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
"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
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
"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.' "
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.
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
"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.