Tenet Healthcare Corp. is putting nearly a third of its hospitals up for sale in a major restructuring that includes a $1.4 billion charge against earnings in the fourth quarter.
The nation's second biggest hospital chain said Wednesday the sale of 27 hospitals, including 19 in California, would lead to net losses for all of 2003 and 2004.
It will retain 69 hospitals in 13 states, and remain the second-largest hospital chain ranked by revenue.
Tenet shares plunged nearly 20 percent in trading Wednesday morning on the New York Stock Exchange, dropping $3.15 to $13.
Tenet said the restructuring was based partly on a new assessment of profit potential after dropping its previous method of collecting managed care revenue from the federal Medicare program.
The company also said the California buildings it hopes to sell would have cost $1.6 billion to retrofit under a state seismic upgrade mandate. The cost of seismic retrofits for the 17 remaining California hospitals will be only $300 million, company officials said.
Besides those in California, Tenet also plans to sell hospitals in Louisiana, Massachusetts, Missouri and Texas.
Tenet president and chief executive officer Trevor Fetter said a three-month review of all hospitals prompted the restructuring.
"We have made the strategic decision to concentrate our efforts on a core group of hospitals in order to produce tangible benefits in quality and service for the communities we serve and to create long-term sustainable growth for our shareholders," he said.
The company said it hopes to receive $600 million for the hospitals it sells, and plans to have most sold by the end of the year.
Tenet had 114 hospitals less than two years ago, but sold a number of them and has reported losses after it continued to receive lower revenue from Medicare reimbursement, paid a record settlement over charges of unnecessary surgeries at one California hospital, and became the focus of a number of federal investigations.
