Physician dissolves Tenet shareholder group

M. Lee Pearce, MD, a Miami physician and one of Tenet Healthcare's fiercest critics, has dissolved the dissident shareholder group that he led for eight years.

Dr. Pearce did not state, in what he said would be its last online report, why he was ending the Tenet Shareholder Committee as of Dec. 31, 2008, nor did he respond to interview requests. But he used the report to launch one last lengthy attack on Dallas-based Tenet, the nation's second-largest for-profit hospital company.

He criticized executives and board members for making six-figure salaries and receiving costly perks while the company paid out billions of dollars in lawsuit settlements and lost billions more in revenue.

Dr. Pearce pointed out that Tenet's stock reached an all-time low of 99 cents on the New York Stock Exchange on Dec. 19, 2008, a significant drop from its high of $52.50 in 2002. He also chastised the company for dragging its feet before adopting many of his committee's recommended reforms that he said would have reduced costs, eliminated executive perks and improved board oversight.

"The changes came too late. The harm was done. The corporate patient still lies in the recovery ward. Diagnosis: severely damaged. Prognosis: grim," Dr. Pearce wrote.

Tenet officials did not comment on the committee's dissolution, but they have said in the past that Dr. Pearce's goal was to get Tenet to buy Florida property from him at high prices.

The company had filed a lawsuit in U.S. District Court in Los Angeles against Dr. Pearce, who also has a law degree, and the shareholder committee, accusing them of making improper proxy solicitations. Tenet later dropped the suit.

Tenet's problems date back to 2002 and include allegations of unnecessary cardiac procedures, physician-employment issues at a Florida hospital, and a transfer-discharge inquiry at its hospitals nationwide.

The company was also under scrutiny for the way it billed Medicare and was investigated by: the Securities and Exchange Commission over some reimbursements and payments; the Dept. of Justice over relocation agreements with physicians; and the Internal Revenue Service over a possible $279 million in back taxes. Tenet agreed to a $900 million settlement with the Justice Dept. in June 2006, an $80 million settlement with the IRS in November 2006, and a $10 million settlement with the SEC in April 2007, according to news releases issued by the departments and Tenet. The company did not admit guilt.

Tenet said on Jan. 22 that it expects to have a net income of about $63 million for 2008, citing reduced operational and malpractice expenses. However, Barclays Capital analyst Adam Feinstein responded to the announcement later that day by airing concerns that the decline in patient volume and increase in bad debt that has hurt the industry overall will likely weigh on Tenet as well. Tenet's stock price closed at $1.16, down 4.9%, on Jan. 23. Tenet has hospitals in 12 states.