Glenview Capital Management, Tenet Healthcare’s largest shareholder, called for a proxy vote to allow investors to “act by written consent without meetings” in a Securities and Exchange Commission filing.
The Street predicted Glenview’s suggested change “would allow aggressive activist hedge funds to launch a boardroom battle” to replace directors outside of an annual meeting.
Tenet offered its own filing that announced a different bylaw change, which would allow shareholders to meet outside of annual shareholder meetings. Glenview said that change would still make it too burdensome.
In a statement, Tenet, which is the third largest investor-owned U.S. hospital company, said its bylaw change would allow majority-holding shareholders the option to call a special meeting. The company said this change would provide strong governance.
Tenet said it is reviewing Glenview’s proposal and will make recommendations.
The past year at Tenet has seen a CEO leave, layoffs, hospital sales and shareholder drama. The Dallas-based health system lost $366 million in the third quarter, which it blamed partially on hurricanes Harvey and Irma.
But Glenview isn't happy. The company in its filing complained of a consistent track record of earnings underperformance, poor governance and said Tenet's stock is behind expectations.
"Tenet's board, which includes many legacy members, has a history of policies that appear to enable entrenchment over progress," the filing stated.
CEO Trevor Fetter left in October months ahead of his planned departure and board members also left the board. The health system has been shedding debt. Tenet sold eight U.S. hospitals in four markets and all nine U.K. facilities and is working on other sales, including selling Chicago-area MacNeal Hospital and related operations, Des Peres Hospital in Missouri and Baylor Scott & White Medical Center - White Rock in Texas.
In other attempts to reduce costs, Tenet announced 2,000 layoffs and is considering selling its revenue cycle management business, Conifer. Reports emerged last year that Tenet may put the company on the market, but Tenet has previously stated it does not intend to sell.
Tenet’s financial issues are not unique. Health systems are facing lower reimbursements, sagging inpatient numbers and suffocating debt. Plus, payers are moving foot traffic away from hospitals to outpatient services. One high-profile example is Anthem’s imaging and emergency room policies that restrict reimbursements for services that can be performed outside a hospital. That kind of cost-containment effort will only intensify this year.