November 03,2003

Grassley Urges Tenet to Provide More Documents to Committee

WASHINGTON – Sen. Chuck Grassley, chairman of the Committee on Finance, has urged the Tenet Healthcare Corporation to comply fully with his document request as part of the committee’s investigation of the company, and in keeping with company officials’ statements about their willingness to change the company’s culture.

The text of Grassley’s letter to the company’s chairman follows.

October 31, 2003

VIA FACSIMILE: (805) 563-7070
ORIGINAL BY U.S. MAIL

Edward A. Kangas
Chairman
Tenet Healthcare Corporation
3820 State Street
Santa Barbara, CA 93105

Dear Mr. Kangas:

In your letter dated October 10, 2003, you make assurances to the Senate Finance Committee (Committee), on behalf of Tenet Healthcare Corporation (Tenet), that you understand the Committee’s concerns about the appearance of conflict and lack of significant change in the corporate culture and management team at Tenet. In pertinent part, your letter states:

The integrity of our corporate culture and senior leadership is critical to resolving thesignificant issues we face. Our aim is to build a company known for the quality of both itspatient care and its people. In doing so, we have confidence in the management team we areassembling at Tenet, and in the direction the company is taking in terms of quality, ethicsand compliance. As you mention, of course, the proof is in the pudding. We could notagree more. We know we must demonstrate to you, and all of our constituents, significantprogress in restoring the reputation of this company. We intend to do so.

On September 5, 2003, the Committee requested documents and information from Tenetabout patient deaths and complications due to medically unnecessary heart surgeries and proceduresat Redding Medical Center (Redding/RMC). Through its attorneys, Tenet has been producingdocuments and information responsive to the Committee’s request. First and foremost, however,the Committee sought the findings and results of Tenet’s independent consultant, the Mercer HumanResource Consulting, Inc. (Mercer), a subsidiary of Marsh & McLennan Companies, retained toreview the cardiology program at RMC. Unfortunately, Tenet has chosen not to provide theCommittee with this critical information. Tenet and its attorneys assert that the responsivedocuments contain information protected under the attorney-client privilege and attorney workproduct doctrine.

As Chairman of the Committee, I am perplexed by Tenet’s decision not to share Mercer’sindependent findings of what happened at Redding. It is perplexing because there is no better wayfor Tenet to demonstrate its intent to restore its reputation and credibility to America’s taxpayers,the community of Redding, California, the employees, staff, physicians, and perhaps mostsignificantly, the patients at RMC (not to mention the Committee itself), than for Tenet to openlyand publicly reveal what went wrong at Redding. It is especially shocking in light of the fact thatTenet proclaimed so publicly that it would get to the bottom of the problems at RMC.

Tenet not only took upon itself an affirmative obligation to investigate the events at Redding,it implicitly took upon itself the obligation to disclose what failures occurred at Redding. OnNovember 1, 2002, three days after the Federal Bureau of Investigation (FBI) raided RMC, Tenetheld an extraordinary conference call for its investors and the investor community. Those invitedto sit in on the call included a virtual who’s who of Wall Street financial institutions, including:Bank of America Securities, Credit Suisse First Boston, Goldman Sachs, J.P. Morgan, LehmanBrothers, Merrill Lynch, Morgan Stanley, and Salomon Smith Barney, among others. Mr. JeffreyBarbakow attempted to reassure Wall Street, saying:

Tenet's stock has come under tremendous pressure this week, beginning Monday with aresearch report raising questions about Medicare outlier payments, then continuing witherroneous rumors throughout the week, and then yesterday with a report of an investigationinvolving one of our hospitals in northern California. Our ability to communicate quicklyand fully throughout the week has been hampered . . . Those of you that know us know thatwe value our investors and try to be as open and available as we can . . . Throughout thisweek there have been many erroneous rumors creating turmoil in our stock. (emphasis added).

