Tenet Tussle Shows Dissent Rising in Ranks

The biggest threat to Tenet ( THC) could be festering inside its own walls.

Already ambushed by numerous external probes, the giant hospital operator now must deal with mounting attacks from within its own ranks. During the past week, at least one physician and thousands of registered nurses have taken fresh swings at the ailing hospital chain. Both parties essentially accuse Tenet of violating federal laws.

For Tenet, the doctor's testimony could prove especially troubling. By now, the hospital chain is accustomed to serious allegations from nurses seeking workplace improvements. But the doctor's attack -- which already has triggered one indictment -- appears to be a first.

"Never before has the government been able to get between Tenet and its doctors," said Jim Moriarty, a Houston attorney who scored a huge settlement against Tenet nearly a decade ago. "This could be the linchpin that brings the whole company down."

Tenet has downplayed the indictment as the "unfortunate" result of one doctor's desperate attempts to avoid jail time for his own misconduct. Investors continued to watch warily, sending the stock -- which has lost 69% of its value over the last year -- up a nickel Tuesday to $16.05.

Sunnier Climes

Based largely on the testimony of former internist Paul Ver Hoeve -- described by Tenet as a "disgraced physician" guilty of 64 counts of felony Medicare fraud -- federal authorities last week indicted Alvarado Hospital CEO Barry Weinbaum on charges he broke Medicare laws himself.

Specifically, the feds have accused Weinbaum of paying various physicians more than $10 million in the aggregate to relocate to San Diego and refer Medicare patients to the Tenet-owned hospital Weinbaum has led there for more than a decade.

The indictment also alleges that Weinbaum knew he was breaking rules and attempted to cover his tracks. The government cites testimony from Ver Hoeve -- who confessed to participating in the alleged scam -- as evidence for its case.

"Barry Weinbaum instructed Dr. Paul Ver Hoeve and his accountant not to characterize the money that Alvarado Hospital had paid to Dr. Paul Ver Hoeve through the relocated physicians as 'Alvarado Income,'" the indictment states. So "Dr. Paul Ver Hoeve directed his accountant to change the characterization of the money that he received from Alvarado Hospital from 'Alvarado Income' to 'Other Income.'"

In some underserved areas -- such as rural states and Indian reservations -- hospitals are allowed to pay relocation expenses for physicians who are willing to practice there. But Moriarty, for one, scoffs at the notion that Tenet needed perks to lure doctors to a Southern California city best known for its mild weather and beautiful beaches.

"That's an outrageous joke," Moriarty said. "When Tenet deliberately intercedes like that, it results in the most egregious violation of a doctor's duties. Now, the doctors are serving Tenet instead of their patients."

Moriarty is representing dozens of patients and survivors who've taken aim at Tenet's most scandalized hospital. Essentially, Moriarty's clients believe that doctors at Tenet's Redding, Calif., hospital performed dangerous -- and unnecessary -- heart procedures on them just to generate huge payments from Medicare. Since the Redding scandal broke last fall, Tenet has slowed down its billing for such procedures and shut down its busy Redding heart center because of a huge slump in admissions. But Redding heart surgeons, the hospital and Tenet itself remain under investigation by federal authorities.

Moriarty estimates that Tenet faces at least $1 billion in legal bills because of its practices at Redding alone. He describes Tenet as a hospital chain that has always viewed patients as nothing more than "billing opportunities." And he insists that Tenet's problems are systemwide.

For its part, Tenet has portrayed the Redding fiasco as an isolated problem that appears to be limited to two contract physicians who no longer practice at the hospital. But the company, which has denied any wrongdoing itself, faces serious patient backlash at other facilities as well. Busy Tenet hospitals on both sides of the country currently stand accused of providing poor or unnecessary medical treatment.

Risk Profile

A former employee of Hilton Head Medical Center, a Tenet hospital in South Carolina, says doctors there regularly took risks -- with management's blessing.

"Because there was no open-heart unit, the hospital's cath catheterization lab was only licensed by the state to do emergency heart caths -- not routine caths," the former employee said. "Despite this, the cardiologists regularly scheduled patients for nonemergent cardiac caths.

"Management knew about this, of course. But since the procedures generated enormous profits, they didn't do anything to stop it."

The California Nurses Association -- a vocal critic of Tenet -- predicts that scandals will soon erupt at multiple Tenet facilities. In the meantime, the powerful group is fighting to unionize Tenet's home-state nurses against the company's wishes. Last week, the union explicitly accused Tenet of breaking labor laws by attempting to block nurses from voting to join its ranks and pushing them toward less critical unions instead.

Tenet hammered out a deal last month with two CNA competitors -- the Service Employees Union and the American Federation of State, County and Municipal Employees -- that guarantees nurses set raises in exchange for joining the one of the two unions and curtailing the threat of future strikes. Since then, an estimated 2,500 employees at six Tenet hospitals have taken the company up on its offer. But CNA -- perhaps the state's most powerful union -- claims far greater support.

In a statement last week, CNA said that 4,000 registered nurses at 13 Tenet hospitals have signed petitions demanding that CNA be added to the list of union choices.

"Tenet RNs do not want sham elections. They do not want Tenet handpicking a union for them. And they are offended at Tenet's crass efforts to bribe them into voting for" another union, CNA stated last week. "CNA is confident that the elections will go forward, and that the illegal backroom deal will be overturned."

CNA is primarily fighting to improve working conditions for current Tenet nurses and secure healthcare benefits for retired ones. But CNA's powerful voice -- rather than its specific labor demands -- may prove to be the biggest threat for Tenet. The big California union has aggressively sought to expose alleged abuses inside Tenet hospitals and, by now, dedicates an entire section of its Web site to the company's scandals.

Moriarty describes the nurses as "canaries" who are the only true patient advocates throughout the Tenet system. But he now has his ear turned in another direction. Moriarty believes the newly indicted Weinbaum -- currently backed by Tenet as "ethical and admired" -- could soon be singing as well.

"He will tell all," Moriarty predicted. "If I were the top five or 10 Tenet executives, I'd be hiring the best criminal lawyers in America right now."

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