A longtime critic of Tenet Healthcare Corp. slammed the company last week for not investing enough in its Florida hospitals, saying that was the reason physicians were losing confidence in Tenet and steering patients elsewhere.
The Dallas-based company defended its capital expenditure program and repeated its accusation that the critic, M. Lee Pearce, is hectoring Tenet to pressure it into buying Florida land from Pearce at inflated prices.
Investment bank research shows that Tenet's capital expenditures lag behind the largest for-profit chain, HCA, on a per-bed basis, but its figures are in the middle of urban- and suburban-oriented chains (See chart).
Pearce, an investor and physician, made the charge in a report he and his advisers compiled that aggregated financial reports that Tenet hospitals filed with the state of Florida. Pearce said that Tenet's 15 hospitals there lost $15.3 million on operations in 2004, compared with operating income of $269.4 million in the previous fiscal year, ended May 31, 2003. The hospitals accounted for $312.1 million of Tenet's $1.24 billion in asset impairment charges in 2004. The company operates 69 hospitals.
Jeff Villwock, a Pearce adviser, said in a news release that Tenet's acknowledgement that its first quarter had weak patient volume in Florida is particularly troublesome because that quarter generally is the strongest there.
"If Tenet did poorly in the first quarter, imagine how much worse operations are likely to be in the present quarter and over the summer months," he said.
Reynold Jennings, chief operating officer for Tenet, said last month a lot of the admissions weakness in Florida on a year-to-year comparison was brought on by a change that turned many short-stay admissions into observation days. Also, Florida specialists have been demanding greater payments to be on-call to cover emergency departments, he said. He also acknowledged that three of its Florida hospitals had other problems, including competition from two new South Florida facilities.
Pearce wants Tenet to replace its regional vice president overseeing Florida facilities, sell underperforming hospitals, reinvest the proceeds in the remaining ones and increase efforts to improve quality.
Tenet spokesman Steve Campanini said Pearce has been trying to goad Tenet into buying land near Tenet hospitals in Florida for five years. In response, a spokesman for Pearce said Tenet was "skirting" the issue. "The bigger problem is: What are they going to do to stop the bleeding?" Pearce's spokesman said.
Tenet's capital expenditure plans are public knowledge through securities filings and certificate-of-need applications, Campanini said. As examples of the latter, he noted an expansion of its Hilton Head, S.C., hospital; a replacement hospital in the Charleston, S.C., market; and an expanded cardiac program at one of its two hospitals in the Memphis, Tenn., area.
Chief executives at Tenet hospitals have been given more control of capital expenditures, with a higher limit for projects they can authorize within their budgets, Campanini said.