Tenet Takes On New Counsel - TheStreet


(THC) - Get Report

legal department is starting to resemble a regulatory agency.

Faced with numerous government probes, Tenet has tapped a federal authority -- who could have been the next Medicare chief -- to lead the company's defense. E. Peter Urbanowicz has resigned from the Department of Health and Human Services to become Tenet's new general counsel. Urbanowicz replaces Tenet veteran Christi Sulzbach, who departed under fire three months ago as the company's legal challenges mounted.

Tenet stands accused of, among other things, overbilling Medicare and profiting from unnecessary surgeries. But the company pointed to Urbanowicz's arrival as a sign of cultural changes.

"Tenet and its new management team are very serious about putting in place new model systems to assure quality patient care and compliance with all government regulations," Tenet CEO Trevor Fetter said on Monday. "I look forward to working hand-in-hand with Peter to put our current legal challenges behind us and operating this company in a manner that achieves these goals."

Tenet shares jumped 3.2% to $15.66 following the announcement.

Tenet selected Urbanowicz based, in part, on his position as "a senior legal advisor to top federal health care officials." Urbanowicz has spent the past two years as deputy general counsel for HHS, the government department under which the Center for Medicare and Medicaid Services operates. Prior to accepting Tenet's offer, Urbanowicz had been considered a prime candidate to succeed Thomas Scully as the next Medicare chief.

Urbanowicz will be joining forces with an old HHS colleague. Less than five months ago, Tenet hired D. McCarty "Mac" Thornton -- former lead counsel for the department's Office of Inspector General -- to serve as a special adviser to the company's compliance department. Tenet added Thornton at the same time it relieved Sulzbach of her compliance duties. Cheryl Wagonhurst, a veteran Tenet insider, now serves as chief compliance officer.

"As we work through the many challenges that we face at Tenet, we are absolutely committed to being a leader in compliance and setting 'best in class' standards for ourselves," Fetter announced at the time. "With Cheryl Wagonhurst's leadership and Mac Thornton's able counsel, I believe our compliance department has the experience, guidance and resources to achieve the very important goals we have set for ourselves."

But some Tenet critics viewed Sulzbach's departure, which came the following month, as the real step forward. Sulzbach steered Tenet through its last major scandal only to find the company in hot water -- facing familiar charges -- less than a decade later. Critics had pointed to Sulzbach's dual roles as both compliance chief and lead counsel as obvious conflicts and stepped up calls for her ouster.

Still, at least one industry expert seems uneasy about Sulzbach's replacement as well. Peter Young, a business consultant for HealthCare Strategic Issues, questions why Tenet needs Medicare insiders like Urbanowicz and Thornton in the first place.

"That's definitely a heavy regulatory background," Young said of Tenet's new legal team. "This confirms the magnitude of Tenet's legal problems going forward. ... It's a clear indication of how bad things are going to be."