Tenet Healthcare Corp., Santa Barbara, Calif., said it will sell or close 14 hospitals in eight states, cut annual costs by $100 million and adopt more transparent accounting, all in an effort to rebuild its investors' shattered confidence. Modern Healthcare reported on Feb. 17 that Tenet was considering a major divestiture. Tenet's stock value has declined by two-thirds since a devastating series of revelations last fall, starting with a stock analyst's questions about the company's high Medicare outlier payments. Tenet said it will exit two states entirely -- selling its four Arkansas hospitals and its lone Nevada hospital -- and will sell or close selected hospitals in California, Florida, Missouri, Pennsylvania, Tennessee and Texas. The 14 hospitals combined generated $933 million of Tenet's $13.9 billion in revenue in fiscal 2002.
Tenet also said it will begin counting employee stock options as an expense on its income statements. A handful of companies, including Bank One Corp. and Coca-Cola Co., have announced plans to expense employee stock options, but no major healthcare services company has agreed to do so. In another accounting change, Tenet said it will switch the end of its fiscal year, currently May 31, to coincide with the calendar year. -- by Vince Galloro