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tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
tenet healthcare Q12008FinalSlides
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tenet healthcare Q12008FinalSlides

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  1. Q1’08 Earnings Call May 6, 2008
  2. Forward-Looking Statements Certain statements contained in this presentation constitute forward-looking statements. Such forward-looking statements are based on management's current expectations and involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results to be materially different from those expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, both nationally and regionally; industry capacity; demographic changes; changes in, or the failure to comply with, laws and governmental regulations; the ability to enter into managed care provider arrangements on acceptable terms; changes in Medicare and Medicaid payments or reimbursement, including those resulting from a shift from traditional reimbursement to managed care plans; liability and other claims asserted against the Company; competition, including the Company’s failure to attract patients to its hospitals; the loss of any significant customers; technological and pharmaceutical improvements that increase the cost of providing, or reduce the demand for, health care; a shortage of raw materials, a breakdown in the distribution process or other factors that may increase the Company’s cost of supplies; changes in business strategy or development plans; the ability to attract and retain qualified personnel, including physicians, nurses and other health care professionals, including the impact on the Company’s labor expenses resulting from a shortage of nurses or other health care professionals; the significant indebtedness of the Company; the availability of suitable acquisition opportunities and the length of time it takes to accomplish acquisitions; the Company's ability to integrate new businesses with its existing operations; and the availability and terms of capital to fund the expansion of the Company's business, including the acquisition of additional facilities. Certain additional risks and uncertainties are discussed in the Company’s filings with the Securities and Exchange Commission, including the Company’s annual report on Form 10-K and quarterly reports on Form 10-Q. Do not rely on any forward-looking statement, as we cannot predict or control many of the factors that ultimately may affect our ability to achieve the results estimated. We make no promise to update any forward-looking statement, whether as a result of changes in underlying factors, new information, future events or otherwise. Non-GAAP Information During the Company’s quarterly earnings calls and in this presentation, management refers to certain financial measures and statistics, including measures such as adjusted EBITDA, which are not calculated in accordance with Generally Accepted Accounting Principles (GAAP). Management recommends that you focus on the GAAP numbers as the best indicator of financial performance. These alternative measures are provided only as a supplement to aid in analysis of the Company. Reconciliation between non-GAAP measures and related GAAP measures can be found in the press release issued on May 6, 2008, and on the Company’s web site, www.tenethealth.com. 2
  3. Trevor Fetter President and Chief Executive Officer
  4. Volume – Admissions Growth(1) 2% Up 1.0% Y-o-Y Growth 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 -2% -4% 2006 2007 2008 (1) Same-hospital. 4
  5. Key Strategies Proving Effective 2nd consecutive quarter of positive admissions growth (same-hospital) Volumes 1.0% admissions growth (Q1’08 versus Q1’07, same-hospital) 0.8% admissions growth excluding flu EBITDA EBITDA margin of 9.9%, up 120 basis points over Q1’07 Physician Continued growth of active medical staffs Relations Commercial payers recognizing Tenet’s progress in clinical quality Pricing Cost initiatives plus operating leverage improved unit costs Costs Growth in uninsured beginning to moderate Bad Debt Aggregate uninsured + charity admissions declined 1.2% Commercial managed care admissions declined 3.7% Commercial Commercial outpatient visits declined 2.1% Volumes 5
  6. Performance metrics(1) (cont.) Adjusted $239mm adjusted EBITDA EBITDA 3.7% growth in admissions compared to April, ’07 April (2) 0.9% growth in commercial managed care admissions Volumes 2.8% growth in outpatient visits 1.6% admissions growth Y-T-D Volume 2.6% commercial admissions decline Growth 1.3% growth in uninsured + charity (through 4/30/08) 0.1% decline in outpatient visits (1) Same-hospital (2) April 2008 had one more weekday and one less weekend day than April 2007. Weekdays generally produce stronger volumes than weekend days. 6
  7. Volume – Admissions Growth(1) Up 1.6% 2% Up 1.0% Y-o-Y Growth 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 April YTD -2% -4% 2006 2007 2008 (1) Same-hospital. 7