Mr. Barbakow, and five other Tenet representatives, spoke for well over two hours andpointedly stated that he wanted to “answer your questions.” Addressing the FBI’s raid at Redding,Mr. Barbakow said, “[w]e are cooperating fully with federal officials in their investigation and weare conducting our own investigation.” Further, he emphad to all participants, “I want to clarifythat we have no reason to believe that this is anything other than an isolated instance involving thesetwo physicians practicing at one hospital.” Before turning things over to Ms. Christi Sulzbach toexplain the “appropriate steps to ensure that quality has been and continues to be provided for allpatients,” Mr. Barbakow made a personal plea to Wall Street:

I became Chairman and CEO during a time of terrible turmoil, when the company'scredibility was nil. It took years for us to earn our credibility back. Years. And it was hardwon. I am not willing to lose that. The innuendo and rumors of this week are personallyoffensive . . . I need first to ensure that our hospitals and our managers are doing the rightthing. And are living up to our standards. In Redding, and everywhere else. And I need todemonstrate to all of you that you can trust this company and that you can trust me.(emphasis added).

It is not necessary to rehash Tenet’s history of profiting at the expense of its patients againhere. Needless to say, it appears that Tenet’s immediate concern in the aftermath of the Redding raidwas to calm Wall Street by promptly taking action to demonstrate that Tenet itself was not at fault,but that two rogue doctors were to blame. Next, Ms. Sulzbach took over the conference call andmade the following representations with regard to Tenet’s plight with RMC:

The hospital believes that it has the appropriate utilization review and quality managementprocesses in place to ensure that all care that is rendered to its patients is appropriate. Thehospital continues to monitor these processes and to take all appropriate corrective actionas necessary . . . We are going to do two things . . . we are going to retain an independentcardiologist, at least one, maybe two, because we have a cardiologist and a thoracic surgeonhere, to do a retrospective review of the patient medical records that are at issue here. Inaddition to that, we are going to implement a concurrent review process so that if thesephysicians schedule procedures at the hospital, that we will have an independent physicianreview the patient medical records to ensure that in fact they agree, that person agrees, thatthe procedure is necessary.

In the following days and weeks, Tenet made further public statements attempting to calmWall Street. A company press release issued three days later, on November 4, 2002, announced,“Tenet ... has hired the national medical audit practice of The Mercer Consulting Group, a respected,independent medical utilization expert to assist in reviewing treatments performed by the two doctorsat Redding. Mercer will, in turn, hire independent, expert cardiologists to review patient records andinternal documents regarding the cases.” On November 7, 2002, the Report on MedicareCompliance reported, “Tenet’s Senior Legal Counsel, Cheryl Wagonhurst, said a multidisciplinaryteam is conducting a review of Redding's cardiac surgery, and so far ‘we have no evidence to supportthe [notion] there was any wrongdoing.’” With its stock continuing to struggle, Tenet attempted toreassure Wall Street in yet another company press release on November 18, 2002:

Since allegations were raised regarding possible unnecessary care by two physicians whopractice at Tenet’s hospital in Redding, Calif., some have questioned the quality of ourprograms and controls in other Tenet hospitals. In light of this, we have initiated a reviewof compliance and quality at Tenet hospitals nationwide. This is in addition to the rigorousprocesses already in place. Last week, we assembled a team of experts in the areas ofCompliance, Quality Management and Medical Affairs to design and launch this additionalreview. This team includes internal resources, as well as outside counsel and experts fromMercer Consulting, a national quality management consulting firm. The purpose of thisreview is to ensure that our existing internal systems relating to quality, peer review andcompliance are operating correctly.(emphasis added).

A few months later, with its stock having fallen back close to the rock bottom levelsexperienced after the raid, Tenet apparently lost faith that independent findings would reassure itsstockholders and investors. Quoting a Tenet spokesperson on April 28, 2003, TheStreet.comreported that, “‘Tenet will not be commenting on the status or outcome of its internal investigationat Redding . . . [and] it’s unlikely we’ll be releasing the Mercer review when it’s completed.” Laterthat summer, on July 7, 2003, The Redding Record-Searchlight reported a Tenet spokesman saying,“the Mercer report is based on ‘private patients’ records’ and that federal law prohibits disclosureof the information. ‘It’s kind of a moot point anyway because the doctors are no longer practicingat the hospital . . ..’” Apparently, it was easy for Tenet to make assurances and promises todemonstrate that “existing internal systems relating to quality, peer review and compliance [were]operating correctly [at RMC],” when it was self-serving to do so.

