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Message from The Chairman
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M. Lee Pearce, M.D. Chairman
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Special Counsel
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A Message from M. Lee Pearce, M.D.
Chairman, Tenet Shareholder Committee
February 16, 2006
Dear Friend,
Welcome to the new web site of the Tenet Shareholder Committee (TSC). Six years ago, I helped create the Tenet Shareholder Committee. Please allow me to take a few moments to tell you about myself and the TSC. I am now 75 years old. When I look back over my life, what I am most proud of is the fact that I have been a licensed, practicing physician (although now in a limited capacity) for over fifty years. In 1955 I took the Hippocratic Oath. I still subscribe to it and believe in its importance. My philosophy has always been to put patients first and to do them no harm. It’s the suffering man or woman, in need of a doctor, in need of a hospital, that has always been the driving force in the long-standing, proud medical profession. Being a physician is the cornerstone of my career.
I hope you will get to know the TSC and join our efforts to bring reform to Tenet Healthcare Co. Tenet has taken some steps to attempt to improve quality in the last three years, but it has not been nearly enough. If you do get to know us, you’ll see that we have many concerns about Tenet. But for me, it always comes down to my belief that Tenet primarily operates on a financial track. That is, Tenet historically has put profits ahead of patients. By doing so, I believe Tenet has needlessly and sometimes even recklessly endangered its patients. In fact, I believe, to the core of my being, although I may not be able to prove it in a criminal legal proceeding, that Tenet’s wrongful practices have led to the needless suffering of patients, and in some cases even their deaths. Those are very strong words, I know. But I stand behind them.
I look, for example, at events at Tenet’s Redding Medical Center in Northern California, where cases of improper cardiac procedures and cardiac surgeries were recently shamefully settled in a deal with the federal government. This was another case settled by what we at the TSC call “checkbook justice.” I’m not aware of any hospital in the history of the United States where so many people underwent so many needless procedures with such poor oversight and control. And it was all so Tenet could make money. That small hospital in Redding registered an astounding $94 million in EBITDA in one year. I and others believe that a thorough examination of all files and autopsy reports related to Redding would show that probably hundreds of people suffered needless morbidity and/or death. My doctor’s instinct cries out: “People came to a Tenet hospital for heart care but many were lied to, many were unnecessarily operated on, many died!”
I look at another Tenet facility, Palm Beach Gardens Hospital in Florida. Tenet came under significant sanctions for running that hospital with shockingly high infection rates. Imagine patients having to undergo surgery and then endure more pain and suffering—and even in some cases, death—from post-surgery infections that clearly were the result of a breakdown in proper operating room procedures and techniques.
I look at events unfolding in New Orleans, where the Louisiana attorney general is investigating suspicious hospital deaths in the wake of Hurricane Katrina, reportedly focusing on two Tenet facilities, and my gut instinct tells me that those poor people were abandoned. What a dreadful way to die: alone in a hospital, abandoned by the people who were supposed to take care of you! Tenet’s actions in New Orleans seem to stand in sharp contrast to its larger competitor, HCA, which by all accounts took the proper hurricane preparations and apparently safely evacuated all its patients. You can read all about Redding, Palm Beach, New Orleans, and many other incidents at the TSC website. I think you’ll find our search engine particularly helpful
Why is the Tenet scandal different from all other corporate scandals? Surely there has been serious wrongdoing at the likes of Enron, Tyco and WorldCom. But in those cases, as in so many others, no one died. But in the case of Tenet, I believe the company bears responsibility for patient deaths.
You might ask, how can I say such things? How can I make such charges? What does a doctor know about running big hospitals? Those are fair questions.
When I came to Florida in the mid-1950s, the hospital industry was in its infancy. I discovered that I had a skill not only for attending to patients, but also for the intricate business of building and operating hospitals. As you’ll see from my biography elsewhere on this web site, I built a number of hospitals in Florida, including Cloverleaf Hospital (now Parkway Hospital), American Hospital of Miami (now Kendall Regional Hospital), and North Ridge Hospital. In 1967, I was called in by friends to help rescue the region’s first bilingual hospital, Pan American Hospital. Of course I did not do this alone. I’ve been privileged to work with more than one thousand talented, committed physicians, friends, investors and dedicated employees in these efforts, as well as the countless others in all the fields it takes to get every hospital up and running. I’ve also been privileged to work with many fine doctors, scholars, research scientists and administrators at institutions such as Harvard Medical School, the Mayo Clinic, and other fine organizations.
You might also ask, how did I come to feel so strongly about Tenet? Well, that story really begins in 1970. At that time, seeing that there was a critical lack of cardiologists and cardiac care facilities in the area around Broward County, Florida, I joined with other doctors and investors to build a first-class cardiac-care institution: North Ridge General Hospital. We established an outstanding reputation for quality medical and surgical care, as well as for great teaching programs--a reputation that was basically maintained until Tenet took over about a decade ago.