  8. Adjusted EBITDA(1) 300 250 239 218 211 194 200 177 168 $ in millions 164 153 150 114 100 50 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2008 2006 2007 (1) Same-hospital. 8
  9. USC Sale Price Sale price = Book value at closing Book $311 million (3/31/08) Value Approx $25mm in 2007, excluding corporate EBITDA overhead and unusual or non-recurring items Capital Normal annual capital expenditures approx. $10mm Expenditures 9
  10. Stephen L. Newman, M.D. Chief Operating Officer
  11. Physician Relationship Program (“PRP”) 13,158 calls logged on 6,764 physicians in Q1’08 5.7% admissions increase from these 6,764 physicians: Best quarterly performance since PRP launch 497 PRP calls on unaffiliated physicians 11
  12. Active Physician Staff Continues to Grow 178 net additions to active physician staff in Q1’08 10.3% net growth in active physician staff since 1/1/07 12
  13. New PRP Enhancements Increased numbers of staff becoming involved Expanded training curriculum Customized education program for hospital-based recruiters 13
  14. Volume Growth 1.0% admissions growth Aggregate commercial admissions declined by 3.7% 14
  15. TGI – Commercial admissions growth in TGI service lines(1) significantly exceeds total commercial admissions growth 2% TGI Service lines – commercial admissions only (1) 1% Total commercial admissions 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Down Y-o-Y Growth -1% 1.2% -2% -3% -4% -5% -6% -7% 2006 2007 2008 (1) Data represents commercial admissions growth in 8 service lines which are typically emphasized by TGI: general surgery, major trauma, neonatal, neurological medicine, neurosurgery, open heart, orthopedic surgery, and Cath/EP. 15
  16. Commercial admissions decline confined to a small number of hospitals 3 hospitals responsible for more than half the Q1’08 commercial admissions decline of 1,520 admissions April: no loss of aggregate commercial admissions in these 3 hospitals 16
  17. Florida’s volume resurgence continues 1.1% aggregate admission growth in Q1’08 Reducing outmigration Regionalizing selected services 17.7% growth (14 cases) in commercial open heart procedures 17
  18. April volumes were strong (1) 3.7% total admissions growth 1.6% Y-T-D admissions growth through April 30 All 5 regions saw positive growth in April 0.9% growth in commercial managed care admissions 2.8% growth in outpatient visits (1) April 2008 versus April 2007. April 2008 had one more weekday and one fewer weekend days than April 2007. The company typically experiences stronger volumes on week days than on weekends. 18
  19. Pricing enhancements Recently signed commercial contracts made key contribution Progress towards closing pricing gap relative to competitors Memorandum of understanding with Independence Blue Cross in Philadelphia Includes incremental payments for Quality 19
  20. Cost structure continues to improve Productivity: 1.2% improvement in FTEs per adjusted patient day 10.7% decline in contract labor expense per adjusted patient day 18% reduction in registered nurse turnover Supply costs: Limited to a 3.9% increase per adjusted patient day Much of supply cost increase due to 1.2% increase in orthopedic, neurosurgical and general surgery procedures 20
  21. Biggs C. Porter Chief Financial Officer
  22. Q1’08 items Cost Report $2mm favorable in Q1’08 versus $12mm Settlements favorable in Q1’07 $8mm favorable settlement of managed care Bad Debt dispute $6mm favorable - Georgia Medicaid Medicaid HMO $6mm favorable Distribution Impairment and $1mm charge Restructuring $47mm charge Litigation 22
  23. Net Revenue(1) - Growth trend remains robust 8% Up 6.7% 6% Y-o-Y Growth 4% 2% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 -2% -4% 2006 2007 2008 (1) Same-hospital. 23
  24. Solid pricing gains(1) 6.0% growth in net inpatient revenue per admission 8.6% growth in net outpatient revenue per visit 5.5% increase in net patient revenue per adjusted admission Recently signed commercial contracts support pricing trend Signed contracts cover approximately: 84% of commercial rates for 2008 68% for 2009 (1) Same-hospital 24
  25. Cost Containment Controllable Expenses(1) per Adjusted Patient Day 8% 6.5 6.3 6% Y-o-Y Growth 5.1 5.1 4.8 4.3 4.2 4% 3.6 2.6 2% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2006 2008 2007 (1) Same-hospital controllable expenses defined as SWB, supplies, and other operating expenses. 25
  26. Bad Debt Bad Debt Expense / Net Revenues 18% (excluding unusual charges) 16% 14% 12% 10% 8% 6% 4% As reported 2% Compact-adjusted (2) 0% (as reported) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2000 2001 2002 2003 2004 2007 2008 2005 2006 (1) Same-hospital (2) Compact adjustment calculations discontinued beginning in Q1’07. 26
  27. Accounts receivable aging distribution 90.0% 80.0% 70.0% Q1 '07 60.0% Q2 '07 50.0% Q3 '07 Q4 '07 40.0% Q1 '08 30.0% 20.0% 10.0% 0.0% 0-90 91-180 over 180 27
  28. Medical Office Building (“MOB”) Proposed Sale 34 MOBs in package Jones Lang LaSalle is Tenet broker 2.4 million square feet net rentable space MOBs located at 21 of our hospitals MOBs located in 7 states 28
