As Columbia/HCA Healthcare Corp. begins addressing its legal mess, its chief competitor and potential merger partner, Tenet Healthcare Corp., is winding down its own legal cleanup.
Santa Barbara, Calif.-based Tenet last week said it took a one-time, $134 million charge in its last quarter to resolve private litigation. The lawsuits against Tenet stem from psychiatric hospitals that belonged to the former National Medical Enterprises.
In the fourth quarter ended May 31, Tenet lost $339.5 million, or $1.10 per share, compared with earnings of $7.6 million, or 3 cents per share, in the year-ago period.
Net revenues for the quarter grew almost 16% to about $2.4 billion.
In its fiscal year ended May 31, Tenet lost $254 million, or 84 cents per share, compared with net earnings of $450.2 million, or $1.54 per share, the previous year.
Net revenues for the year rose 13% to $8.7 billion.
Tenet's losses reflect the fourth-quarter $134 million charge and costs of about $740 million related to its January acquisition of OrNda HealthCorp.
NME renamed itself Tenet in 1995 after its acquisition of American Medical International and the divestiture of its psychiatric hospital business.
The fourth-quarter charge settles about 700 lawsuits by former NME psychiatric patients. It also sets aside money for future settlements or legal fees related to the NME litigation. The lawsuits generally allege fraudulent billing and unnecessary hospitalizations.
A Tenet spokesman declined to comment on the value of the settlements, citing a confidentiality agreement. But a New York Times report last week placed their worth at almost $100 million.
Tenet spokesman Lance Ignon said the settlements resolved "a lion share" of outstanding civil lawsuits. Some 300 similar cases are pending in Texas and the District of Columbia.
This isn't the first time Tenet or its predecessor NME has paid big bucks to end legal battles.
NME agreed in 1993 to pay $15 million to settle 59 lawsuits by former patients at its Texas psychiatric hospitals. The patients accused NME of fraudulent billing and prolonging hospitalizations to collect more money.
Then in 1994 NME paid $379 million to the federal government and some states to settle civil and criminal fraud charges, again related to operations at its psychiatric facilities.
Recently, amid speculation about a possible merger with Columbia, Tenet agreed to pay the federal government almost $13 million to settle charges that several former OrNda hospitals had paid illegal kickbacks to doctors for patient referrals (July 28, p.14).