In 1985, I sold North Ridge to Tenet’s predecessor company, American Medical International (AMI), fully believing that the transaction was in the best interests of the patients, the physicians, residents of the region, and my investors. For a time, I held a significant stake in AMI. I thought AMI had the capital and the vision to enable North Ridge to continue to grow as a first-rate medical facility. In 1995, AMI was absorbed by National Medical Enterprises (NME), a company with a troubled past. NME changed its name to Tenet. At North Ridge and elsewhere in the Tenet empire, things started to go downhill fast. I have taken up enough of your time already with this letter, so for more on AMI, NME and Tenet, please see our book, Greed, Scandal & Wrongful Deaths at Tenet Healthcare. You can access it online from this web site.
Although I had sold North Ridge and its 11 acres, my investment group continued to own 19 debt-free acres of land and a large medical office complex adjacent to the hospital. In the late 1990s we built a high-quality outpatient center on some of the land. But as the years went by, I watched the steep decline of the quality of care at North Ridge with mounting alarm and dismay, as Tenet instituted cutback after cutback designed to save money.
And it wasn’t just at North Ridge. Throughout the 1990s, matters at NME/Tenet went from bad to worse. Scandals seemed to be erupting everywhere. The old guard at NME acted like they were kings. In 1993 Jeffrey Barbakow, an NME board member, became the new CEO, but unfortunately matters became even worse. Barbakow, a Wall Street financial executive, adopted an imperial method of operation, moving the company to lavish Santa Barbara, California, for his personal convenience, and showering himself and his minions with huge perks. All this came at a tremendous cost—declining quality of care at Tenet hospitals and huge price increases. In 1994, under Barbakow’s leadership, NME/Tenet admitted to seven federal felonies—again, you can read all the details in our book—and entered into a five-year Corporate Integrity Agreement with the Department of Justice. In 1999, the agreement expired and Tenet’s prices began to skyrocket.
By 2000, I could stay quiet no longer. Together with other concerned shareholders, I founded the Tenet Shareholder Committee. Our aim was—and is—to bring reform to Tenet Healthcare. We’ve had some success over the years. After Barbakow repeatedly denied us permission to speak to the Tenet board, we ran for election as independent board members. Our views were endorsed by many corporate reform activists, institutional investors, and The Wall Street Journal. We lost that battle, but we continue to fight on, deeply concerned by Tenet’s focus on profits ahead of patients, and continuing incidents of possible wrongful deaths, fraud, and serious corporate mismanagement.
During the fight for seats on Tenet’s board, I personally, and on behalf of other individuals, held a substantial number of shares in Tenet. After the battle, and given what I felt was the troubled future for the company, I could not in good conscience keep those shares. I sold most of the Tenet shares under my control prior to the end of 2001. But I decided to hold on to a not insignificant number of shares solely to help give the TSC a voice at shareholder meetings and other venues. I have not, and will not, trade these shares. I am in this fight to reform Tenet, not to profit.
Prior to the eruption of another round of scandals at Tenet in 2002 over possible improper Medicare reimbursements and events at Redding Medical Center in Northern California, Tenet stock was trading at around $52 share. It’s now trading at approximately $7 share. These days, hedge funds and institutional investors own about 98% of Tenet stock.
Now, Tenet and its many powerful friends in Washington on both sides of the aisle will tell you something different. They will tell you that I’m only in this for the money. They will say that all I really want to do is sell Tenet my medical campus facilities surrounding North Ridge General Hospital. Or failing that, they will tell you, I want to buy back North Ridge General Hospital itself.
It is certainly true that I would love to buy North Ridge and restore it to its former glory as a sterling quality hospital focusing primarily on cardiac care. And both parties have agreed that the only sensible business model is that the hospital and the surrounding medical campus should be owned by the same entity. But it is absolutely false to suggest that a business deal is my central motive in founding and directing the Tenet Shareholder Committee. I’m not in this for the money. I don’t need the money. If the entire hospital and medical campus were to go up in smoke tomorrow, I would still be an elderly doctor with an extremely high net worth.
Let me be very precise about this: the work of the Tenet Shareholder Committee is founded on the physician’s principle that the patient comes first. It’s our view, supported by massive amounts of evidence in the public record and on this web site, that Tenet Healthcare is a deeply corrupt company, with a historically flawed culture, and that this company and this culture is doing damage to the American healthcare system. Tenet is a company that was not founded nor led by physicians. Tenet is a company that is endangering the lives of some of its patients, taking advantage of the communities in which it operates, and quite possibly defrauding the government and the taxpayers. I will not quit, I will not stop in my efforts to hold Tenet accountable, no matter what the ultimate disposition of the North Ridge properties.
Won’t you join our cause? You don’t have to hold stock in Tenet Healthcare to become a member of the TSC. And you don’t have to agree with everything we say. We would be honored to have your membership and support.
With best wishes for your continued good health,
M. Lee Pearce, M.D.