NEW YORK – Tenet Healthcare Corp. (THC) said Monday it has met with Securities and Exchange Commission officials about Medicare reimbursement, but its stock rose on a disclosure that it bought back shares last week.
Tenet stock was up $1.51, or 9.3 percent, at $17.84 in midday New York Stock Exchange trade.
CIBC World Markets analyst Charles Lynch said Tenet's statement that it repurchased 10 million shares last week alleviated investor fears.
"That's a decent amount of money to commit," Lynch said. "It provides better direction than before that the company would be willing to commit capital to buying its own stock."
This comes after a series of negative events slashed more than 60 percent of the company's market value since Oct. 25.
Tenet said it does not know whether the SEC plans to launch a formal investigation.
The No. 2 U.S. hospital chain behind HCA Inc. said the SEC called the informal meeting last week to discuss various matters, including its past high volume of "outlier" billings — above-average charges for exceptional levels of care to patients — to Medicare.
The company said it expects auditors from the Department of Health and Human Services to spend several months reviewing the way Tenet billed the Medicare program and that it also expects additional regulatory scrutiny of its affairs.
Tenet said it did not know how many of its hospitals will be audited, but the focus would be on those receiving the highest outlier payments.
Auditors "would first test an audit tool at a single Tenet hospital and then would expand to a sampling of other Tenet hospitals," the company said.
Tenet acknowledged that an "aggressive" pricing strategy led to high outlier payments that represented about $763 million in revenue for the fiscal year ended May.
The company also said the SEC meeting focused on the unusually high trading volume of its stock. It said regulators asked whether it knew of unusual trading by third parties before Tenet's announcements.
After the repurchase of 10 million shares, Tenet said it will not enter the market to repurchase its own stock until after it announces second-quarter results in early January.
The company said it is in full compliance with its credit agreements and has generated $2.5 billion in operating cash flow and $1.6 billion in free cash flow for the 12 months ended in August.