Tenet Healthcare Corp., Santa Barbara, Calif., said today that its problems with Medicare outlier reimbursements have spread to managed-care contract negotiations. The company acknowledged what analysts had been predicting -- that health plans are driving a harder bargain with Tenet than its competitors because of Tenet's prior strategy of rapidly increasing its gross charges. That strategy boosted reimbursements under the Medicare outlier program and the stop-loss provisions of many managed-care contracts. Both of those measures are designed to reimburse hospitals for treating the costliest patients. Because of its voluntary policy reducing outlier payments, Tenet expects 2003 outlier revenue to fall by $760 million compared to 2002. The company predicts that overall revenue for 2003 will be $13.6 billion, down about $300 million from 2002.
Tenet also said its second-quarter earnings would be far below analysts' expectations of 34 cents per share. Over the next 12 months, Tenet said, the company would earn 80 cents to $1 per share on continuing operations, not including any special charges. Tenet said that it expects to take such charges in the next 12 months but cannot estimate their value. Tenet owns and operates 114 hospitals, including 14 hospitals slated for sale or closure. -- by Vince Galloro