in a research note.

"We believe Tenet's share valuations likely experience more noise and volatility in the coming months," he said. "Even though we estimate the doctors alone have a minimal earnings per share effect, the investigation's future clouds our visibility on Tenet shares."

Analysts at Credit Suisse First Boston and Banc of America Securities kept their positive ratings on the stock, however, stressing that the investigation centers on just two physicians at one facility.

"Although the allegations suggest some failure of Tenet's internalcompliance processes, and don't alleviate THC of all responsibility, wecannot imagine that THC-related physicians are systematically risking jail to engage in such behavior," said Banc of America Securities analyst Gary Taylor, who rates the stock a buy.

In Thursday's press release, Tenet said the decision to perform anymedical procedure is left up to the attending physician, and that the firm relies upon the professionalism of its doctors to make evaluations. Still, some observers have questioned why Tenet's internal reviews did not uncover the fraud before the federal authorities.