Tenet's Dispute With Glenview Comes to a Head as CEO Exits
Tenet CEO Trevor Fetter

Dallas-based healthcare company Tenet Healthcare Corp. (THC) late Thursday, Aug. 31, said that its chairman and CEO Trevor Fetter has stepped down from his positions as director and CEO. Announcement of his plans to step down comes almost two weeks after resignation of two directors at Tenet who are associated with Glenview Capital Management LLC.

Glenview owns 17.8% of Tenet.

The company said he would resign effective earlier of March 15, 2018, or when a successor is appointed.

Tenet shares were up roughly 4%, or 70 cents, to $17.87 through mid-afternoon trading Friday.

Its current independent lead director Ronald A. Rittenmeyer will become executive chairman effective immediately. The role establishes Rittenmeyer as the company's senior most executive.

Tenet has also started the process to "refresh the composition of its Board." The process will ensure that future board members have the best "mix of skill and experience to maximize the future value of the company," Tenet said.

"The Board of Directors thanks Trevor for his significant contributions to Tenet and appreciates his commitment to remain with the company during the transition period. During Trevor's tenure, Tenet has built a strong enterprise that is aligned with the trends driving healthcare, and which provides multiple channels for growth across the company's Hospital, Ambulatory and Conifer segments," Rittenmeyer said.

Tenet announced in a Securities and Exchange Commission filing that Randy Simpson and Matt Ripperger would step down from Tenet's board. In a letter disclosed with the filing, the pair said they were leaving "due to irreconcilable differences regarding significant matters impacting Tenet and its stakeholders."

The filing contained a letter from Simpson and Ripperger. The two said their resignation signals that efforts to find a mutually agreeable path to improving Tenet have been "fully exhausted."

In January 2016, Tenet, the nation's third-largest investor-owned hospital chain, agreed to add Simpson and Ripperger to its board. Simpson and Ripperger are Glenview partners and co-leaders of healthcare research for the fund.

Prior to that deal, Glenview had become the largest shareholder in Dallas-based Tenet and announced that it was trying to influence change at the struggling company.

Separately, Tenet said Friday, Sept. 1 that it would sell two Philadelphia hospitals, related physicians practices and other area assets to to a new entity being created by Paladin Healthcare for $170 million.

The deal comprises all of Tenet's hospital-affiliated operations in Philadelphia, although its ambulatory business USPI will continue to have a small presence there.

Paladin will acquire Tenet's Hahnemann University Hospital, St. Christopher's Hospital for Children and the other assets and operate them through American Academic Health System, LLC (AAHS), a newly formed affiliate created to own and operate academic medical centers and general acute care hospitals across the country.

Tenet will receive $152.5 million in cash at closing and a promissory note in the amount of $17.5 million. The transaction is expected to be completed early 2018, subject to regulatory approvals and other closing conditions.

Paladin Healthcare currently manages four general acute care hospitals in Southern California and Howard University Hospital, a 145-year-old teaching hospital located on the campus of Howard University in Washington, D.C.

"Tenet has been delivering quality medical care in Philadelphia for nearly 20 years, and we are strongly committed to securing the best future for Hahnemann and St. Christopher's," said Mike Halter, Philadelphia Market CEO for Tenet and CEO of Hahnemann University Hospital. "Paladin shares our commitment to providing compassionate, exemplary care and service, and we believe that entrusting the stewardship of these institutions to its affiliate AAHS will benefit the patients, employees, physicians and community for years to come."

"We are excited to have been selected by Tenet to acquire Hahnemann and St. Christopher's, as well as the local physician practices and other hospital-affiliated entities," said Joel Freedman, Chairman of Paladin Healthcare. "We are committed to sustaining and enhancing the outstanding clinical and academic programs at both hospitals, providing the capital investment they need to thrive, and preserving their long-term future as financially stable healthcare providers and employers.

Paladin's effort will be backed by real estate investment manager Harrison Street Real Estate Capital LLC.

"Our leadership team has extensive, first-hand experience in operating hospitals in the Philadelphia market and understands the vital role Hahnemann and St. Christopher's play in the Philadelphia healthcare delivery system," said Barry Wolfman, President of Paladin Healthcare. "We appreciate Drexel University College of Medicine's support and look forward to working closely with the entire physician community to continue the longstanding clinical and academic excellence of both hospitals."

Drexel has been the academic affiliate for Tenet in Philadelphia in an agreement that runs through June 2022.

Bill McConnell contributed to this story.

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