Trevor Fetter took an important step -- out the door -- on his journey to the top echelons of Tenet ( THC). In early 2000, Fetter resigned as Tenet's CFO to accept the top post at a technology start-up. The news blindsided some. After all, Fetter had made his name as a finance wizard at big companies such as Tenet, MGM ( MGM) and Merrill Lynch ( MER). He was now leaving, at the top of his game, to become CEO of an online purchasing venture that wouldn't even exist without seed money from Tenet. "Trevor Fetter was a really, really good CFO," said one former Tenet executive. "When he went over to Broadlane, it shocked a lot of people." Founded just months earlier with backing from Tenet, Broadlane was an upstart group purchasing organization that aimed to revolutionize the static industry with new technology. By the time Fetter was called back to Tenet on a rescue mission last year, Broadlane had signed up hundreds of hospitals -- starting with Tenet's own -- that had billions of dollars' worth of purchasing power. And Fetter had racked up three years' worth of CEO experience on his resume. But Fetter's achievements away from Tenet may, in the end, prove less important than the fact that he left the company in the first place. The Tenet board, accused of massive failures in the past, must now hire a top-notch CEO to replace disgraced Jeffrey Barbakow and revive the ailing hospital chain. As an "outsider" during Tenet's rise and fall who has gone on to become a productive interim CEO, Fetter is seen as the one insider with an excellent shot at ascending to the throne. Tenet said it plans to announce a new CEO in September but declined to answer other questions for this story.
But when Fetter went part time, Tenet was on its way up. Less than a month after negotiating Fetter's new employment contract, Tenet reported the first in a long string of record-breaking quarters that would make the company a Wall Street darling. Tenet shares slipped 17 cents to $16.03 Friday in light preholiday trading.
"When they promoted Christi to general counsel, it appeared to be such a raging conflict of interest," said one former executive. "Now, she was wearing two hats -- and they were such important ones."
"This remaining triumvirate helped cause the problem and can never be part of the solution," Pearce stated in a recent letter to Tenet's board. "Tenet ... cannot begin to heal until the old NME management team, and its corporate culture have been purged." But Fetter's old job at Broadlane is no longer waiting. Although it kept Fetter as chairman of the board, Broadlane recently hired an emergency room physician -- hailing from troubled Electronic Data Systems ( EDS) -- to fill the CEO seat Fetter vacated last year to rejoin Tenet. Still, Tenet executives have a vested interest in seeing that now-profitable Broadlane ultimately succeeds. Just weeks after pouring seed money into Broadlane, Tenet turned around and offered company employees a piece of the pie. Tenet executives -- including Barbakow, Dennis, Fetter, Mackey and Sulzbach -- gobbled up thousands of cheap shares in anticipation of an initial public offering. While Broadlane remains private, with continued plans to go public, Tenet pegged the value of Broadlane shares at $5.71 -- or nearly four times what its executives paid -- just six months after the company was hatched. Since then, Broadlane has leaned heavily on Tenet for both financing and business. But the company, which recently lured outside funding and made Tenet a minority holder, is moving closer to an IPO that could reap hundreds of millions of dollars for Tenet executives. Institutional Shareholder Services, which supported Pearce's dissident group in a proxy fight three years ago, blasted the arrangement. "ISS takes a dim view of the participation of Tenet officers in the stock sale," ISS wrote. "This transaction galvanizes our conviction that the Tenet board could benefit from directors who may be more critical of such actions."
Instead, the incumbents rode Tenet's rocketing stock price to victory. Three years later, Tenet's board -- still dominated by incumbents -- is charged with selecting a CEO that can lead the company out of the mess that piled up under its watch. "We've come full circle from 1999 to 2003," Pearce said. "Once again ... the company is last amongst its competitors in numerous financial measures. The only apparent growth segment for the company is legal services -- but only as a client."