Transformations:
On the Mend
CEO Trevor Fetter says Tenet Healthcare, once in critical condition, has recovered with a focus on clinical quality.
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Courtesy Tenet
Trevor Fetter knew he had his hands full when he returned to Tenet Healthcare Corp. (THC) as its president in November 2002, having previously served in several senior management positions at Tenet from 1995 to 2000, including CFO. He recalls that the U.S. government was investigating the company for unusually high Medicare charges at some of its more than 100 hospitals and that Tenet was facing multiple lawsuits alleging unnecessary procedures at one hospital. But what Fetter didn’t know at the time was how much worse things would get. He describes how, five weeks after his return, FBI agents raided a Tenet hospital in San Diego on suspicion of doctor bribery. He also says the U.S. SEC was investigating the company for not properly disclosing amounts of outlier Medicare reimbursement payments. “The company was in a lot of trouble with a lot of people,” says Fetter, who became interim chief executive in May 2003 and full-time CEO that September. “It was a colossal mess.”
Fetter, 50, didn’t hesitate to shake things up (see “By the Numbers”). “I told the management team, ‘Assume that this is your company and that you and future generations of your family are going to own it forever,’” he recalls. “‘What would be the important metrics that you would use to evaluate performance?’”
“I wanted the company to move beyond those problems far in advance of when they were actually resolved.”
Fetter worked hard to shield his people from the litigation. “I had a team of experts, including a lot of lawyers, working to resolve the legal problems,” he says. “I wanted the rest of the company to move beyond those problems far in advance of when they were actually resolved.” The settlements that resulted with the U.S. Department of Justice, the SEC and various state authorities required almost $2 billion and took four years to work out, the company says.
Today the slimmed-down Tenet (Fetter says the company obtained some of the funds needed for its legal settlements by selling off lower-performing facilities) is asserting a growing reputation for clinical quality. It says it operates 49 hospitals in 11 states, including California, Florida and Texas, down from 116 hospitals at the end of 2002, and has 57 outpatient clinics — significantly more than when Fetter arrived — that perform surgery on an ambulatory basis or administer tests such as MRIs and CT scans. Measured by revenue, Tenet says, it is the third biggest investor-owned hospital network in the U.S., after Hospital Corp. of America, a privately held company, and Community Health Systems Inc. (CYH).
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By The Numbers
Tenet reports that it is recovering financially too. Operating revenues increased 5 percent to just over $9 billion in 2009, with net income of $181 million, up from $25 million in 2008, marking the second consecutive year of profits after five years in the red.
The company says its improving fortunes are in part a result of quality improvements that Fetter set in motion. Its continued expansion of patient safety initiatives has, among other metrics, created a significant downward pressure on malpractice expenses, which Tenet says declined $89 million in 2009 from the 2008 level. An example of a safety initiative Tenet rolled out is a companywide protocol for reducing within-hospital falls that starts with analyzing the patient’s age, medications and physical condition, says Stephen Newman, Tenet’s COO.
