Tenet Healthcare Corp. has made a concerted effort to turn adversaries into allies since the Santa Barbara, Calif., company's troubles began in November.
At its annual shareholders meeting last week in Los Angeles, Tenet's leadership took plenty of heat, but those efforts at winning friends and gaining influence may have dampened what could have been a firestorm of protest.
Fueled by a nearly 80% drop in the price of Tenet's stock since the last annual meeting in October 2002, a handful of investors pilloried the company, but the California Nurses Association was Tenet's most vocal and persistent critic last week. The union represents registered nurses at five Tenet hospitals and is seeking to represent them at 19 other Tenet hospitals, for a total of 6,700 registered nurses. About 35 nurses and union officials demonstrated and conducted a news conference outside the meeting. Then, as many as a dozen who are also shareholders attended the meeting.
"You would think that Tenet would be looking to repair its relationship with its caregivers," said David Johnson, the nurses association's director for Southern California. "Instead, Tenet has chosen to launch an attack on the registered nurses working in their hospitals."
But there could have been another heavyweight California union there-the Service Employees International Union-if Tenet hadn't come to a framework agreement with the SEIU and a division of the Association of Federal, State, County and Municipal Employees in May.
Mary Kay Henry, who runs healthcare organizing in Southern California for two SEIU locals, said she wasn't nostalgic for the days when the union would demonstrate outside the meeting and ask questions inside it. "We see our demonstration as having moved inside the hospitals because we have organized more (Tenet) workers," Henry said. "People feel like we actually have a much more direct mechanism to address worker issues."
The SEIU now represents workers at 10 additional Tenet hospitals, for a total of 17 hospitals and 7,000 workers, Henry said. The settlement with Tenet also frees up the union's resources to work on organizing workers at not-for-profit hospitals in Southern California, she added.
Trevor Fetter, Tenet's president and acting chief executive officer, noted the agreement in his remarks to shareholders, but he also expressed concern that Tenet's relationship with the nurses union is poor. After the meeting, Fetter said he didn't want to downplay the union's complaints about Tenet, but he added that many of the problems are related to a dispute over pension benefits that has sparked a nine-month strike at 131-bed Doctors Medical Center-San Pablo (Calif.) Campus.
Besides some partial peace on the labor front, Tenet also seems to be benefiting from its announcement in January of a "Compact with the Uninsured." The compact, at least for now, has quieted K.B. Forbes, executive director of Consejo de Latinos Unidos, a Latino advocacy group. Forbes was one of the first to criticize Tenet's gross charges, or list prices, in relation to the effect those rapidly increasing charges had on the bills of uninsured patients. Tenet later said that rapid increases in gross charges were a big factor in the high Medicare outlier payments the company received, which helped spark the collapse in the company's stock price and triggered an audit by HHS' inspector general's office.
Meanwhile, Tenet directors last week elected Edward Kangas as the company's nonexecutive chairman. Kangas, 59, is the former chairman and CEO of the accounting firm Deloitte Touche Tomatsu. Kangas' election was prompted in part by two olive branches Tenet extended to investors this spring-the splitting of the chairman and CEO positions and the resignation from both posts by Jeffrey Barbakow.
Tenet also announced that it will submit to two voluntary quality initiatives-one to collect and make public performance data for three medical conditions, the other to submit to surveys of its hospitals by the Leapfrog Group, the coalition of health insurance purchasers that pushes for higher quality. Tenet also said it promoted Jennifer Daley, a physician, to senior vice president, clinical quality; she had been a regional chief medical officer for Tenet. In that position, she will oversee nine regional chief medical officers who will focus on clinical quality. Similarly, a nursing executive council will be formed, led by Lauren Arnold, who was named vice president of nursing.
On the compliance front, Tenet hired the law firm of Sonnenschein, Nath & Rosenthal, which includes two former high-ranking officials in HHS' inspector general's office-Mac Thornton and Howard Young.
After the shareholders meeting, Kangas said the executive search firm Spencer Stuart has narrowed the list of potential CEO candidates to about "a half-dozen," including Fetter. The directors will review those candidates in "short order," Kangas said, adding that review could take "a few weeks to a couple of months, but we're not talking until Christmas."
"This is a company that fundamentally does good things," Kangas told shareholders in explaining why he agreed to join the board in April. "That's not to say that I, the board of directors and the management don't recognize that this is a difficult time for the company, its employees and, most importantly, its shareholders."
The selection of Kangas was applauded by a frequent Tenet critic, shareholder M. Lee Pearce. Pearce expressed faith in Kangas, but only, Pearce added, if the board adds more independent members to give Kangas a majority of new directors to work with.
Kangas doesn't share Pearce's concerns. He said the holdover directors are no trouble to work with. Although the search remains for the final board slot, there are no plans to add more directors, Kangas added.
As for Tenet's labor relations, Pearce said after the shareholders meeting, "It's pitiful. This is a cry for help." He noted that Tenet's labor costs are a little more than 40% of revenue-which is in line with other investor-owned hospital companies-while the Mayo Clinic, Rochester, Minn., spends more than 60% of revenue on labor costs. "You can't have quality without bedside nursing," he said.
-With Mark Taylor