  29. 2008 Outlook Revisions . . . pricing strength offsets slower outpatient volume growth Prior Revised (2/26/08) (5/6/08) Admissions - growth (1) (%) 1-2 no change Outpatient visits – growth (1) (%) 2–3 1-2 Net inpatient revenue per admit - growth (1) (%) not provided 3.5 – 4.25 Net outpatient revenue per visit – growth (1) (%) not provided 4.5 - 5.25 Pricing – base line growth (%) 3.2 3.4 Pricing – managed care increment ($mm) 36 47 Net revenue ($ bil) 9.3 – 9.4 no change Bad debt ratio (%) 6.5 - 7.0 no change Controllable operating expenses PAPD – Growth (1) (%) 3.0 – 3.5 no change EBITDA ($mm) 775 - 850 no change Adjusted cash flow from operations ($mm) 400 - 500 no change Capital expenditures ($mm) 600 - 650 no change (2) Cash balance at 12/31/08 ($mm) 200 - 300 no change (1) Same-hospital growth from 2007 to 2008 (2) Excludes potential proceeds from initiatives to raise $400-600mm, USC sale, and other non-operating items 29
  30. 2008 Adjusted EBITDA Outlook Revisions 2008 (2/26/08) 2008 - REVISED ($ millions) Revenue Cost EBITDA Revenue Cost EBITDA Prior year 8,852 (8,151) 8,852 (8,151) 701 701 Cost Report Adjustments (40) - (40) (40) - (40) Georgia/ Florida Medicaid (60) - (60) (56) - (56) Volume (1) 193 (116) 77 167 (106) 61 Pricing – Base Line Increase (2) 280 (18) 262 291 (18) 273 Managed Care (3) 36 - 36 47 - 47 Other Initiatives (4) 51 (18) 33 51 (18) 33 Costs – Base Line Inflation (5) - (261) (261) - (271) (271) Cost Reduction Initiatives (6) - 100 100 - 100 100 Other (7) 88 (86) 2 88 (86) 2 9,400 (8,550) 9,400 (8,550) Total (8) 850 850 (1) Annual admissions growth of 1.5 percent, outpatient visit growth of 1.5 percent using 2007’s average pricing with 40 percent margin assumption on incremental revenues. (2) Base line pricing increases of 3.4 percent for 2008. These assumptions are before discrete initiatives valued in this analysis, and include certain assumptions on adverse mix change (3) Price increases in existing contracts and anticipated future increases. (4) Full-year impact of 2007’s ED acuity capture effort and incremental adjustments to chargemaster. (5) Inflation rate of 3.5 percent reflects normal merit increases, union contract adjustments and other items before discrete initiatives valued in this analysis. (6) Full year impact of cost initiatives initiated in 2007. (7) Includes impact of Sierra Providence East Medical Center (El Paso), Coastal Carolina Hospital, physician practices and other non-acute operations. (8) Various risks including volume growth, volume mix, and bad debt create at least $75 million in uncertainties for 2008 performance, hence the adjusted EBITDA outlook range from $775 mm to $850mm. 2009 uncertainties exceed those identified for 2008. This schedule is not intended to provide a series of spot estimates or line item guidance. Other combinations of line item performance could produce the same, or higher, or lower results. 30
  31. Illustrative, sample walk-forward path to $1 billion adjusted EBITDA in 2009 2008 - REVISED 2009 ($ millions) Revenue Cost EBITDA Revenue Cost EBITDA Prior year 8,852 (8,151) 9,400 (8,500) 701 850 Cost Report Adjustments (40) - (40) - - - Georgia/ Florida Medicaid (56) - (56) - - - Volume (1) 167 (106) 61 151 (91) 60 Pricing – Base Line Increase (2) 291 (18) 273 312 (20) 292 Managed Care (3) 47 - 47 34 - 34 Other Initiatives (4) 51 (18) 33 - - - Costs – Base Line Inflation (5) - (271) (271) - (286) (286) Cost Reduction Initiatives (6) - 100 100 - 29 29 Other (7) 88 (86) 2 88 (67) 21 9,400 (8,550) 9,985 (8,985) Total (8) 850 1,000 (1) Annual admissions growth of 1.5 percent, outpatient visit growth of 1.5 percent using 2007’s average pricing with 40 percent margin assumption on incremental revenues. (2) Base line pricing increases of 3.4 percent for 2008. These assumptions are before discrete initiatives valued in this analysis, and include certain assumptions on adverse mix change (3) Price increases in existing contracts and anticipated future increases. (4) Full-year impact of 2007’s ED acuity capture effort and incremental adjustments to chargemaster. (5) Inflation rate of 3.5 percent reflects normal merit increases, union contract adjustments and other items before discrete initiatives valued in this analysis. (6) Full year impact of cost initiatives initiated in 2007. (7) Includes impact of Sierra Providence East Medical Center (El Paso), Coastal Carolina Hospital, physician practices and other non-acute operations. (8) Various risks including volume growth, volume mix, and bad debt create at least $75 million in uncertainties for 2008 performance, hence the adjusted EBITDA outlook range from $775 mm to $850mm. 2009 uncertainties exceed those identified for 2008. This schedule is not intended to provide a series of spot estimates or line item guidance. Other combinations of line item performance could produce the same or higher, or lower results. 31

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