The Santa Barbara, Calif.-based hospital management firm announced that Trevor Fetter, 42, would move into the newly created job as president while Chief Operating Officer Thomas Mackey retired and David Dennis, the chief corporate and chief financial officer, resigned.
"The actions I am taking to form a new management team and to take a fresh look at our approach to pricing are not a signal that our fundamental strategy is flawed or the result of any impropriety," Tenet Chairman and Chief Executive Officer Jeffrey Barbakow said in a statement. "I believe these changes will put us on a better track, and I am taking the necessary steps to accomplish that."
Tenet was thrown into turmoil late last month when it was announced that the FBI was investigating charges that two cardiac surgeons at a Tenet hospital in Redding, Calif. had at times allegedly performed heart procedures that may not have been medically necessary. It was revealed this week that the Department of Health and Human Services had commenced an audit on Oct. 28 into Medicare payments -- known as "outlier" payments -- made for certain high-priced services such as complicated heart surgeries.
The Los Angeles Times said Thursday that Redding Medical Center is a relatively small hospital with 228 beds, however it was one of Tenet's most profitable facilities, due in large part to the high number of cardiac surgeries that have been performed since 1995.
One such patient was country music star Merle Haggard, who had a pair of wire mesh stents to support cardiac arteries implanted in his heart in 1997 by one of the surgeons now under scrutiny.
"I suspected when it was done to me, that I didn't need an operation," the 65-year-old Haggard told the Times this week. "The whole thing has made me mad; I'm just waiting here for the FBI to contact me."
According to Haggard, the drummer in his band went to the Redding hospital three years ago with chest pains and was told by the same doctor that he would need a heart transplant. Drummer Biff Adams sought a second opinion and had his problem cleared up with a prescription for Coreg, a blood pressure medication.
"That straightened me out," Adam informed the Times. "I didn't need a heart transplant -- that's for damn sure."
The Times also said the California Attorney General's office planned to go to court Friday to seek a restraining order barring the two surgeons caught in the investigative spotlight from practicing medicine until the FBI probe is completed.
The California Nurses Association and the Institute for Health and Socio-Economic Policy issued a joint press release Thursday claiming that 10 percent of the Medicare payments received by Tenet were in the form of outlier payments compared to a 3.5-percent average for hospitals nationwide.
"The data raises some critical questions," warned Kay McVay, president of the CNA, which has been a frequent critic of Tenet. "Has Tenet's aggressive pricing policies led to inappropriate qualification of some medical procedures as outlier cases to generate higher profits?"
"The outlier issue and other scandals circulating around Tenet today again demonstrate the inherent problem of market-driven medical care," she added.
Barbakow said he was confident Tenet would be vindicated by the audit and that the company's earnings would continue to grow. He said the higher level of outlier payments at Tenet hospitals appeared to be simply the result of higher base prices that Tenet charges.
"As I carefully studied our Medicare outlier situation over the last two weeks, it became clear to me that formulas that drive these outlier payments were affected by our overall pricing," Barbakow said. "In some cases, particularly aggressive pricing strategies created increasing outlier payments. That's simply not the way I want to do business at Tenet, nor do I want such a perception to exist in anyone's mind."
(Reported by Hil Anderson in Los Angeles)