LOS ANGELES Tenet Healthcare responds to U.S. probe

News of the management shuffle sent the chain's shares tumbling more than 30 percent.
LOS ANGELES (AP) -- Tenet Healthcare Corp. will review and possibly adjust its prices in response to the federal government's investigation of whether the company overbilled Medicare.
Tenet also said two of its top executives have left the company, the nation's second-largest hospital chain, which is based in Santa Barbara, Calif.
Thomas Mackey, 54, chief operating officer since 1999, retired after 17 years. David Dennis, 53, Tenet's chief financial officer since 2000, resigned. Trevor Fetter was named to the new position of president. Stephen Farber was promoted from treasurer and senior vice president to succeed Dennis.
The management shuffle was announced Thursday before a company conference call that stretched more than three hours.
Leery investors sent company shares tumbling more than 30 percent, or $8.70, in extended trading Thursday.
Jeffrey Barbakow, Tenet's chairman and chief executive, acknowledged to investors in a conference call that the company's "aggressive" pricing policy resulted in a higher-than-average number of special payments for costly procedures, such as heart surgeries.
He denied that Mackey and Dennis were forced to resign in response to the federal audit, saying they decided to step down because of the company's management restructuring.
Audit planned
The U.S. Department of Health and Human Services said Wednesday it will audit so-called government "outlier" payments at several Tenet hospitals. The payments are meant to reimburse hospitals for expenses above the rate Medicare pays for certain conditions.
Tenet's policy of pricing services higher than some competitors does not violate Medicare regulations -- but it does give a perception of the company that it ought not have, Barbakow said.
"The actions I am taking to form a new management team and to take a fresh look at our approach to pricing are not a signal that our fundamental strategy is flawed or the result of any impropriety," he said.
Barbakow said Tenet expects to outpace the national average for outlier payments because many of its hospitals have costlier open heart surgery and teaching programs.
But the main reason the payments were higher than average was Tenet's expensive prices, particularly at 11 of its 113 hospitals, which made up 56 percent of the outlier payments in 2002, the company said.
Seven of those 11 hospitals are in California, with three in Pennsylvania and one in Texas.
The company's outlier payments more than doubled between fiscal years 2000 and 2002. The payments totaled $763 million in 2002, $564 million in 2001 and $351 million in 2000, according to figures the company released Thursday.
The FBI, meanwhile, is investigating allegations that two doctors who practice at a Tenet hospital in Redding performed unnecessary heart surgeries. The Redding probe is not related to the Medicare audit.