That divestiture will leave Tenet with two Philadelphia hospitals, Hahnemann University Hospital and St. Christopher's Hospital for Children. Even with its downsizing, Tenet officials say they plan to spend $800 million this year in capital improvements at their 57 remaining hospitals.

In a prepared statement, Trevor Fetter, Tenet president and CEO, says the decision to sell the three metro Philadelphia hospitals was made so that the company could focus on improving Hahnemann and St. Christopher's facilities. Tenet officials anticipate the sale of their three local hospitals may take up to a year to complete. According to industry sources, prospective buyers could include Community Health Systems of Tennessee, which owns five area hospitals; Jefferson Health System; the University of Pennsylvania Health System; and the Temple University Health System. While there is no asking price for the individual hospital dispositions, Fetter said during a conference call, "we anticipate proceeds of $250 million to $275 million in cash…once these sales are completed."

As for the company's settlement with the government, according to a statement from the US Department of Justice, several issues in its investigation, which were resolved by the settlement, arose from lawsuits filed by whistleblowers. They involved "outlier revenues," which are additional payments made to hospitals for treating the costliest Medicare cases. The government had alleged that Tenet collected more than $700 million in such payments in 2002 alone, including $108 million by its Philadelphia-area hospitals.

Assistant Attorney General Peter D. Keisler of the civil division of the US Justice Department said the settlement "reflects our continued resolve to hold responsible those who engage in health care fraud in any form. The department of justice will not tolerate fraudulent efforts by hospitals or other health care providers to claim excessive sums from the Medicare program."

In a statement following the Justice Department's announcement of the settlement, Tenet acknowledged receiving "significant outlier payments" to about 50 of its hospitals between 2000 and 2002. In late 2002, Tenet adopted a new method of calculating these payments that cut them by 90% effective Jan. 1, 2003. In the statement, Fetter says, "the company acknowledges that Tenet made mistakes in its conduct before 2003. . . Some of this company's past actions did not measure up to the high standards that we have imposed on ourselves since these issues first arose." A call to Tenet was not returned by deadline.

The sale of the three local hospitals won't be the first such dispositions for Tenet in metro Philadelphia. The company has closed or sold four medical properties since 1998, according to local real estate records. They were City Avenue Hospital, Parkview Hospital, Elkins Park Hospital and Medical College of Pennsylvania Hospital. Tenet entered the Philadelphia medical market in 1998 when it bought eight hospitals from the bankrupt Allegheny Health System.