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The restatements stem from a previously disclosed investigation regarding contractual allowances for managed-care contracts.
Stephen Taub, CFO.com | US
January 19, 2006
Tenet Healthcare Corp. announced that it will restate its financial results for the four years ended in 2003 and the seven months ended December 31, 2002.
The restatements stem from an investigation disclosed last July, regarding contractual allowances for managed-care contracts, commissioned by Tenet's audit committee at the request of the Securities and Exchange Commission.
The hospital management company added that it will also restate its previously reported 2004 results to take an income-tax charge of $47 million as a result of these restatements and their effect on the company's deferred tax asset valuation. Tenet stressed the restatements will not impact the previously reported results for the first three quarters of 2005.
One effect of the revisions is that certain reserves that had been recorded earlier will be reversed, and certain revenues and expenses will be recognized sooner than originally reported, the company elaborated.
Tenet disclosed that the anticipated adjustments result primarily from contractual allowances and other reserves that lacked adequate supporting documentation or were otherwise inappropriate, as well as certain revenues and expenses that should have been recognized in these same earlier periods.
Trevor Fetter, Tenet's president and chief executive officer, said in a press release that an investigation that led to the restatement "did not find any widespread issues with contractual allowances for managed-care accounts across the company."
Last July, Tenet disclosed that the SEC had asked it to investigate the allegations of a former company employee, who asserted that inappropriate managed-care reserves may have been taken at three Tenet hospitals in California through at least fiscal 2001.
According to the company, so it could ascertain the existence of any systemic financial reporting problems, the audit committee directed that the investigation should also encompass an assessment of hospital managed-care contractual adjustments throughout the company for the past five years.
Tenet added that the probe found several other reserve issues unrelated to managed care contractual allowances for which the company will make adjustments as part of the prior-year restatements.