Nurses study: Tenet charges higher prices for drugs than other hospitals

Erica Werner

Monday, Nov. 25, 2002 | 11:11 a.m.

LOS ANGELES -- Hospitals operated by Tenet Healthcare Corp. charged more than eight times their actual cost for drugs -- and more than twice as much as other hospitals nationwide -- according to a study commissioned by the California Nurses Association.

The study set for release today found that the nation's second-largest private hospital chain, which is already under investigation by the federal government for its aggressive Medicare billing practices, in recent years raised its charges for drugs at hospitals nationwide to 736 percent above cost -- and 1,037 percent above cost at its 40 California hospitals.

Nationally, hospitals marked up drugs by 334 percent, according to the analysis, while California hospitals on average marked up drugs by 504 percent.

"As we looked at it and broke it out, it became fairly obvious that Tenet Healthcare was far beyond any other system," said Don DeMoro, executive director of the Institute for Health and Socio-Economic Policy, the nonprofit Northern California group that conducted the study.

While not specifically refuting the nurses association's data, Tenet spokesman Harry Anderson said the group has a contentious relationship with Tenet and is striking one Tenet hospital in Northern California and seeking to unionize another.

"I think some suspicion should be cast on this since it's being put out by an adversary that clearly has an ax to grind," Anderson said Sunday.

Hospitals' list prices for drugs and services are based on various factors and do not represent what they actually receive. Anderson emphasized that the study did not reflect how much patients or insurers were actually paying for the drugs. But setting high prices allows hospitals to receive more from the government and private insurers.

The nurses' study compared charges for drugs at the nation's more than 5,000 hospitals with actual costs of the drugs from 1993 to 1999 and 2000, the most recent available information.

Tenet said earlier this month that the federal government was investigating its so-called "outlier" payments, which Medicare -- the federal health program for the elderly -- pays to defray costs of the most expensive cases.

The probe of the Santa Barbara-based company, which owns or operates 113 hospitals and related businesses in 16 states including Lake Mead Hospital in North Las Vegas, was triggered by an insurance company reporting concerns over billings for a higher-than-average number of procedures, such as heart surgeries, that qualify for the payments.

Tenet has acknowledged an aggressive pricing strategy that it believes was legal but that "led to a consequence in Medicare outliers that was not what we wanted it to be and is not who we are as a company," Anderson said.

The federal government is also looking into allegations that two doctors at Tenet's Redding Medical Center performed unnecessary heart surgeries and other invasive surgeries. The U.S. Attorney's Office in Sacramento has said Tenet isn't a target of the probe, and the doctors haven't been charged with anything.