Longtime observers of for-profit hospitals could be forgiven if Tenet Healthcare Corp. once again is reminding them of Columbia/HCA Healthcare Corp. circa 1997.
The Santa Barbara, Calif.-based company said it plans to consolidate 56 billing offices into eight regional offices in a three-year project that will cost $275 million and eliminate 300 jobs. The move mirrors steps taken by Nashville-based HCA, starting in 1999, to consolidate billing and collections in 10 "patient account services centers" across the country (July 22, 2002, p. 26).
It is just the latest Tenet announcement since its turmoil began in November 2002 that's reminiscent of the way the former Columbia/HCA reacted when the federal government's sprawling probe of HCA's Medicare billing practices became widely known in July 1997. Like HCA, Tenet has changed leadership, with its top three officials, including former Chief Executive Officer Jeffrey Barbakow, leaving the company. Like HCA, Tenet is looking to shrink, with 14 hospitals slated for sale or closure. Like HCA, Tenet has adopted some new corporate governance practices aimed at reassuring investors.
Tenet's latest effort will provide operating information about each hospital more easily and quickly to corporate management, Tenet spokesman Gary Hopkins said. Getting more information from the hospitals to the headquarters is likely to be key for Barbakow's replacement. The former CEO's position with investors was devastated last November when he had to acknowledge that he had no idea that the company's strategy of sharply increasing gross charges, or list prices (See related story, p. 10), was driving Tenet's Medicare outlier payments much higher than the industry standard. The revelation of those relatively high payments, combined with several federal probes, both related and unrelated to outlier payments, have caused the value of Tenet's stock to drop by about two-thirds since late October 2002.
Tenet said the project would cost $100 million in capital expenses and $175 million for installation and training. The patient-accounting software that will be installed already is used at 60% of Tenet's hospitals. A total of 2,900 workers will staff the billing offices, down from 3,200 at Tenet's current roster of 17 central billing offices and 39 hospital billing offices, the company said. Tenet owns and operates 114 hospitals.
HCA has said it spent about $100 million in capital expenses on its centers. HCA recently announced that it was scrapping an accounts-receivable software system that it was developing because the centers already were delivering many of the benefits HCA was expecting from the software system (May 26, p. 3).