Reference no: EM132885448

Case Study: Tenet: Does Getting Lean Mean Getting Mean?

Tent Healthcare Corporation grew to become the nation's second-largest hospital chain by acquiring other health care providers and turning them into profit centers. When Tenet decided to enter a geographic area, it typically purchased two or more health care providers, consolidated their services, pooled their talent, and reduced their costs. One tactic for improving efficiency was to replace high-skilled jobholders, such as registered nurses, with lesser-skilled and lower-paid nurse's aides. Because of its size-69 general hospitals in 13 states-Tenet negotiated price concessions from many of its suppliers, saving it millions each year. Although Tenet's stockholders and managers seemed happy, many of its competitors believed the company's tactics ignored what was best for patients and their communities.

Tenet hospital CEO's are given an incentive plan, thus enlisting their help in and commitment to generating revenues. Such incentives put pressure on executives to raise their hospital prices to collect money from a special Medicare 'outlier' fund. This fund compensates hospitals for caring for sick than average patients by granting extra payments when the cost of a patient's care exceeds a threshold. On March 24, 2004 the Justice Department announced 'Tenet Healthcare Corporation has agreed to pay the United States $22.5 million to resolve allegations that one of its facilities improperly billed Medicare for millions of dollars for referrals provided by doctors with whom the hospital had prohibited financial arrangements. This settlement is the largest False Claims Act recovery the United States has obtained from a single hospital arising out of alleged violations of the Stark Statute. The Stark Statue prohibits hospitals from billing Medicare for services rendered to patients by doctors with whom the hospital has a financial relationship, unless the financial relationship falls within specified exceptions.

Questions:

1. In what ways might Tenet's drive for profits place patient care in jeopardy?

2. What ethical issues do you see in this case?

3. What issues relating to social responsibility exist for Tenet and its rivals?