As retiring Tenet Healthcare Corp. President and Chief Operating Officer Michael Focht moves on, so will his employer.
Focht's decision to leave Santa Barbara, Calif.-based Tenet after 20 years parallels his company's decision to take a new path. Focht, 56, announced his May 31 retirement Jan. 14.
A company spokesman said Focht's impending departure is not connected with Tenet's decision last month to divest up to 20 of its hospitals (Feb. 15, p. 6).
"We now have the luxury of looking inward, focusing on our core business and realizing we won't grow at the same pace," said Chief Executive Officer and Chairman Jeffrey Barbakow.
Barbakow said he believes Tenet has completed its primary mission of the past five years-snapping up and digesting properties. He added that state regulators' increased scrutiny of Tenet's purchase of nonprofit hospitals and the completion of most large-scale deals means the rate of acquisitions will slow down.
Tenet had 33 acute-care hospitals five years ago; now it owns 129. Annual revenues in that time have grown to nearly $10 billion from slightly more than $3 billion, making it the second-largest for-profit hospital operator in the country. Deals were large and small, involving individual hospitals and big-system buyouts such as the purchase of American Medical International in 1995, OrNda Healthcorp. in 1997 and the bankrupt Allegheny Health, Education and Research Foundation late last year.
Although Barbakow has been credited with much of the company's growth since his arrival from the Metro-Goldwyn-Mayer film studio in 1993, Focht had the key role of giving the green light to transactions.
"The structures of deals were left to Jeff, but I was intimately involved in valuing certain companies. If I said, 'We don't want to buy it,' we didn't," Focht said in a recent telephone interview, during which he uncharacteristically took credit for accomplishments.
But Focht contributed far more to Tenet than decisions about transactions, Barbakow said. Barbakow selected Focht from the executive ranks of Tenet's predecessor, Santa Monica, Calif.-based National Medical Enterprises, to help transform a troubled company, which in the early 1990s was under federal investigation for billing practices associated with its psychiatric facilities.
"We joined the board the same day, and I had asked Mike to help fix some of the problems and build the new Tenet," Barbakow said. "Culturally, he's done so much along those lines. He used his incredible focus, integrity and energy to shape this company in all ways."
Within a year of Barbakow's assembling his management team, Tenet was formed with the acquisition of Dallas-based American Medical International for $3.3 billion. The cash and stock deal with AMI, a 38-hospital chain with $2.3 billion in annual revenues, doubled Tenet's size overnight.
Few observers are concerned about Focht's departure. He will remain a board member and become a consultant.
"A lot of companies go through this phase. It gives them the chance to reorganize, to sort things out," said Steve Valentine, president of the Camden Group, an El Segudo, Calif., consulting firm.
Two men will replace Focht in the president's office: Thomas Mackey, 50, executive vice president for western operations, and Chief Financial Officer Trevor Fetter, 39. They are widely praised by analysts. "They have good management bench strength," said Kenneth Abramowitz, healthcare analyst for Sanford Bernstein Co. in New York.
Barbakow said the Mackey-Fetter pairing in the president's office is a nod to the growing complexity of Tenet and the healthcare business. "Things aren't going to change all that much-the promotions that have been (given) are the logical ones," said John Hindelong, a healthcare analyst with Donaldson, Lufkin & Jenrette in New York.
Mackey, a 14-year Tenet veteran widely lauded for the smooth integration of OrNda's California hospitals into the Tenet network, will address future transactions. Mackey and Fetter will also take a closer look at operations.