Presented with independent findings of what happened at RMC, Tenet has chosen towithhold that information from the Redding community. A few days later, however, Tenetapparently did not hesitate to share similar, but self-serving, information about another of itshospitals. On July 10, 2003, the Los Angeles Times (The Times) published an article about seriousproblems at Tenet-owned Queen of Angels-Hollywood Presbyterian Medical Center (Queen ofAngels). According to the The Times, the California Department of Health Services (CDHS)discovered some startling failures in the peer review process at Queen of Angels:

When state health inspectors looked through the files of thoracic surgery patients at Queenof Angels . . . they spotted a big problem. Some cases in which patients had died orexperienced severe complications hadn’t been reviewed by a panel of physicians, as requiredby law, to determine if the care was proper. That suggested that, at the very least, thatsurgeons might not be learning from mistakes. At worst, it could mean that bad doctorswere practicing unchecked, endangering patient lives.

CDHS inspectors ultimately said the hospital board was at fault for failing to take responsibility forpatient care. The L.A. Times also reported that the hospital board had retained Mercer to review theproblems at Queen of Angels:

After scrutinizing dozens of files, Mercer identified major problems that hospital doctorsdidn’t, administrators said. In particular, four top members of the medical staff . . . werefound to have provided inferior care, including unnecessary procedures and overlyaggressive treatment, according to interviews and a summary prepared by the hospital forThe Times.(emphasis added).

Evidently, Tenet believes it can pick and choose when it will release Mercer’s independentfindings about problems at Tenet hospitals. When it appears self serving, such as when Tenet seeksto place blame elsewhere, Tenet will release information. However, in other instances, such as withRMC, Tenet will proclaim that it hired Mercer, but then choose not to share Mercer’s independentfindings.

Your recent letter to the Committee closed saying, “this board will take whatever action isnecessary to deal with Tenet’s issues in a forthright and productive manner.” My Committee staffhave informed me that Tenet’s attorneys will shortly provide the Committee with its detailedarguments as to why the Mercer documents may be protected under the attorney-client privilege andattorney work product doctrine. Regardless, in my opinion Tenet owes a duty to RMC patients,physicians, staff, the Redding community, and America’s taxpayers to share what it knows. Simplysaid, Tenet must know that, sooner or later, what happened at Redding will come to light.

Finally, Tenet’s announcement today that the U.S. Attorney’s office in Los Angeles issueda new request for documents “primarily regarding certain cardiac physician arrangements, coronaryprocedures and billing practices at three Los Angeles-area hospitals owned by Tenet subsidiaries. . . [including] Centinela Hospital Medical Center, Daniel Freeman Memorial Hospital and USCUniversity Hospital” adds to my concerns about Tenet’s corporate governance practices with respectto federal healthcare programs. In light of this latest development and my doubts about the Mercerinformation, I request that Tenet comply with the attached request for documents.

If Tenet fails to fully comply with the Committee’s requests, as Chairman of the Committee,I must consider all options to compel the production of critical information, including the issuanceof a subpoena.

Sincerely,

Charles E. Grassley
Chairman

cc: Mr. Trevor Fetter
Chief Executive Officer and President
Mark Willett, Government Relations
VIA FACSIMILE: (805) 682-5462


THIRD REQUEST FOR DOCUMENTS

1. From October 1, 2002 to the present, all E-mails relating to Mercer, sent to or from any ofthe following: Mercer; any member of RMC’s “Administrative Team”; any Tenet officer;any Tenet director.

2. From October 1, 2002 to the present, all documents, including but not limited to anycommunication (not including E-mails) relating to Mercer’s review of the cardiologyprogram and all related programs at RMC.

3. The findings and results of any Mercer review performed on behalf of Tenet relating toQueen of Angels–Hollywood Presbyterian Medical Center.

4. All documents relating to any actual or proposed contractual arrangement, whether writtenor oral, between Tenet and Mercer relating to Queen of Angels–Hollywood PresbyterianMedical Center.

5. From 1998 to the present, all E-mails relating to Mercer and/or peer review, sent to or fromany of the following: Mercer; Queen of Angels’ “Administrative Team”; any Tenet officeror director.

6. From 1998 to the present, all documents, including but not limited to any communication(not including E-mails) relating to Mercer, between any of the following: members of Queenof Angels’ “Administrative Team”; any Tenet officer or director.

7. From 1993 to the present, the findings and results of any Mercer review published by Tenetor ever publicly available, in whole, in part, or in summary, to any person or entity.

8. All documents, including, but not limited to subpoenas or document requests received byTenet from the United States Attorney’s Office for the Central District of California relatingto Centinela Hospital Medical Center, Daniel Freeman Memorial Hospital and USCUniversity Hospital.