When Trevor Fetter returned to Tenet Healthcare Corp. last November, one of the first things Fetter says he did was call Tom Scully, administrator of the Centers for Medicare and Medicaid Services. Fetter, now Tenet's president and acting chief executive, and Scully had become well-acquainted when Scully ran the Federation of American Hospitals and Fetter, then Tenet's chief financial officer, served on its board from 1997 to 1999. Earlier this year, Fetter rejoined the board of the federation, which lobbies federal lawmakers for investor-owned hospitals.
That November phone call was mostly a courtesy call, but a month later, both men say they had a more substantive phone discussion.
Fetter, 43, had rejoined the company Nov. 7 amid the turmoil brought on by the revelations that Tenet's Medicare outlier reimbursements were significantly higher than most of the rest of the industry-as a percentage of Medicare inpatient reimbursements, their outlier reimbursements were four times the average.
"Tom in late December was very firm in telling me that, in his very, very strong opinion, the right thing to do for Tenet would be to voluntarily shut off the outlier payments," Fetter says, recalling the conversation during an interview at Modern Healthcare's Chicago office. "Although he had been very consistent in saying that what Tenet had done was within the law, he'd also been consistent in saying that it was wrong, and he expressed the opinion to me that we ought to immediately cut off the payments.
"I took his advice very seriously and did it."
Interviewed by phone, Scully says the U.S. Justice Department and HHS' inspector general will have to decide whether Tenet's conduct was legal, but he confirms that he was clear with Fetter that Tenet could "quit billing me unilaterally, or I'm just going to keep pounding you" for behavior on outliers that is "outrageous."
"They at least had the decency to stop Jan. 1," Scully says. "To be honest with you, if Trevor and I didn't have a good relationship, I'm not sure that would have happened."
From the studio lots of Hollywood to the patient wards of Tenet, Fetter's career shows that he values relationships, and not just with the powerful people he's cultivated, such as Scully and Jeffrey Barbakow. With Barbakow's resignation last week as chief executive officer of Tenet, Fetter was named acting CEO of the Santa Barbara, Calif., company and is a candidate to replace his longtime boss. Barbakow will relinquish his post as chairman and step down from Tenet's board in July.
Since Fetter returned to Tenet, a lot of the major steps the company has taken also can be seen as attempts to build or mend relationships. These include signing an important labor pact with a pair of formerly antagonistic unions in California; seeking regulatory approval to grant managed-care discounts to uninsured patients; and, bowing to the demands of shareholders, remaking its corporate governance procedures and switching Tenet's fiscal year to the calendar year. Tenet also realigned its hospitals into two divisions from three and has slated 14 hospitals for sale or closure.
Most of that relationship-building has taken place while working for Barbakow, who has twice hired Fetter for major positions with Tenet, which owns or operates 114 hospitals. Barbakow and Fetter first worked together in Merrill Lynch & Co.'s Los Angeles office, starting in 1986. It was Fetter's second stint with Merrill Lynch, sandwiched around his earning an MBA at Harvard Business School.
At Harvard, Fetter displayed the penchant for being low-key that he has employed throughout his career. A classmate, Jim Ryan, says Fetter's understated approach distinguished him in an environment where many ambitious students are clamoring to be at center stage. "But in talking to him," Ryan says, "you knew his brain was working a lot faster than his outward expressions (would indicate)."
Ryan and his wife had dinner a handful of times with Fetter and his wife, Melissa Foster Fetter, but they fell out of touch after graduating in 1986. Ryan didn't hear from Fetter again until 1998, three years after Ryan's wife had died of cancer. "He took the time out to write me a note, and I haven't seen him since 1986," says Ryan, who runs a real estate management and development company in Rochester, N.Y. "I always wanted to get back to him and tell him how much I appreciated it."
In 1988, Barbakow left Merrill Lynch to become chairman, president and CEO of Metro-Goldwyn-Mayer/United Artists, a Merrill Lynch client, and Fetter followed as a senior vice president for MGM, Culver City, Calif. In 1991, Barbakow left MGM when the company was sold, and by 1993 he was leading another Merrill Lynch client-Tenet's predecessor company, National Medical Enterprises, Santa Monica, Calif. Fetter had stayed behind, eventually becoming MGM's chief financial officer. It was the last time Barbakow wasn't Fetter's boss.
Harry McMahon, who succeeded Barbakow as head of Merrill Lynch's Los Angeles office and now is co-head of global corporate finance for the firm, says people in the entertainment industry took note of the job Fetter did of reducing MGM's debt and imposing financial discipline, despite his efforts at keeping a low profile.
Fetter had a bright future in that bright-lights world, McMahon says, because "his skills are in short supply in the entertainment industry." McMahon says: "The combination of sophisticated financing skills and high integrity, in my experience, is a powerful mix, and he's got that going for him."
But two years after Barbakow left for NME, and just a few months after NME had acquired Dallas-based American Medical International and renamed itself Tenet in March 1995, Barbakow came calling on Fetter.
`My industry now'
"He approached me about joining Tenet as CFO, and I knew nothing about healthcare," Fetter says. To get up to speed, Fetter cloistered himself in a hotel room for a day with healthcare consultants from McKinsey & Co. who were conducting a conference at the hotel. "By the end of the day," he says, "I was absolutely fascinated with it from an intellectual point of view. I still wasn't sure I was wild about going into the healthcare industry."
