Tenet Healthcare CEO Barbakow Resigns
By GARY GENTILE, AP Business Writer
LOS ANGELES - The board of Tenet Healthcare Corp. has replaced the hospital chain's chief executive and started a search for a successor who will restore investor confidence in the troubled company.
Chairman and chief executive Jeffrey C. Barbakow submitted his resignation after the board met by phone Friday and decided to seek new leadership-a decision Barbakow agreed to, the company said Tuesday.
The board appointed Tenet's president, Trevor Fetter, 43, as acting CEO of the nation's second-largest for-profit hospital chain.
"As Tenet begins a new chapter in its history, I consider this step a part of my personal commitment to do anything I can to restore Tenet to its rightful place of leadership in our industry," the 59-year-old Barbakow said Tuesday.
The move comes less than two weeks after Barbakow wrote in his annual letter to shareholders that he looked forward to continuing as chief executive, although he planned to resign from the board and relinquish his role as chairman.
Barbakow's departure was welcomed by investors, who saw Tenet's stock plunge in October after several investigations into the company were launched. Shares of Tenet rose 59 cents, or more than 3 percent, Tuesday, to close at $16.14 on the New York Stock Exchange (news - web sites).
The move also applauded by M. Lee Pearce, a Florida physician who is head of the Tenet Shareholders Committee. "Barbakow had to go," Pearce said. "I congratulate Tenet's Board for finally realizing that."
Barbakow will receive severance payments for the next three years equal to his annual salary and target bonus as of the date of his resignation. Barbakow's stock options, granted over the past 10 years, will also vest immediately. He will have three years to exercise them, the company said.
Barbakow was among eight big corporate CEOs whose pay prompted controversy and who declined invitations from the Senate Commerce Committee to testify at a hearing last week on executive compensation and its possible negative effect on investor confidence.
Barbakow was credited with saving the scandal-plagued company known as National Medical Enterprises when he joined the board in 1990.
He became chief executive in 1993, when NME was accused of holding some patients against their will in its psychiatric hospitals and treating them until insurance benefits ran out.
Barbakow quickly settled the resulting lawsuits and oversaw the transformation of NME into an owner of acute care general hospitals. It was under his leadership that NME became Tenet Healthcare, a name chosen because it represented integrity and "shared values."
Problems returned last fall. In a matter of days, investigations were launched into charges that two doctors at a Tenet hospital in Redding performed hundreds of unnecessary heart surgeries, and doctors at a San Diego hospital might have paid to recruit patients.
A federal audit was launched after it was revealed that the company relied more heavily than most on Medicare outlier payments. Outliers are payments to reimburse hospitals for extra care given to the sickest patients beyond fixed charges set by Medicare.
In response to the crisis, Barbakow replaced two top executives and brought back Fetter, a former executive, as president.
Barbakow also announced a plan to sell non-core assets, cut annual costs by $100 million and adopt voluntary guidelines that drastically reduced Tenet's reliance on outlier payments.
The company adopted several corporate reforms, including changing its fiscal year and expensing stock options.
The appointment of two new independent directors may have led to the decision to replace Barbakow.
"The influence of the new board members is likely what is being felt here," said Sheryl Skolnick, an analyst at Fulcrum Global Partners LLC.
That interpretation was bolstered by the fact that Tenet chose to quote a new, independent director in Tuesday's statement announcing the management change.
"It is the right time for Tenet to have new top leadership with a demonstrated ability to address issues facing the company and restore the confidence of our investors," Edward Kangas, former chairman of the accounting firm of Deloitte Touche Tohmatsu, said Tuesday.
A board committee made up of Tenet directors is conducting a search for a permanent replacement for Barbakow; Fetter will be considered, the company said.
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Tenet Healthcare: http:www.tenethealth.com