Deep healing

Trevor Fetter used to work in the movie industry, but he had no idea that the drama at Tenet Healthcare Corp. more closely resembled a movie plot than a hospital system.

First, there was a crisis with investors because Tenet had been pursuing a strategy that resulted in significant earnings growth but wasn’t sustainable. When a research analyst wrote about it, the stock price plummeted from $50 to $30 a share in just a few days.

Two days after that, the FBI raided one of the company’s hospitals because of an investigation into whether two physicians had performed unnecessary cardiac procedures when alternative treatments may have been available.

At this point, the then-CEO asked Fetter to return to the company after a nearly three-year absence. Two weeks after returning, the FBI led a raid on another hospital because of an investigation into the company’s hiring practices.

“I would say that by when I first came in, it was mid-November 2002, the first two shoes had dropped,” says Fetter, now president and CEO. “Little did anyone know that there were further shoes that would drop, and by the end of December 2002, I felt I had just begun to get my arms around what kind of challenges the company was facing.”

In 2003, Tenet was not only performing below the national average in clinical quality, but it was a mess financially, too. Net operating revenue dropped from $7.86 billion in 2003 to $7.77 billion in 2004, and its loss increased from $1.15 billion to $1.18 billion in that same period. When you think things can’t get worse, think again: Tenet had 10 percent of its revenue and 6 percent of its employees in New Orleans-area hospitals, so when Hurricane Katrina hit in 2005, it was a devastating blow to the system.

In short, turning Tenet around wasn’t going to be easy.

“I dug in,” he says. “It got a lot worse. In addition to the company’s own problems, the industry, it turned out, was really peaking at that time in 2002 and early 2003, and from 2003 through 2008, it has been under steady pressures that have not been seen in a decade. It’s been a very tough operating environment, and it was also a tough cleanup job.”

Get the right people

Fetter’s condition for returning to Tenet was that the chief financial officer and chief operating officer be fired. He also had to recruit new board members and asked 49 of the 50 senior managers to leave. There were now gaping holes on his staff, and it was critical to get the right people on his team to lead the turnaround.

To start, Fetter looked at who he had internally that was capable of leading.

“In a crisis, the best thing to do is assess who you have in the company already,” Fetter says. “Who’s very dedicated? Whose heart is in the right place? And who has the skills and knowledge and continuity? Those people are incredibly key in any sort of turnaround.”

He says to not presume that everyone is guilty or contributed to the problem.

“There are very good people on the inside,” he says. “You need to find them and put them in positions of responsibility.”

Fetter says that the people left in your organization will fall into one of three categories. The first group is a small group in total denial. Most were planning to retire soon, had a lot invested in company stock, and it all fell apart when everything hit the corporate fan.

“There were those who were just stunned and became ineffective by virtue of that,” he says.

Then the second group is made up of those looking to separate themselves from the problems.

“Their first instinct was to present things in a way that would exonerate them from any responsibility for the problem,” Fetter says. “One has to be very wary of and concerned about that as to whether you’re getting the right story or not.”

Then the last group is the one that you really want to help you.

“There’s a group of people that tend to be second- and third-level people in any given function,” Fetter says. “They step forth and they might say, ‘I know all about what happened — either I didn’t realize we were doing the wrong thing, or I thought it was wrong, but that’s what the top management wanted to do, but I’m ready to dig in and really help make this better. It’s a great company, and it deserves to be better.’”

Once you find internal people to guide you out of the abyss, then you have to look externally to fill the remaining gaps. Fetter first turned to connections he already had.

“There’s no substitute for the six degrees of separation, where it’s someone you know, who tells you about somebody they know, who tells you about somebody they know, and it turns out that you know that person in three other ways, too,” he says. “That was a very key part of it.”

During difficult times, you have to pay particular attention to people’s motivations for joining your business.

“When you’re in a free fall, it’s very difficult to attract people,” he says. “Some people are attracted to you for the wrong reasons. They might look at an opportunity to do something spectacular for their own resume and then leave you right away, but others are truly attracted to something that’s a difficult challenge. They may be bored by something that’s stable.”

