Federal authorities search Tenet hospital in San Diego

Gary Gentile

Friday, Dec. 20, 2002 | 10:16 a.m.

LOS ANGELES -- Federal authorities served search warrants Thursday at the administrative offices of a Tenet Healthcare Inc. hospital in San Diego as part of an investigation related to physician recruitment and relocation, the company said Thursday.

The probe is the fourth to be launched against the embattled Santa Barbara-based company in recent months.

Search warrants sought by the U.S. Attorney's Office in San Diego were served on two administrative offices at Alvarado Hospital Medical Center, Tenet officials said in a statement.

Before the announcement was released, trading in Tenet stock was halted at the company's request on the New York Stock Exchange.

Tenet shares fell 11 cents to $17.04 before trading was halted. The stock fell $1.24, or 7.2 percent, in after hours trading.

Tenet said the warrants were served on the hospital's chief executive and director of business development.

Based on the information in the warrants, Tenet said it believed the investigation centers on "physician recruitment, relocation and consulting issues."

No patient care issues or problems relating to Medicare payments are involved, the company said. Tenet said it is cooperating with the investigation.

The San Diego U.S. Attorney's Office declined to comment.

Several financial analysts said the raid was an example of the microscope Tenet will be under for some time as it deals with state and federal investigations as well as shareholder lawsuits.

Analysts, however, maintained their ratings on the stock, saying Tenet has the resources to pay fines that may result from the probes and remains a sound company.

Earlier Thursday, a group representing California senior citizens filed a lawsuit in Superior Court in Los Angeles, charging that the nation's second-largest hospital chain overcharges patients and performs unnecessary procedures to boost profits.

A Tenet spokesman said the company had not seen the lawsuit and could not comment.

Tenet has been under fire since November when federal authorities launched an audit of Tenet's Medicare billing practices.

State and federal agents are also investigating whether two doctors at a Tenet hospital in Redding in Northern California performed unnecessary heart surgeries. The two have not been charged with any crime.

The probes led to changes in management and an admission by chief executive Jeffrey Barbakow that the chain engaged in aggressive pricing over the past two years.

The company -- owner of Lake Mead Hospital in North Las Vegas -- also is being investigated by the Securities and Exchange Commission, which is looking into huge trading volume in its stock preceding its announcements about the Medicare audit.