Five months after buying eight Allegheny Health, Education and Research Foundation hospitals out of bankruptcy for $345 million, Tenet Healthcare Corp. executives are trotting out early evidence of a turnabout.
Tenet spun the news, along with a healthy dose of peppy optimism, at Merrill Lynch & Co.'s healthcare services investors conference in New York last week.
Thomas Mackey, the Santa Barbara, Calif.-based company's chief operating officer, said the hospitals are performing "better than we expected at this point." Census levels-down 25% from prior-year highs at the time Tenet took over-have recovered about halfway, he said. Expense reduction efforts are paying off, too, saving $7 million annually on medical/surgical supplies alone.
That's welcome news, considering that Tenet estimated its Philly holdings squashed earnings by 2 cents per share in its third quarter ended Feb. 28. Overall, the company earned $124 million in the quarter, or 40 cents per share, down from 47 cents per share in the year-ago quarter.
Sold. Meanwhile, in Pittsburgh, the now-famous mansion once occupied by AHERF Chief Executive Officer Sherif Abdelhak was auctioned for $1.1 million last week as part of an ongoing effort to retire the bankrupt system's remaining debt.
The six-bedroom, seven-bath home, set on five acres, was the subject of local news articles about the wealthy lifestyles of AHERF officials. Abdelhak, who was fired in June 1998, received the residence as part of his 1990 compensation package but sold it that year for $938,000 to an AHERF spinoff company called Jellico. He paid $5,000 in monthly rent to live there but moved out after his dismissal.
A home bath. Companies that snapped up home health agencies at a premium as little as three years ago are now unloading them for a pittance, according to recent filings with the Securities and Exchange Commission.
The fire sales are the industry's reaction to Medicare reimbursement cuts for home nursing under the 1997 balanced-budget law.
To give just two examples:
Owings Mills, Md.-based Integrated Health Services disclosed it had sold part of its home health agency business for $12.7 million. The February sale, to Medshares/IHS Acquisition, an affiliate of Memphis, Tenn.-based Medshares, included 69 agencies with 251 locations. The sale works out to about $51,000 per location.
IHS acquired the bulk of its home health agencies in 1996, when it agreed to pay about $772,500 per site-$309 million in total-to acquire the 400 sites owned by First American Health Care of Georgia, Brunswick. That figure includes $155 million payable in installments starting next year.
Columbia/HCA Healthcare Corp., which also decided last year to leave the home health business, sold "substantially all" of its 327 agencies in 550 locations for $90 million, it disclosed in a recent SEC filing. That works out to about $164,000 per spot. Columbia reportedly paid $300,000 to more than $1 million per agency as it acquired them in the mid-1990s.
Policy wonks. HCFA may have bent a little on its policy on congressional testimony last week, but it sent an underling, not Administrator Nancy-Ann Min DeParle, to Capitol Hill.
The agency contends that policy requires HHS officials to testify before, not after, citizen witnesses do. So far, it has given no coherent reason for this policy, which has angered congressional Republicans. Last month, the agency got on the nerves of the Senate Special Committee on Aging by refusing to testify about nursing home quality enforcement (March 29, p. 72).
HCFA last week sent Carol Cronin, head of its beneficiary services center, to testify before the committee on aging about the accuracy of information provided by Medicare+Choice plans. The decision to send Cronin was made after the committee sent a notice stating that DeParle would appear as part of a panel of witnesses to testify after the regular folks.
Big Brother. James Sheehan, U.S. attorney for the Eastern District of Pennsylvania, who is feared for his aggressive prosecution of healthcare fraud, offered a tip to providers and their lawyers at last month's American Health Lawyers Association conference on Medicare and Medicaid issues in Baltimore. Sheehan warned attendees about the "Panda-Cam" his office has used in undercover fraud surveillance. He wasn't kidding.
"When you walk into the room, look for the stuffed animal," Sheehan said, only half jokingly.
Chillary. Democrats responded warmly to first lady Hillary Rodham Clinton's potential bid for a U.S. Senate seat from New York, but she was in for a cold-as in temperature-reception at the new Northwestern Memorial Hospital in Chicago last week.
Gary Mecklenburg, the hospital's president and chief executive officer, scored a public relations coup when he had both Clinton and Chicago Mayor Richard Daley on hand for a ribbon-cutting ceremony to christen the $580 million facility.
A local media circus-along with hundreds of invited guests-showed up.
The hospital, which has 2 million square feet of warm indoor space, held the ceremony, on a typically chilly spring day, in a driveway between the new inpatient and outpatient towers. One Northwestern employee inquired whether her lips were blue. Thank goodness the new hospital, scheduled to open May 1, didn't open in January.