Tenet to Discount Charges to Uninsured

Hospital chain is seen as setting a precedent. The offer is good regardless of income.

By Lisa Girion
Times Staff Writer

March 3, 2004

Making good on a year-old pledge, Tenet Healthcare Corp. said Tuesday that its hospitals would begin discounting charges to uninsured patients — a move expected to help the Santa Barbara-based company collect a higher portion of its bills.

A number of hospitals have instituted sliding fees and charity-care programs in response to criticism of the widespread practice of charging uninsured patients steeply higher rates than those negotiated by HMOs and Medicare. But Tenet, the nation's second-largest hospital chain, is believed to be the first to offer discounts to patients regardless of income or ability to pay.

The discounts, which will be rolled out through June, will vary by hospital and will be tied to the range offered to local managed-care providers.

Tenet runs 100 hospitals, though it plans to shed 27 by the end of the year as part of a turnaround effort. Facing several government investigations of its Medicare billing and other questionable practices, Tenet has blamed much of its financial difficulty on weak revenue and uncollected patient debt.

"Our Compact With Uninsured Patients represents a groundbreaking approach by Tenet to help solve one of our nation's most pressing problems," Tenet Chief Executive Trevor Fetter said. "The problem of the uninsured really belongs to all Americans and requires a national solution."

Patient advocates praised the move, saying it would pressure other hospitals to adopt similarly bold policies.

"We applaud Tenet," said K.B. Forbes, head of Consejo de Latinos Unidos, an East Los Angeles-based nonprofit group that challenged Tenet through lawsuits and publicity campaigns to change the way it charges uninsured patients.

"What they have done — adopt a universal, across-the-board price discounting plan — will force other hospitals to look," Forbes said. "They've said, 'You will be charged a reasonable rate that is fair, that is comparable to what an insured person will pay, and you will be given payment terms.' "

Tenet adopted its discounting plan more than a year ago as part of a settlement with Forbes' group. Pieces of the plan, including limits on collection efforts, took effect right away. But Tenet delayed the discounts until it was sure they would not jeopardize its participation in Medicare.

The company got the guidance it had sought on Feb. 19 when the U.S. Department of Health and Human Services announced that there was no federal regulation to stop hospitals from eliminating pricing tiers.

Tiered pricing schemes evolved under Medicare rules, which hospitals had interpreted to require a single, standard charge for every service. Medicare and HMOs negotiated discounts from the standard charge. But hospitals resisted granting similar deals to the uninsured.

Hospitals are required to accept uninsured patients to qualify as a Medicare provider, but they have complained of the rising cost of uninsured care. Although the federal government handed out $22 billion to hospitals for uninsured patient care last year, another $22 billion went unpaid, according to the American Hospital Assn.

Tenet's discount plan is a dose of good news for the scandal-plagued company because it could help Tenet reduce what it writes off as bad debt. Tenet collects an average of about 7 cents on the dollar for its care for uninsured patients.

"By offering a lower 'compact' rate … we are offering a more affordable bill, and we would expect them to pay more of that," Tenet spokesman Steven Campanini said. "You are lowering your booked revenue, and it could help us to reduce our revenues that are written off as bad debt."

The American Hospital Assn. issued guidelines in November intended to make hospital pricing more fair and predictable. Association spokesman Rick Wade said Tenet's discounting plan would promote those goals but wouldn't work at every hospital.

"There are some places, particularly larger hospital systems, that will look at what Tenet has done as a model for what they can do," he said. "There are smaller hospitals that will work something out that's more in line for their community. Every place will handle it a little differently. In the end, there will be some kind of predictability for people so they know they aren't going to come in and face the full charges."

On Tuesday, bad debt was among factors cited by Fitch Ratings in its decision to cut Tenet's senior unsecured debt to "B-minus" from "B-plus" and its bank facility rating to "B" from "B-plus," with a negative outlook.

A day earlier, Moody's cut its senior implied rating on Tenet by one notch to "B2," its fifth-highest junk rating, from "B1." It also cut Tenet's senior unsecured rating by two notches to "B3," its sixth-highest junk rating, from "B1." The outlook is negative.

Tenet shares fell 12 cents to $12 on the New York Stock Exchange.