1. Progress and Growth Strategy
Trevor Fetter
President and Chief Executive Officer
June 3, 2008
2. My Message Today:
• Tenet’s culture and values are…
• …driving measurable improvements in operations
and performance, and…
• …innovation to capture industry opportunities and
mitigate industry headwinds
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3. Culture and Values Aligned with Long Term
Growth
• Leaders are managing for long-term value
• Intrinsic belief that high standards of clinical quality are
good for patients and for shareholders
• We make decisions based on facts
• We strive to be “ahead of the curve” on trends impacting
our business
• We focus on our customers (payors, physicians and
patients)
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4. My Message Today:
• Tenet’s culture and values are…
• …driving measurable improvements in operations
and performance, and…
• …innovation to capture industry opportunities and
mitigate industry headwinds
4
5. Same Hospital Adjusted EBITDA and EBITDA
Margins Have Been Expanding
($ in millions)
Adjusted EBITDA
$300 12.0%
Adjusted EBITDA Margin
$250 10.0%
$200 8.0%
$150 6.0%
$100 4.0%
$50 2.0%
$0 0.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2006 2007 2008
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6. Volume Trends are Favorable
(Same-hospital)
4.0%
2.5% Total Admits
1.0%
Paying Admits
Annual Growth
-0.5%Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208*
O/P Visits
-2.0%
-3.5%
-5.0%
-6.5%
-8.0%
Note: “Paying Admits” is defined as total admissions less charity and uninsured admissions.
Q208 includes volumes through April and May. 6
9. We are Effectively Containing Cost Growth
(Same-hospital)
Controllable Expenses(1) per Adjusted Patient Day
Year-over-Year Growth
Average 4.7%
2006 2007 2008
(1)
Same-hospital controllable expenses defined as SWB, supplies, and other operating expenses.
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10. We’ve Kept Bad Debt Expense Stable
Bad Debt as a Percent of Net Revenue
Same-Hospital
10.0%
9.0%
8.0%
7.2% 7.2%
7.0% 6.5% 6.3%
6.0% 5.9%
5.6%
6.0% 5.5%
5.4%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108
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11. We Have Improved Collection Rates Across
All Payor Classes
Managed Care
98.3% (Q1’08)
100%
96.9% (Q1’07)
Balance-after
64.5% (Q1’08)
60.0% (Q1’07)*
Collection
Rate
Blended “Self-Pay”
36.2% (Q1’08)
33.2% (Q1’07)
Uninsured
12.3% (Q1’08)
12.0% (Q1’07)
8% (Pre-Compact)
0% 0%
Fully Insured Uninsured Charity Care
Degree of Insurance
*Estimated rate – Balance-after was not calculated in this timeframe
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12. We are Enhancing Balance Sheet Efficiency
• Managing and incentivizing “leaning” the balance sheet
• Recent announced divestitures at high multiples of
EBITDA and Free Cash Flow
• Anticipating additional $400 million - $600 million
incremental cash over the next 24 months
• Sale of Medical Office Buildings
• Broadlane sale/recapitalization
• Sale or monetization of excess land, buildings and
underutilized assets
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13. My Message Today:
• Tenet’s culture and values are…
• …driving measurable improvements in operations
and performance, and…
• …innovation to capture industry opportunities and
mitigate industry headwinds
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14. Strategic Initiatives are Proving Effective
Commitment To Quality
• All-time high for Tenet’s CMS Hospital Core Measure Performance Score at 90.8 (Q4’07) ...
C2Q exceeds national average score of 88.0% (latest public data Q2’07)
• Center of Excellence designations by managed care
• United – almost 5 times national rate for cardiology: 31% of Tenet hospitals versus 6.5%
nationally
• CIGNA – 149 COE designations for service lines
Targeted Growth Initiative
•
TGI Commercial admissions growth in targeted service lines is exceeding total commercial
admissions growth in general surgery, major trauma, neonatal, neurological medicine,
neurosurgery, open heart, orthopedic surgery, and Cath/EP
Physician Relationship Program
• 1,264 net new physicians added since Jan. 1, 2007
PRP • A 10.3% increase to our active medical staff
• Includes 178 net new physicians added in Q1’08
• Physician satisfaction scores have risen by 2.5% to 76.7%.
