Tenet Healthcare Corp. sale plan includes NLV hospital

Tuesday, March 18, 2003 | 10:53 a.m.

SUN STAFF AND WIRE REPORTS

SANTA BARBARA, Calif. -- Tenet Healthcare Corp., the second-biggest U.S. hospital company, plans to sell or consolidate 14 hospitals and reduce expenses as it revamps pricing practices that led to a U.S. government probe.

Among the hospitals to be sold is Lake Mead Hospital Medical Center in North Las Vegas.

Last year, Lake Mead Hospital was seventh largest in Southern Nevada by number of licensed beds available with 198. Led by Chief Executive Officer Jeff Comer, Lake Mead Hospital has 900 affiliated doctors and 580 employees.

Officials at Lake Mead Hospital just learned of Tenet's plan this morning and wanted to assess it before making a comment.

Tenet spokesman Steve Campanini said today that the company has begun a process expected to take several months to develop a list of qualified buyers for all the hospitals the company is divesting, including Lake Mead.

"As far as Lake Mead Hospital is concerned, it's very early in the process and it would be premature to discuss potential buyers," Campanini said.

He added that the company would be working with outside advisers, including brokers and investment bankers, to develop a list of qualified buyers and that the sale would be conducted in an auction format "to get the best value out of the facilities."

Tenet's profits were squeezed after the company abandoned a policy that allowed it to boost prices and get higher payments from Medicare. Tenet now plans to save $100 million a year through measures including job cuts, lower travel expenses and the sale of two of the company's three corporate jets.

The moves are "important early steps" in Tenet's efforts to revive earnings and win back investor confidence, Tenet President Trevor Fetter said in a statement. The government is auditing payments Tenet got for the sickest Medicare patients and the Justice Department also is investigating.

"These are low-margin hospitals, so it should improve their profit margins," said Legg Mason Wood Walker analyst Clifford Hewitt, who has a "buy" rating on Tenet and doesn't own shares. "It's better to reduce your size and be profitable than to just be bigger and not as profitable."

Tenet Chief Executive Officer Jeffrey Barbakow in November forced out his chief operating officer and finance chief and said some pricing was "particularly aggressive' and "not the way I want to do business."

Shares of Tenet rose 39 cents to $17.59 as of 10:05 a.m. in New York Stock Exchange composite trading today. The stock has lost more than half its value in the last 12 months.

The hospitals slated for possible divestment had revenue of $933 million and earnings before interest, tax, depreciation and amortization of $141 million in the 12 months ended Nov. 30, Tenet said. The list includes all four of Tenet's hospitals in Arkansas, two each in Pennsylvania, Tennessee and Missouri, and one each in Nevada, Texas, Florida and California.

The company, based in Santa Barbara, Calif., currently has 114 hospitals.