An outspoken doctor has issued a second, more favorable opinion of Tenet's ( THC) health. M. Lee Pearce, a Florida physician who diagnosed serious problems at Tenet two years ago, now believes the company has a shot at recovery. Showing a fresh burst of faith, Pearce revealed Monday that he will trust Tenet's new directors to cure the company instead of pursuing invasive treatment -- like another proxy fight -- on his own. "I was persuaded that ... the board
is finally committed to serious reform of the company," explained Pearce, who represents other disgruntled shareholders through the Tenet Shareholder Committee. "Since the board now seems to be focusing on reform, we do not want a proxy contest to become a distraction." The doctor's comments turned down the heat just a notch at scandal-plagued Tenet. But Pearce didn't do a complete about-face: He continues to call for the dismissal of Tenet managers from CEO Jeffrey Barbakow on down, citing their performance and the stock's steep plunge over the last year. The market shrugged off Monday's developments, as Tenet shares slipped 12 cents to $15.96 in light trading. The stock, which traded above $50 last fall, has lost more than two-thirds of its value in the past year.
"We are not going away," he pledged. "We will continue to speak out. As we have in the past, we again extend an offer to work with those board members who share with us a sense of urgency for the adoption of reforms, as well as a belief that our highest priority must be the provision of quality health care to each of our patients." Pearce's warning came even as fresh allegations began to swirl around the company. In a
banner news story on Sunday, the Orange County Register of Santa Ana, Calif., exposed numerous complaints against the chief neurosurgeon at a Tenet hospital that operates the largest head trauma center in the county. Israel Chambi, who oversees the busy -- and highly profitable -- neurosurgery unit, has been repeatedly sued and investigated for allegedly performing unnecessary surgeries and regularly botching legitimate ones. Chambi came to the high-profile job at Tenet after reportedly losing a university teaching post over complaints of poor judgment and incompetence. So far, the Tenet hospital has stood behind Chambi's performance. But Tenet has already lost some high-profile doctors to big scandals elsewhere. The company's Redding, Calif., hospital -- once among the busiest heart centers in the Tenet network -- is now trying to distance itself from two star physicians accused of performing questionable heart surgeries there. Hundreds of Redding patients have already sought the medical records necessary to pursue litigation against the hospital and its parent company. That wave of litigation, if it materializes, could dwarf the 100-plus lawsuits filed by patients at a Tenet hospital in Palm Beach, Fla. The hospital there, almost shut down by Medicare, has been blamed for serious chest infections that killed or seriously disabled heart surgery patients.
Pearce also believes Tenet needs a change of scenery. He has repeatedly called for Tenet to move its corporate headquarters from pricey Santa Barbara, Calif., to the Dallas location where most Tenet administrators already work. He's asked for other cutbacks, as well. "Stop spending precious company resources on stock repurchases," Pearce said, echoing urgent demands made by an outspoken fund manager last week. For its part, Tenet welcomed Pearce's promise to drop any proxy plans -- without making any new promises of its own. "We are pleased with Dr. Pearce's declaration," Tenet spokesman Steven Campanini said Monday. "Our board and management intend to continue with the company's realignment strategies as planned." Tenet has touted a number of improvements -- particularly in corporate governance -- in recent months. Most notably, the company has stripped Barbakow of his chairman title and replaced several other veteran board members. But the board's true independence still remains challenged. Of six returning board members, five have weathered criticism because of their related-party dealings with the company. Pearce has demanded that at least a majority of the board -- down from 90% -- be truly independent.