$150 million incremental capital infusion in 2006 - 2007
Capital • Capital Expenditure per bed (3 yr. avg.) now at competitive level
• 2008 CapEx plan of $600 – $650 million keeps hospitals competitive, well-equipped
Infusion
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15. Focus on Quality has Positioned Us Well
(1)
CMS Hospital Compare Data
SCIP(2) measures added
Tenet
National Average
2004 2005 2006 2007
(1)
Measures are for 4 trailing quarters.
(2)
Surgical Care Improvement Project (Infection Control). 14
16. Trinity Health
92.9%
Catholic Health
Partners
92.6%
Q206 – Q107
Tenet Healthcare
92.1%
Q407
Tenet Healthcare
89.9%
to Largest Systems
Catholic Health West
89.6%
Catholic Health
89.1%
Initiatives
Tenet vs. Ten Largest U.S. Hospital Systems
Ascension Health
88.8%
Community Health
Systems
87.5%
Hospital
Corporation of
87.2%
America
LifePoint Hospitals
84.0%
Health Management
83.9%
Associates
Tenet’s Q407 results
Tenet’s Clinical Quality Compares Favorably
National Average, 88.0%
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17. High Quality at the Hospital Level: Delray
• HealthGrades
– America’s 50 Best Hospitals
– Distinguished Hospital Award – Clinical
Excellence
– 5-Star designations (3 areas)
– Specialty Excellence Awards (3 areas)
• Centers of Excellence Designations
– CIGNA (7 areas)
– United Healthcare (4 areas)
– Blue Cross Blue Shield (1 area)
• American Heart Association Performance
Achievement Awards (3)
• JCAHO Certified Primary
Stroke Center
• Quality Respiratory Care
Recognition, AARC
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18. Commercial Admissions Growth in TGI Service
Lines Exceeds Total Commercial Admissions
Growth
3.0%
Represents delta between TGI admissions and total commercial admissions
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
-0.5%
2006 2007 2008
Note: 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. 17
19. PRP: Recruiting, Redirecting, Relocating
and Hiring More Physicians
• 178 net new physicians added in Q1’08 with active staff
privileges(1)
• 1,264 net new physicians added in since 01/01/07…
a 10.3% increase in our active medical staff
• Physician Relationship Program (PRP):
• 13,158 visits to 6,764 physicians in Q1’08
• Included visits to 497 physicians unaffiliated with Tenet
(1)
“Active staff” status generally requires at least 10 admissions per year or 10 outpatient surgeries per year.
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20. Physician and Patient Satisfaction is
Strengthening Steadily
Patient Satisfaction
Physician Satisfaction
2005 2006 2007
Note: Physician survey conducted on a semi-annual basis in 2005 and 2006. Beginning in 2007, the
survey will be conducted annually in the fourth quarter. Composite score of all survey items.
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21. Hospital Capital Expenditures at Competitive
Levels
CapEx Per Bed
$45,000
$40,000
$35,000
$30,000
$25,000
$20,000
$15,000
Q403 Q104 Q204 Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108
Note: Last 12 months for continuing operations, excluding construction of new hospitals.
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22. Challenging (But Improving) Environment
• Headwinds
– Difficult U.S. economy
– Cost-shifting to patients
– Rising number of uninsured
• Tailwinds
– Aging population
– Increasing rate of obesity and chronic disease states
– Coverage for uninsured among leading public policy
issues
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23. Key Takeaways
• We passed an “inflection point” in our turnaround
between 12 and 18 months ago:
• Volume trends are positive
• Pricing exceeding expectations
• Exercising continued discipline around costs
• Mitigating bad debt pressures
• Driving hard on cash
• We remain confident our strategies can generate
profitable and sustainable growth
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24. What You’re Going to Hear Today…
• Execution of our strategy, as seen through the
perspective of our most important customers
• How our strategy leads to a virtuous cycle of
increasing growth and value
Higher Margins
Growth Better Cash Flow
Greater ROIC
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