Old infection concerns -- possibly tied to flying insects inside a Florida surgery unit -- aren't the only threat to Tenet's ( THC) lucrative cardiac business in the state. Last week, Gov. Jeb Bush signed a new law that could allow four nonprofit hospitals to begin competing with Tenet for open-heart surgeries in southern Florida. Tenet-owned Delray Medical Center promptly responded by filing a lawsuit contesting the legality of the new law just two hours after it was enacted last week, according to the Palm Beach Post. The company's second open-heart unit in the region, operated by Palm Beach Gardens Medical Center, has already weathered a huge dive in profits following publicity about an alleged infection-control problem at the facility. Palm Beach Gardens faces more than 100 patient lawsuits that could start going to trial next year. In the meantime, Tenet is fighting to protect its remaining heart business in the rapidly growing region. The company's Delray hospital told the Palm Beach Post last week that "the provision of healthcare services should be determined by demonstrated need and careful planning through uniform laws and rules" instead of the new measure. But Bush described the current system as a broken one that has already failed, for years, to address growing patient needs. And HCA ( HCA) -- which has joined forces with Tenet to block new open-heart units in the past -- told the newspaper that it has no plans to enter the fight this time around. The Tenet Shareholder Committee, a group long critical of the company, compared Tenet's latest action to a
legal maneuver carried out last month by former CEO Jeffrey Barbakow. Barbakow -- who cashed out $111 million worth of Tenet stock options before scandal engulfed the company -- scored headlines after filing a lawsuit seeking to recoup losses from his investment in bankrupt WorldCom.
"The same day we learned of Barbakow's hypocritical lawsuit on the West Coast, we also learned that Tenet has filed a lawsuit on the East Coast to attempt to block open-heart competition in Florida," committee spokesman Paul Brickman told TheStreet.com last week. "The spirit of Barbakow continues to haunt this company and its culture." Tenet's stock, which fetched $65 a share at the time of Barbakow's sale, fell 32 cents Tuesday to $12.79. Just weeks ago, the shareholder committee called for federal prosecutors to examine possible violations of Medicare laws -- and a brand-new corporate integrity agreement with the government -- at yet another Tenet-owned hospital in southern Florida. The committee uncovered a complaint from David Prager, "a well-respected physician and cancer specialist," claiming that Tenet's North Ridge Medical Center in Fort Lauderdale had billed Medicare for the treatment of nonexistent conditions. Tenet remains under intense government scrutiny. It has been accused of, among other things, overbilling Medicare and profiting from unnecessary heart surgeries. It is currently seeking a global settlement that, some believe, could be reached relatively soon. But the Tenet Shareholder Committee has loudly urged government authorities not to let the company off the hook. "Past corporate integrity agreements with Tenet have failed to protect patients, shareholders and taxpayers from a recurrence of fraud," committee Chairman M. Lee Pearce stated last month. "That is why we believe in any future settlements with Tenet, the Department of Justice must include strict provisions to protect patient health and safety and to end financial rip-offs of government healthcare programs." Tenet has already paid a record-breaking fine to settle allegations that it profited from numerous unnecessary heart surgeries carried out at its former hospital in Redding, Calif. But it still faces hundreds of civil lawsuits filed on behalf of past heart patients -- some of them now dead -- who underwent questionable heart procedures there. It has been accused of recklessly endangering patient lives at its Palm Beach hospital as well.
Last June, when a plaintiff's attorney publicized claims that Palm Beach Gardens had bug zappers in its operating rooms, the hospital denied the allegations. A hospital lawyer told the Associated Press that "there is no evidence of an infection problem." But pest control documents, recently obtained by TheStreet.com, paint a chilling picture. For years, they show, Palm Beach Gardens struggled with -- but failed to correct -- an insect problem in its operating rooms. Correspondence between multiple exterminators and the hospital repeatedly mention, in some fashion, a "flying insect issue in the O.R." The exterminators identify specific insects -- crazy ants, fruit flies, fungus beetles, gnats -- and offer remedies to the problem. Their comments appear to grow more urgent as time goes on. By March of 2001 -- years after the problem erupted -- special consultants were clearly suggesting one of the most expensive remedies possible. "The problem is persisting because the old, wet materials in the roof were never removed when the roof was repaired," wrote C.D. Mampe, a DM Associates consultant with more than three decades of experience. "Since there is little or no air movement in the roof structure, this area will never dry out, and the fungus gnat problem will persist. ... The ultimate solution is to open up the roof, remove all wet organic materials and replace the roof." Just one month later, the long-time exterminators who hired the consultant found themselves terminated from the job. But a replacement firm sounded similarly troubled when it took over. "There are several areas of high priority such as the intensive care and operating rooms," Michael Brimanson of Bug Stoppers wrote in October of 2001. "We feel these areas should be treated as a zero-tolerance area for insects. ... The facility will require a considerable amount of attention and dedication."
Bug Stoppers promised to "meet or exceed" the hospital's requirements for $5,900 per month. But Sandra Perdew, the CFO of yet another firm, was still listing serious deficiencies the following year. She mentioned fly-infested mops and slime in the surgical trash room. She said the entire sterile processing room was "in poor condition and certainly in need of cleaning and maintenance." She said the general surgery unit had holes in the wall and cups of Pepsi on the trash can. She also mentioned concerns about the decontamination room and the nurses' lounge. Perdew, who felt that her previous suggestions had gone unheeded, sounded clearly frustrated. And she specifically portrayed an "ongoing small fly problem in the food area" as a threat to the rest of the facility. "The maintenance and structural issues (in the food area) that we went over ... remain the same," she wrote in February 2002. "It is imperative that we work together to get this problem under control." That same year, a flood of patient lawsuits -- accusing the hospital of lax infection control that led to serious infections -- caught the government's attention. In a rare death threat, Medicare warned it would yank funding from the hospital if it didn't address its concerns. The hospital resolved the matter, keeping its Medicare funding intact, early last year. But the hospital still got hurt. The Palm Beach Post reported last November that annual profits at Palm Beach Gardens had fallen by half in the fiscal year ending May 2003. However, the hospital -- one of only four with open-heart units in the state -- went on to say that business has picked up since that time. "We've recently seen an increase in admissions compared to last year," hospital CEO Mary Jo Gregory told the local newspaper. "The hospital is well on the road to recovery."