N.O. Hospital Pledges To Rebuild

Tenet Healthcare Corp., whose two major hospitals in New Orleans have been closed since Hurricane Katrina and which is under investigation into patient deaths at one of them, says it will spend "hundreds of millions of dollars" to build a new health care system in the region.

"We were a major health care provider here before the hurricane. We still are after the hurricane," Reynold J. Jennings, the company's chief operating officer, said from New Orleans.

Tenet had been the largest private hospital company in the region. But its Memorial Medical Center and Lindy Boggs Medical Center remain closed indefinitely, while three suburban New Orleans hospitals, NorthShore Regional Medical Center in Slidell, Kenner Regional Medical Center and Meadowcrest Hospital in Gretna, are gradually returning to service.

Tenet plans to reopen four medical offices at Memorial and two at Lindy Boggs in three to four months, which will let doctors resume their practices, and to reopen a cardiac surgery institute at Memorial within six months.

Jennings said the prospects of reopening 347-bed Memorial "don't look good" because flooding in the lower two floors caused extensive damage. He said 188-bed Lindy Boggs suffered less structural damage and reopening it could depend on insurance settlements.

The company also plans to link its three suburban hospitals with the New Orleans hospitals to create a health network known as NOLA Regional Health Network.

The announcement sent Tenet stock falling. The shares dropped 53 cents or 5.8 percent, to $8.59 in afternoon trading on the New York Stock Exchange. They have shed more than 30 percent since Katrina.

The New Orleans and coastal Mississippi region hit by Hurricane Katrina accounted for $600 million or 6 percent of Tenet's 2004 revenue. The company hasn't disclosed damage estimates for the hospitals. It has $1.6 billion in cash and $1 billion in property insurance, although coverage of flood damage is limited to $250 million.

Jennings said insurance would cover most costs of rebuilding, minus a deductible that he said "we can handle."

Memorial Hospital, which opened in 1926, was nearing replacement age, and Tenet could use this chance to build a smaller, more modern health care system in New Orleans, said Joseph Chiarelli, an analyst for Oppenheimer & Co.

"Hospitals don't need to be as large as they used to be," Chiarelli said. "Stays are shorter, and a lot more can be done on an outpatient basis."

Company officials said their plans to rebuild in New Orleans won't be affected by the outcome of a Louisiana investigation into the discovery of more than 40 bodies at Memorial when Katrina's flood waters receded. The state attorney general is investigating reports of euthanasia and is awaiting autopsy results, a spokeswoman said Monday.

Tenet officials say some of the patients died before the storm and were placed in the hospital morgue, and that more than half of the rest were patients in an acute-care facility run by another company not affiliated with Tenet.

Results of the autopsies could determine whether Tenet faces criminal or civil charges. Plaintiff attorneys say Tenet was unprepared and reacted too slowly to the rising water until Memorial became an island, with no power and no immediate way out.

"They had days of warnings to evacuate. If they had moved those patients in the first place, we wouldn't be having this argument," said Jeff Rasansky, a personal-injury lawyer in Dallas.

When Hurricane Rita threatened Houston three weeks after Katrina, Tenet dropped satellite phones at its local hospitals, hired armed security guards and reserved two helicopters if it needed to evacuate patients by air, steps it didn't take in New Orleans.

Tenet argues that it was a victim in New Orleans of inadequate levees and a slow government response to the disaster. It says doctors and nurses at Memorial performed heroically to treat patients as backup generators were swamped and conditions became hellishly hot.

Even before Katrina, Tenet was a troubled company. It hasn't earned a profit since 2002, about the time news surfaced that a Tenet hospital in California performed unnecessary heart bypass surgeries, which led to a $395 million payment to settle victims' claims.

Tenet is on trial in San Diego on charges of bribing doctors to use one of its hospitals. The case is expected to go to the jury this week. Federal prosecutors around the country are investigating similar allegations at other Tenet hospitals. Last week, the company's chief financial officer decided to leave.

The drumbeat of legal problems has taken its toll on Tenet's relations with doctors, which hospitals need for their patient referrals. Tenet is losing ground to rivals in hospital admissions.

The ghastly scene at Memorial, which contrasted with the lack of deaths at a nearby HCA Inc. hospital. could make doctors even more reluctant to use Tenet, said Sheryl Skolnick, an analyst for Fulcrum Global Partners.

"Seventy-five percent of their doctors have already left," Skolnick said. "If I'm a doctor in the Southeast, am I going to send my patients to Tenet, knowing that they were clearly scrambling more than HCA?"