continued to plummet Friday, dragging down its own sector and several others one day after it announced the departure of two senior managers and conceded that its own pricing practices should be reviewed.
Shares of the Santa Barbara, Calif., health services provider, which had seen its market capitalization more than halved in a week after disclosing an FBI probe into two of its doctors, was down another $13.20, or 47%, to $14.75 in extremely heavy trading Friday morning.
The company's corporate credit and senior unsecured debt ratings were lowered by S&P Thursday, and its shares were downgraded by a slew of brokerages.
Tenet is the second-largest hospital chain in the country and its difficulties were bleeding into that group, with
down 19% to $28.25, to name just one. Health-maintenance providers were also lower, with
off 10% to $11.22 and
( PHSY) losing 8.7% to $29.20.
Benefit managers like
( CMX) losing 6% each.
Tenet said after the bell Thursday that Chief Operating Officer Thomas Mackey, 54, will retire, while Chief Financial Officer David Dennis, 53, resigned. The company named Trevor Fetter, an executive with its spun off Broadlane unit, to the new position of president. He will remain chief executive and chairman of Broadlane. Stephen D. Farber was named chief financial officer.
Tenet faces a federal audit of so-called "outlier" reimbursement at some of its hospitals. The term is a reference to procedures that are expensive enough to require government reimbursement above what is covered by Medicare -- a kind of payment that Tenet receives more frequently than its average peer.
Chief Executive Jeffrey Barbakow said in the release announcing the shakeup that Tenet had been too aggressive in some of its pricing practices, and the new management would take a "fresh look" at how the company charges for hospital services.
"As I carefully studied our Medicare outlier situation over the last two weeks, it became clear to me that formulas that drive these outlier payments were affected by our overall pricing," he said. "In some cases, particularly aggressive pricing strategies created increasing outlier payments. That's simply not the way I want to do business at Tenet, nor do I want such a perception to exist in anyone's mind.
"While our pricing approach was entirely consistent with the Medicare regulations, it put us on a course that was inconsistent with the position and posture we want Tenet to have within our industry," Barbakow said. He said the moves don't imply the company's fundamental strategy is flawed or that any impropriety had occurred.
Tenet affirmed its earnings estimate for fiscal 2003 and said it expects earnings per share from operations to grow at least 25% over the comparable fiscal 2002 figure of $2.34 per share. It said that it must complete further analysis before it can provide long-term guidance.