Are Tenet hospitals in your network?

Many benefits professionals and risk managers evaluate networks based, at least to some degree, on the thickness of the directory and the depth of the discount. The logic is – hey, the more hospitals in there, and the better the discounts, the better it is for my employees/claimants and the better it is for my bottom line.
Logical, and likely wrong.
Let’s take Tenet Hospitals as an example.
I recently completed an analysis of several networks for a client, who was initially impressed that one of the networks under consideration featured their national contract with Tenet, a large for-profit health care system with facilities in the southeast, Texas, California, and southeastern Pennsylvania. In total, Tenet has about 56 hospitals (some are in the process of being sold) and about $9 billion in revenues.
They also have one of the highest charge-to-cost ratios of any hospital or health care system in the nation.
A very thorough, albeit dated, report on hospital charge to cost ratios was underwritten by the California Nurses’ Association and published in 2004. Although the data is somewhat old, it is nonetheless revealing. For example:

• Of the nation’s hospitals with the highest charges compared to costs, seven of the top ten were Tenet facilities (three were soon to be sold)
• Tenet’s charge to cost ratio typically was several times higher than the national average
• 64 of the top 100 hospitals ranked by charge to cost ratio were Tenet facilities
• the top hospital was a Tenet facility with a ratio of 1092%

I’d note again that these data are old and Tenet has sold off some of these facilities. However, data from client medical bill repricing reports indicates high charge to cost ratios are still quite prevalent among Tenet facilities.
There is additional evidence that charging a lot has been a core business practice at Tenet, which has been charging more than other hospitals for identical procedures since at least 2000. According to one report describing an analysis of Tenet charge policies by the SEIU:
“Tenet’s California hospitals charged an average of $73,038 for pacemaker implants, 81 percent more than the $40,452 charged by non-Tenet hospitals, according to state government figures analyzed by the Service Employees International Union. Tracheostomies, at $569,672, were 69 percent higher at Tenet than in the rest of the state, where they average $336, 579. “Tenet is engaged in turbocharging,” said Steve Askin, health care research coordinator for the union in Los Angeles.”
And:
“From 1996 to 2001, Tenet’s average daily inpatient charge in Orange County grew 101 percent, compared with 28 percent for non- Tenet hospitals. Tenet’s charges for outpatient services here rose 119 percent, compared with 43 percent for its competitors, according to the data.
Last year, [2006] eight of the county’s 10 highest-charging hospitals belonged to Tenet. The Orange County hospital at the top of that list was Tenet’s Western Medical Center in Santa Ana. It billed an average of $9,453 a day per patient. That was $2,500 more than the highest non-Tenet hospital — UCI Medical Center — and nearly twice the countywide average.”
Look at Tenet’s website (or, for that matter, any other health care systems) for information about cost and cost-effectiveness . There are very few statements (and even less supporting data) regarding cost effectiveness, efficiency, or competitiveness. Lots of words about quality and patient care and how great their people are (all of which are important, and significant, and appropriate to be considered in evaluating network facilities).
What does this mean for you?
Discounts are not important – net costs are. Do not evaluate networks on the basis of how thick the directory is and how deep the discounts are. Hospitals that charge a lot can ‘discount’ a lot more than hospitals that don’t engage in charge inflation.
This is obviously critically important for group benefits administrators as well as work comp payers. It also is instructive when considering the potential for national health reform. I’ll dig into that tomorrow.