In Dr. Saum Sutaria's two years as Tenet Healthcare's chief operating officer, he has forged ahead on the company's strategy of expanding profitable services and culling others.
Analysts view the longtime, former McKinsey & Co. executive as the natural pick to take the reins as CEO on Sept. 1. He joined the Dallas-based hospital chain in January 2019 as COO, a position that tasked him with overseeing Tenet's hospital operations and outpatient facilities. He also has direct responsibility over the company's prized surgery center and revenue-cycle subsidiaries.
A prominent voice on company investor calls, Sutaria has described his focus on building out key service lines like trauma programs, a surgical spine program across some south Florida hospitals and surgical oncology in San Antonio, Texas.
"By being a center of excellence in a few specialty lines as opposed to trying to be all things to all people, I think that's one way that hospitals have been able to differentiate themselves with payers, with the major health plans and consumers," said A.J. Rice, a healthcare services analyst with Credit Suisse.
In that spirit, Tenet bought about 45 ambulatory surgery centers for $1.1 billion last year, growing its total portfolio to 310 across 33 states and expanding its musculoskeletal surgery offerings. About 80% of the acquired centers perform orthopedics, pain and spine procedures.
Tenet did not make Sutaria or its current CEO and executive chairman, Ron Rittenmeyer, available for comment. Sutaria worked at McKinsey for 18 years, and he led its healthcare and private equity practices. He earned his medical degree from the University of California, San Diego and completed post-graduate training at the University of California, San Francisco, where he previously served as an associate clinical faculty member.
In November 2019, Tenet promoted Sutaria to president and COO. One year later, the company named him to its board, a promotion one analyst said indicated he would be the next CEO. He made $8.6 million in total compensation last year, down from almost $14 million in 2019.
Sutaria helped navigate Tenet through the COVID-19 pandemic and made progress on the strategy Rittenmeyer set, Rice said. He's also worked to reduce nurse turnover rates in a difficult labor market.
"I think this is just a recognition of the fact that Saum has done a good job and it's a natural step forward in the progression of the leadership at Tenet," Rice said.
Rittenmeyer, who has been CEO and executive chairman for nearly four years, is handing over control more slowly than most of his peers leading investor-owned companies. Sutaria will still report to Rittenmeyer through 2022 in his capacity as executive chairman of both the company and its board of directors.
It's more common for a public company's executive chairman to just be chairman of the board, as is the case at Community Health Systems, for example. Only about one-quarter of executive chairman are chairman of both the company and the board, like Rittenmeyer is, said Susan Schroeder, a partner with Compensation Advisory Partners.
The difference is that as executive chairman of the company, Rittenmeyer will still be an employee. As such, he'll have more power than if he were just executive chairman of the board, Schroeder said. That means Rittenmeyer will still be involved in day-to-day decision-making, but will likely slowly transition Sutaria into that role over time, she said.
"This is a textbook case of how it is supposed to work," Schroeder said. "The new CEO is groomed for several years under the old CEO and then the old CEO stays on for another year or so as the executive chairman."
Corporate governance experts typically recommend public companies have separate people serve in the board chairman and CEO roles, Schroeder said. That's different from Tenet's arrangement, where Rittenmeyer serves in both capacities.
Even after his executive chairman role ends, Rittenmeyer will likely stay on payroll as a consultant. His employment contract that extends until December 2022 has him spending two years as a consultant upon departure for a base salary of $750,000 per year to work no more than 8 days per month.
During his time as CEO, Rittenmeyer has pushed a strategy of narrowing Tenet's focus on its core service lines. He oversaw the decision to spin off Tenet's revenue-cycle subsidiary, Conifer Health Solutions, into a separate, publicly traded company. That's slated to happen by mid-2022. Tenet also sold off most of its urgent care business in April.
Rittenmeyer's tenure has also spanned years of turmoil at Tenet's six-hospital Detroit Medical Center, culminating in a $10.6 million arbitration judgment in favor of two cardiologists who said they were improperly terminated. The doctors also claimed DMC and Tenet executives ignored alleged Medicare and Medicaid fraud, issues the U.S. Justice Department began investigating in 2018, along with alleged overpayments to doctors and poor quality of care.
On top of the devastating global pandemic that began in early 2020, Rittenmeyer has managed through a five-month-long strike by nurses at one of its Massachusetts hospitals. Last month, four U.S. lawmakers demanded Tenet disclose how it spent its COVID-19 relief fund, accusing the company of using the money to enrich its executives and shareholders.
Among their demands: a full account of Rittenmeyer's total compensation. He made $16.7 million in total compensation in 2020, including $10 million in stock awards.
A Tenet spokesperson noted that the company's share price has grown from $17.21 the day before Rittenmeyer became CEO on August 30, 2017 to $67.76 on Aug. 9, growth of almost 300%. The company has also lowered its leverage ratio, recruited 10 new directors and successfully closed 25 union contracts within roughly the past year.