That changed when Fetter met Michael Focht Sr., a healthcare veteran who retired in 1999 as Tenet's president and chief operating officer. With Focht available as a teacher and the opportunity to help lead a company that was in its formative stage, Fetter leaped across the chasm dividing two very different worlds-entertainment and hospitals. Neither world could figure out why he had leaped.
"It's a decision that shocked all of my friends in the entertainment industry and colleagues that I'd had at MGM," Fetter says. "I was greeted with some degree of suspicion by people at Tenet who thought, `Well, what can this guy from the movie business possibly know about our business?' "
Fetter joined Tenet as executive vice president in October 1995 and became CFO a few months later. Early on, he spent a week shadowing one of Tenet's hospital CEOs. Fetter acknowledges that he occasionally faces some skepticism from Tenet hospital administrators.
Not having worked his way up through the ranks is "sort of my cross to bear," he says, but "it also gives me a different perspective. I think that the industry could use more new perspectives. It is an industry that is badly in need of innovation, and one of the ways that we get innovation is to think different." And, as Fetter points out, he's spent eight years working in healthcare, compared with seven years at MGM. "I consider this my industry now," he says.
Stepping off `Tenet island'
Although no one could have guessed it at the time, Fetter's next job was ideal preparation for his return to Tenet. Barbakow tapped Fetter to find a CEO for Tenet's materials management department, which was being spun off in 2000 into a separate company known as Broadlane, based in San Francisco. Tenet owns a two-thirds stake in Broadlane. But after Fetter interviewed three candidates for the job, he decided he wanted it for himself.
Starting with 26 other former Tenet employees, Fetter built a team that had grown to 280 employees by the time he returned to Tenet in November 2002. Just as important to Fetter as the experience of building a management team was the chance to learn about the hospital industry's dominant not-for-profit side in meetings with executives across the hospital industry.
Fetter says he learned just how risk-averse the hospital industry is as a whole. Broadlane's most adventurous clients were either investor-owned hospital companies with the fattest margins or hospitals that were about to go bankrupt. Those in the vast middle ground took a wait-and-see approach to cost-cutting initiatives pitched by Broadlane, because, he says, drawing an analogy to the movie business, "No one in development ever gets fired for saying no to a movie. You get fired for saying yes to a bad movie, but nobody ever intends to make a bad movie."
Such risk-aversion has a cost, Fetter says. "If you ever want to truly drive change in healthcare in America, that has got to change," he says. "Seeking better performance has to become ingrained in the culture." Fetter says going to Broadlane let him "step off the Tenet island and see it from the mainland." He returned to Tenet as a more demanding manager, he says, who has "seen the power of a lean, cohesive team in operation and what it can accomplish."
Fetter returned to Tenet at the behest of Barbakow, who described him as "a very skilled, innovative and very candid executive" in a presentation to investors. "I am very gratified and pleased, personally, to have him back on board at Tenet," Barbakow said. "In three weeks, he has been able to accomplish what would have taken a complete outsider at least six months."
Fetter describes his longtime boss as "an incredibly nice guy" who is very pleasant with and trusting of his subordinates. "Those are attributes that have served him well over a very long period of time," Fetter says. "They did not serve him well the past couple of years." Barbakow, Fetter notes, was perceived "as a genius" for the first 91/2 years that he ran NME/Tenet.
Scully says rehiring Fetter was an important signal by Tenet that the company was serious about changing. "We spent a lot of time together at the federation, and one of the things that I like about Trevor is that he's a straightforward, honest guy," Scully says. "If the hospital industry had more guys like him, it would be better off."
Fetter says he has been working "24/6" since his return, devoting one day a week to his wife and their daughter and son. He starts his day reading three newspapers, then checks the Bloomberg news wire when he arrives at the office; and he enjoys communicating via e-mail. Within Tenet, he says, "I like to have relationships with people who are at all different levels of the company," something that e-mail facilitates.
Fetter says he doesn't subscribe to any big-picture management theories, instead preferring a decisionmaking process that relies on facts and experience. But, pressed to express a central truth or an organizing thought to his view of the business world, Fetter singles out one idea, or tenet, if you will.
"I suppose the thing that I see again and again and again is that the most dangerous attribute for any company is hubris," Fetter says. "Virtually every story that you can find of a fallen company has at its heart some excessive amount of self-confidence. It's incredibly important for companies-and this is something that we're doing at Tenet today-(to be) questioning assumptions, looking around the corner and seeing what others in the industry are doing."
President, Tenet Healthcare Corp.
Santa Barbara, Calif.
Birthplace: San Diego
Family: Wife, Melissa Foster Fetter; daughter and son, ages 12 and 8
Education: Bachelor's degree in economics, 1982, Stanford University, Palo Alto, Calif.; master's in business administration, 1986, Harvard Business School, Cambridge, Mass.
Previous jobs: Merrill Lynch & Co., New York, 1982-84, investment banking analyst; Los Angeles, 1986-88, associate; Metro-Goldwyn-Mayer/United Artists, Culver City, Calif., 1988-90, senior vice president; 1990-93, executive vice president; 1993-95, chief financial officer; Tenet Healthcare Corp., 1995-96, executive vice president; 1996-2000, CFO; Broadlane, San Francisco, 2000-02, chairman and chief executive officer.
Quote: "I have a tremendous degree of appreciation for what (hospital CEOs) do, because it is so unbelievably difficult."