Tenet Healthcare Overview April 9, 2014 Sam Balk Barbara Beck Raj Davda Jack Davidson Keith Osborne...

Tenet Healthcare OverviewApril 9, 2014

Sam BalkBarbara Beck

Raj DavdaJack DavidsonKeith OsborneTrena Payne

Linda SeifferthAnil SipahimalaniTricia Swaggert

CEO, Background & History

CEO: Trevor Fetter- promoted from CFO to CEO in 2002 to resolve a series of government investigations that threatened the company’s existence

• Formed in 1995 as result of merger between National Medical Enterprises and American Medical International

• 1997 – added another for-profit hospital system – OrNda• Scandals Had Devastating Financial & Operational Effects

– 1990s- Pleaded guilty in 1994 to charges related to unnecessary prolonged child admissions to psychiatric facilities in Texas and payments to school counselors

– In 2002, - Charges that more than 600 patients at Redding Medical Center in California underwent unnecessary cardiology procedures

– In 2002 – Paid a $900M fine for fraudulent Medicare billing related to outlier payments– Scandal forced hospital divestitures and severe layoffs

– At their peak in 2001, they had 111 hospitals – At their “low” point in 2005, they had 74 hospitals

• 2013 – completed acquisition of Vanguard (Abrazo)• Currently -77 Acute-care hospitals across several states

– Majority of their business in in Texas, Southern California and Florida

2Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

The Business

* Footnotes here.

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2014 Cigna 3

- 77 acute care hospitals in 13 states and 183 outpatient centers, mostly in CA, FL and TX. - Headquartered in Dallas, Texas

- 4000 physicians that admit to Tenet, 900 are Tenet employees.

- Owns subsidiary Conifer Health Solutions, providing business process solutions for more than 600 hospitals.

- Second largest for-profit hospital system with significant market share in select markets

Mission: To improve the quality of life for every patient, provide an exceptional environment for employees, and physicians, and provide an attractive return to shareholders.

Values: Quality, Integrity, Service, Innovation, Transparency

Value Proposition: Offer comprehensive, coordinated wide array of services including Intensive Care, Critical Care, Physical Therapy, Orthopedics, Oncology, Transplant Services, Surgery and Outpatient Services.

Relationship to Key Drivers

Financial Review

Cash, Profit, Assets – actual numbers as previously noted.

People- 4000 physicians that admit to Tenet, 900 are Tenet employees.

Growth – Continued growth from ACA

Capture additional Vanguard synergies

Value creation through portfolio management

Drive incremental outpatient growth

Develop new health plan business

Leverage value based care business model


Relationship to Cigna

* Footnotes here.


• Tenet is a valued part of Cigna’s network and also a client (service administration)• Current relationship is tenuous• On Jan. 31, Tenet issued Cigna a formal notification of termination of the Master Agreement - Effective May 31,

2014• Tenet is proposing terms that are disproportionate to the market on a rate basis and not in the best interests of

our customers and clients– As a result of their growth from acquisitions, they have demanded renewed agreements at significantly high

rates, ranging as high as 87% over two years. • Cigna is continuing negotiations with Tenet

– Remain far apart on multiple issues of critical importance to our customers--issues that impact the future cost and affordability of care from their facilities & professionals.

– At this time, no agreement has been reached– Cigna's intention is to work toward a mutually beneficial solution and prevent customer/patient disruption

• Impact if Contract Terminates– The negotiations impact over 70 hospitals in thirteen states and nearly 4,000 physicians who admit to Tenet

facilities– Approximately 900 of these physicians are employed by Tenet– Any claims for non-emergency services provided by Tenet facilities and affiliated providers after that date will

be processed according to out of network benefits – if available in their plan

Financial Highlights

* Footnotes here.


• Total Revenues: $ 11.1 B• Operating Income: $ 663 M• Operating Profit Margin: 5.97%• Net Income: ($ 104 M)• Net Profit Margin: (1%)• Revenue Growth: 22%• Return on Equity (13.8%)• Net Income Growth: (178%)• Earnings per Share Growth (-201%)• No significant change in share price and P/E N/A• Reasons:

– 4.3 B for Vanguard acquisition with 1.3 B in cash and 2.5 B of debt– Revenue growth likely includes accretion of Vanguard– 2014 expect continued decline inpatient admissions and increase in net income from

Vanguard of $50-100 M

Key Things We Know About Tenet

* Footnotes here.


• With acquisition of Vanguard, and associated costs, Tenet will leverage their size to increase rates– As a result of their growth from acquisitions, they have demanded renewed

agreements at significantly high rates, ranging as high as 87% over two years. • Inform customer and clients of possible termination• Recognize disruption in customer and HCP relations• Impact to asset (network), people (employees)

Questions?


“Cigna,” the “Tree of Life” logo and “GO YOU” are registered service marks, and “Cigna Medical Group” is a service mark, of Cigna Intellectual Property, Inc., licensed for use by Cigna Corporation and its operating subsidiaries. All products and services are provided by or through such operating subsidiaries, including Connecticut General Life Insurance Company, Cigna Health and Life Insurance Company, and Cigna HealthCare of Arizona, Inc., and not by Cigna Corporation. Cigna Medical Group (CMG) is an operating division of Cigna HealthCare of Arizona, Inc. All models are used for illustrative purposes only.

000000 00/14 © 2014 Cigna. Some content provided under license.

Tenet Healthcare Overview April 9, 2014 Sam Balk Barbara Beck Raj Davda Jack Davidson Keith Osborne...

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