Tenet Moves to Cut Bad Debt

March 3, 2004 (PLANSPONSOR.com) - With a green light from federal regulators, Tenet Healthcare Corp. will offer discount pricing to uninsured patients at its hospitals with an eye toward ultimately lowering the amount it sets aside to cover bad debts.

Tenet is implementing the plan first announced two years ago after the US Department of Health and Human Services said that nothing in Medicare rules prevents hospitals from offering discounts to uninsured and underinsured patients who cannot afford their hospital bills, Reuters reported.

The latest move to cut bad debt comes as Tenet’s stock has plunged amid a series of missteps that led to the departure of its chief executive last year. The Santa Barbara, California-based company’s turnaround effort has been hampered by an industry-wide bad debt increase. In the third quarter of 2003, for example, Tenet’s provision for bad debt soared to $522 million from $260 million a year before.

But the discounts for the uninsured could give those patients more affordable hospital bills, decreasing the amount Tenet must set aside as unlikely to be paid. “By lowering the bills for the uninsured and increasing the amount that is paid on those bills, we hope to lower our bad debt ratio,” Tenet spokesman Steven Campanini told Reuters. “We’re pleased to be able to implement the compact: It’s fair for patients, its good business for us and its part of our turnaround.”

Rick Wade, an American Hospital Association spokesman, said the discounts do not completely resolve the hospitals’ problems. “What are we going to do about health insurance for these folks?” Wade asked, noting that a large number of people might not be able to pay their bills even after the discounts.

Tenet announced its “Compact with Uninsured Patients” January 2002 at the same time that it announced a settlement with Consejo de Latinos Unidos, a group that had filed lawsuits against Tenet claiming the company’s billing and collection practices were unfair. Tenet has also been investigated by various branches of the U.S. government over the past two years for the way it billed Medicare, for some hospital acquisitions and for its physician relocation agreements.

Under Tenet’s discount program, the company’s hospitals will provide financial counseling to uninsured patients and “reasonable payments and payment schedules.” The company’s compact says it will not pursue legal action for nonpayment of bills against a patient who is unemployed or without significant income.