Trevor Fetter, the Chairman and CEO of Tenet Healthcare, thrived on solving complex organizational and financial challenges. At the beginning of 2014, he faced the biggest test of his career – integrating Vanguard Health Systems, a company two-thirds the size of Tenet, into the company.
Fetter had taken over as CEO at Tenet when the hospital chain faced crippling scandals concerning Medicare payments. Fetter settled with the government, improved quality at Tenet hospitals, and deliberately improved the company’s finances through cost controls, sale of low-performing hospitals, and small acquisitions in targeted markets.
But the purchase of Vanguard represented a step change in Tenet’s strategy. Fetter believed the recent passage of the Affordable Care Act would spur further consolidations in the healthcare sector. He justified the 70% premium Tenet paid for Vanguard by calculations that showed that the merged entity would realize $100-200 million in annual synergies.
But were the synergy calculations justified? Fetter faced real pressures to deliver. Tenet’s investors included Glenview Capital Management, an investment fund known for aggressively pressuring management to reward investors. Glenview held 12.5% of the company in 2014.
Suggested Citation: Sid Yu, Jacob Thomas, and Jaan Elias, "Tenet's Vanguard Acquisition," Yale Case 23-011, January 30, 2023.