Tenet Healthcare CEO's Pay Jumps As Furloughs Hit Local Hospitals

FRAMINGHAM, MA — The Dallas-based company that operates three major for-profit hospitals in Worcester and MetroWest is ordering furloughs for nurses and medical workers as the coronavirus pandemic cuts into revenue-generating services like elective surgery.

Meanwhile, Tenet Health CEO Ronald Rittnemeyer's compensation rose 62 percent in 2019 to more than $24 million. He agreed to donate a portion of his salary in light of the furloughs, but it's possible he could face further reductions after a shareholders meeting in May.

According to an analysis of financial filings, Tenet entered the coronavirus crisis in a good financial position. The company had some $350 million in excess cash at the end of 2019, and in April began the process of refinancing debt to increase borrowing capacity to $2 billion. The federal CARES Act stimulus bill will also allow Tenet to get an advance on billions in Medicare payments.

"They were already a lot leaner coming into 2020," Bentley University finance professor Kristina Minnick told Patch this week after reviewing the company's financial statements. "Assuming [the coronavirus] is not going on for multiple years, they have cash to weather the storm."

A week ago, Tenet enacted furloughs affecting about 3,400 hospital workers nationwide, including staff at Saint Vincent in Worcester and the MetroWest Medical Center, which includes Framingham Union Hospital and Leonard Morse Hospital in Natick.

A Tenet spokesperson said those cuts do not affect "direct bedside nursing care positions for COVID and care for patients with urgent medical needs." The spokesperson would not say how many workers will be furloughed at Saint Vincent and the MetroWest Medical Center hospitals.

Counting the new cuts, the company has furloughed about 10 percent of its workforce in recent months, including non-medical corporate workers.

Rittenmeyer has said he will donate 50 percent of his salary from April to June to a Tenet charity that benefits employees experiencing hardship — a $187,500 sacrifice based on his current rate of pay. But Rittenmeyer's salary is just a fraction of his total compensation.

Executive pay rises

In 2019, Rittenmeyer earned a $1.2 million base salary, nearly $7 million in bonus pay and $16 million in stock awards. He also earned about $350,000 in perks, like the use of the company jet ($50,000) and a personal car and driver ($15,000). In 2018, Rittenmeyer's total compensation package was just under $15 million, according to corporate filings.

Rittenmeyer earns about 452 times the median Tenet worker, according to the corporate filings.

Rittenmeyer's compensation is in line with similar for-profit health care companies. Samuel Hazen, the CEO of Tenet competitor HCA Healthcare, received a compensation package worth about $26.7 million in 2019. (HCA does not own any hospitals in Massachusetts, but does have three in New Hampshire.)

Several other top Tenet executives saw their compensation rise by more than $1 million between 2018 and 2019, and the company hired Saum Sutaria last year as chief operating officer with a compensation package of nearly $14 million.

A large part of compensation comes from stock. In 2019, Rittenmeyer was given $16 million in restricted stock units. In March, he received an installment of close to 63,000 shares as part of his compensation plan, according to filings.

Tenet's stock has dropped since the coronavirus pandemic began, but the value is expected to rise as the crisis subsides. The rating agency Fitch downgraded Tenet's credit in April, but the agency saw a possible bright future for the company owing to expected "strong recovery in elective patient volumes beginning in later 2020 and into 2021."

Tenet's board of directors — which includes former Democratic U.S. Sen. Robert Kerrey and retired Army Gen. Lloyd Austin — designed the compensation packages for Rittenmeyer and other executives.

On May 28, Tenet shareholders will hold an advisory vote on executive compensation. Bentley University's Minnick said shareholders could vote against the compensation. A "say on pay" vote might force the board to reassess executive compensation.

Other Tenet executives are taking pay cuts of between 10 and 20 percent in April, May and June. Saint Vincent CEO Carolyn Jackson, for example, is taking a 10 percent cut during that time, a Tenet spokesperson said.

Local furloughs

The local impact of Tenet's furlough plan came to light last week when the Massachusetts Nurses Association, which represents nurses at Saint Vincent Hospital, rang the alarm.

As of April 21, the MNA still didn't know how furloughs would work, said spokesman David Schildmeier. In the meantime, Saint Vincent is using a practice called "flexing" to reduce the number of nurses on shift, he said.

Many nurses work on a flexible schedule, which means their shifts can be canceled based on need at the hospital. Nurses who work in areas of Saint Vincent that are shut down — like elective surgery — are being "flexed out" of their shifts. The MNA wants "flexed" nurses used to assist nurses attending to coronavirus patients. According to state figures, Saint Vincent was caring for 80 coronavirus patients as of Wednesday, including 14 who were in the intensive care unit.

Saint Vincent began negotiating on furloughs with the MNA on April 10, but those talks broke down April 15. A hospital spokeswoman sent a statement to Patch emphasizing that any Saint Vincent furloughs will be voluntary.

"On April 10, there was a discussion with the MNA and mandatory furloughs were discussed as the MNA indicated they might oppose letting nurses volunteer for furlough," the statement read. "However, after that date, mandatory furloughs of nurses were not part of any Saint Vincent Hospital proposal, whatsoever."

Other local hospitals like Milford Regional Medical Center and UMass Memorial Health Care have not announced any staff cuts since coronavirus began. But those hospitals are organized as nonprofits, as are hospitals in the Partners HealthCare network like Newton-Wellesley.

Even with its cash reserves, the federal stimulus and a larger credit line, Tenet — like other health care companies — is likely doing everything it can to reduce costs during the coronavirus crisis, Minnick said. The cuts also help hospitals to reserve personal protective equipment.

There is also evidence that Tenet was anticipating damage from the coronavirus. In the company's annual report released in February, a section addresses the potential for the crisis to hurt the company's profitability to some degree.

"[T]he treatment of a highly contagious disease at one of our facilities may result in a temporary shutdown, the diversion of patients or staffing shortages," the report said. "Moreover, we cannot predict the costs associated with the potential treatment of an infectious disease outbreak by our hospitals or preparation for such treatment."

Corrections: An earlier version of this story said the Tenet CEO recently sold stocks. He acquired the stock as part of his compensation plan. The date of the company's annual report was also incorrect. It was released in February, not December.