Tenet Enjoys Calm at Annual Meeting

When Tenet Healthcare Corp. Chairman Edward Kangas opened the company’s shareholder meeting to questions from the floor Thursday, he sounded a bit like a teacher instructing rowdy preschool children anxious to hit the play yard.

Kangas, chairman of the nation’s second-largest hospital chain for less than 24 hours, beseeched the dozen or so shareholders in attendance to form a line behind the microphone and take turns. In the interest of fairness, he said, those with multiple questions should ask one and then go to the end of the line.

An elderly man who identified himself as both an investor and a former patient asked why Tenet’s profit margin didn’t match that of its chief competitor, HCA Inc. The next questioner wanted to know when Tenet’s stock price would improve.

Kangas scanned the room for a third question. Seeing none, he quipped “Last call” and adjourned the meeting in just under an hour.

The relatively tame session was in sharp contrast to the raucous showdown at Tenet’s 2003 annual meeting in Los Angeles in July. At that gathering executives were confronted by California nurses who wanted to organize and investors who had watched the value of their Tenet holdings plunge by as much as 75%.

Last year’s meeting was held in the wake of revelations that Tenet had pumped up revenue with a questionable Medicare billing scheme and that two doctors at its Redding hospital were under investigation for performing hundreds of allegedly unnecessary heart surgeries. Jeffrey Barbakow had recently resigned as CEO and state and federal investigators were prying into Tenet’s affairs.

“We were struggling in the aftermath of the company’s failed pricing strategy and its many other problems,” Trevor Fetter, who at the time had been acting chief executive for less than two months, recalled at Thursday’s meeting, the first since Tenet formally announced plans to move its corporate headquarters here from Santa Barbara.

When this year’s meeting ended, Fetter noted what a difference nine months had made. “It’s remarkable isn’t it?” he said. “There were a lot of people angry about a lot of things, and we, one by one, checked things off the list.”

Fulcrum Global Partners analyst Sheryl Skolnick attributed the change to a slowdown in the rate of announcements of new investigations and a large turnover in shareholders.

“There’s just not that sense of outrage anymore,” she said. “It’s a very different situation.” Skolnick said Fetter, who was named CEO in September, deserved credit for attempting to systematically tackle the company’s problems.

“But it’s still a fragile company,” she added. This week, Tenet posted a wider first-quarter loss than it previously had signaled after losing a legal dispute with a health maintenance organization.

In his presentation to shareholders, Fetter surveyed changes in the 18 months since the scandals broke, including streamlining the company from 11 to five regional operations and making peace with the California Nurses Assn. The company abandoned its aggressive pricing scheme, capped executive bonuses and thinned the executive ranks.

Efforts to improve patient care were launched and the ethics program was revamped. To staunch losses, which neared $1.5 billion last year and continued into this year for a fifth consecutive quarter, Tenet is shedding a third of its hospitals and retaining 69 of is healthiest.

“By this time next year,” Fetter said, “I expect the results of everything we’re doing to be much more apparent than they are today.”

Tenet’s stock Thursday fell 7 cents to $12.20 on the New York Stock Exchange.