Two Senior Executives Leave as Tenet Shakes Up Management

Two Senior Executives Leave as Tenet Shakes Up Management

Updated: Thursday, November 7, 2002 05:53 PM ET Dow Jones

SANTA BARBARA, Calif. -- Tenet Healthcare Corp. (THC, news) , under federal scrutiny for Medicare payments to its hospitals, announced two of its senior executives are leaving the company.

The hospital operator late Thursday said that David L. Dennis, 53 years old, who has been the company's chief corporate officer and chief financial officer since 2000, resigned. Chief Operating Officer Thomas B. Mackey, 54 years old, has retired, Tenet said. Mr. Mackey had worked for Tenet for 17 years and served as Tenet's chief operating officer since 1999.

Former Tenet executive Trevor Fetter was named to the newly created position of president. Mr. Fetter, 42 years old, will report to Chairman and Chief Executive Officer Jeffrey C. Barbakow.

Mr. Fetter served as chief financial officer and chief corporate officer in the office of the president at Tenet from 1995 to 2000. He currently is chairman and chief executive officer of Broadlane Inc., a provider of cost-management services to hospitals, which was spun off from Tenet in 1999. Mr. Fetter resigned as Broadline's CEO, but will continue to serve as its chairman.

Tenet's divisional executive vice presidents, who oversee the operations of its 113 hospitals, will report to Mr. Fetter.

Tenet named Stephen D. Farber, 33 years old, chief financial officer, succeeding Mr. Dennis. Mr. Farber has served as Tenet's treasurer and senior vice president of corporate finance since March 2000. He also will report to Mr. Barbakow.

Earlier this week, Tenet disclosed it had received notice from the U.S. Health and Human Services Department's Inspector General office in Kansas City, Mo., stating that it planned to conduct an audit of so-called outlier payments to Tenet. Outlier payments are made to hospitals by Medicare to compensate them for unusual cases that involve very expensive care.

The audit, expected to take at least nine months, will concentrate on certain components of the complex formula used to calculate outlier payments, Tenet has said.

"As I carefully studied our Medicare outlier situation over the last two weeks, it became clear to me that formulas that drive these outlier payments were affected by our overall pricing," Mr. Barbakow said Thursday in a prepared statement. "In some cases, particularly aggressive pricing strategies created increasing outlier payments. That's simply not the way I want to do business at Tenet, nor do I want such a perception to exist in anyone's mind."

Federal authorities also are investigating whether two heart physicians who worked at a Tenet hospital in Redding, Calif., performed unnecessary operations and other invasive procedures. Tenet hired an outside medical auditor and dispatched a team of investigators to Redding Medical Center to investigate. Attorneys for both doctors have denied the allegations.

The Redding Medical Center has one of the highest percentage of outlier payments of any hospital in the country, according to the Center for Medicare and Medicaid Services, which oversees the Medicare program.

Mr. Barbakow said forming a new management team and looking at pricing aren't signs of any impropriety.

The company affirmed its 2003 earnings outlook, but said it must "complete further analysis" before it offers long-term guidance.

"As for the long term, over the next several years, we had previously said that we expected mid- to high-teens growth each year, and some years higher. I reaffirmed this long-term guidance last week, but since that time I have new information regarding the impact of certain pricing strategies and a better understanding of the sustainability of these approaches," Mr. Barbakow said.

The news was reported after the close of trading Thursday. As of 4 p.m. EST, shares of Tenet were up $1.67, or 6.4%, to $27.95.

Diana Rosenberg; Dow Jones Newswires; 609-520-7817