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Settlement stirs up financial trouble for Tenet Healthcare

Compliance Monitor, January 11, 2005

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A $395 million lawsuit settlement entered by Tenet Healthcare Corp. has created further financial problems for the Santa Barbara, CA-based hospital operator, the Associated Press (AP) reported January 7.

According to reports and a Securities and Exchange Commission filing, the company "was forced to cancel an outstanding credit agreement and enter into a smaller one," the AP reported. Tenet initially had an agreement with Banc of America Securities on an undrawn credit line of $800 million. After the settlement, the credit agreement was revised down to $250 million.

According to the AP, the reduced credit line is not the end of Tenet's recent run of woe. In addition to the unnecessary cardiac procedures that produced the $395 million settlement, a former company administrator pleaded guilty last week to one criminal count of conspiring to pay kickbacks to physicians in exchange for referrals to a certain hospital. Tenet claims this case is due to a renegade employee and that the company itself and the facility in question--Alvarado Hospital Medical Center--had no part in the former executive's wrongdoing.

The AP also reported that Tenet is having a hard time making money and that its earnings are in a steady decline. The company expected its fourth-quarter earnings numbers to widen over already weak third-quarter figures.

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