For example, when recruiting the nonexecutive board chairman, the candidate told Fetter that he liked, what he called the corporate equivalent of whitewater rafting, and that he wanted to add value to the company, so Fetter brought him in to brave the rapids.

Another motivation someone may have is genuinely wanting an opportunity, so look for those people.

“There are other people who are attracted by their perceptions that there is a great opportunity,” he says. “Maybe in their company they were the No. 2 person in their particular function without a clear path to become No. 1, and we offer the opportunity to become No. 1 in that function. That can be very appealing.”

Then lastly, you have to appeal to people’s senses. For example, one Tenet employee used to work with a company that sold women’s shoes. At one point he told Fetter, “The thing is, women don’t necessarily need more shoes, but I feel really good about what we’re doing here.”

You should also use how your business impacts the world to recruit talent.

“This is a business that exists to help other people, and that sounds sappy, but people who are successful in this industry have to, on some level, feel very good about what they do, … ” Fetter says. “For people to really get engaged, they have to feel like there’s a mission and they’re fulfilling a mission that’s really valuable.”

Move forward

With people in place, Fetter could then focus on initiatives to improve the hospital system’s quality — essentially its product.

Tenet had come up with a small team of people in the company who created a cornerstone initiative called Commitment to Quality. The team wanted to improve quality standards across the company and make those standards more uniform, as well.

“You have to rally people around a goal — an aspirational goal that they see how they get there, and it’s something that’s seen as virtuous,” Fetter says.

He communicated with different groups about why this was a good way to start the process. It was easier with employees,
because they already had a vested interested in their patients, so by telling them about new initiatives that would help their patients, it helped get them on board.

Then Fetter went to the shareholders and explained how it was good for them, because a company with high integrity and quality is a better investment. This was also critical because the quality improvement initiative required a major financial commitment to improve technology and techniques.

But saying you’re going to do something and actually doing it are two different things, so Fetter was sure to institute metrics.

“First of all, you measure things,” he says. “So you decide what should be measured, and then you measure it and then you publish the measures. You might just publish them inside your own company — that has an impact — but publishing them outside the company has an even bigger impact. Then align the incentive systems and management systems to those measures.”

Fetter measures the performance of his hospitals using a balanced scorecard. It captures the clinical quality into great details, such as infection rates and service standards, and it also measures employee satisfaction and turnover. The best way to gather this information is through surveys.

For example, to gather patient satisfaction he uses an outside company so the patient can be honest with their feedback. Within about 45 days of treatment, an outside representative calls the patient and asks several questions, including, “Would you recommend this hospital?” “Would you come back to this hospital again?” and more specific questions about their experience.

To get feedback from employees, they are surveyed twice a year about their job and company satisfaction through an online survey. While many questions about both their satisfaction in the job and with the company are asked, there’s one crucial question Fetter ensures is always asked — “Do you feel that management took action to address the items from the last survey?”

“My big advice would be to survey constantly, but you better do something about it when you get some feedback,” Fetter says.

Tenet has also set up anonymous feedback venues where employees can e-mail complaints or suggestions in between surveys.

When complaints come in either through the anonymous e-mail system or in a survey, an internal team of about 12 people works to reconcile the problems. No matter what the complaint is, the team works to resolve it. Often team members may respond to the e-mails, requesting to know which hospital the issue is in or other details that will help them address the situation.

Fetter says that Tenet spends at least $30 million a year on compliance and responding to problems or complaints. While it’s a huge investment, he’ll gladly make it.

“It’s quite a commitment, but in health care, the consequences of doing the wrong thing either from a compliance point of view or having a quality problem with a patient are so severe, that I consider this to be an excellent investment,” he says.

Fetter’s efforts haven’t gone in vain either. While Tenet was below national standards before, it now performs higher than the national average. Additionally, in 2008 net operating revenue improved to $8.66 billion, and Tenet saw a $300 million profit. While the company has spent about $2 billion settling all the litigation, it’s mostly behind them, and it now anticipates a bright future.

“I’m obviously not proud of the company’s track record prior to 2003, but I am very proud of the company’s track record since 2003,” Fetter says. “We’ve actually become leaders in clinical quality. … We’ve become nationally recognized as leaders in corporate governance.”

How to reach: Tenet Healthcare Corp., (469) 893-2200 or