Clinical Operations Kelvin A. Baggett, M.D., M.P.H., M.B.A. SVP, Clinical Operations & Chief Medical Officer December 10, 2012
Forward-looking Statements Certain statements contained in this presentation constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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: the passage of heath care reform legislation and the enactment of additional federal and state health care reform; other changes in federal, state and local laws and regulations affecting the health care industry; general economic and business conditions, both nationally and regionally; 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; liability and other claims asserted against the Company; competition, including the Company s ability to attract patients to its hospitals; technological and pharmaceutical improvements that increase the cost of providing, or reduce the demand for, health care; changes in business strategy or development plans; the ability to attract and retain qualified personnel, including physicians, nurses and other health care professionals, and 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 Company's ability to integrate new businesses with its existing operations; the availability and terms of capital to fund the expansion of the Company's business, including the acquisition of additional facilities; the creditworthiness of counterparties to the Company s business transactions; adverse fluctuations in interest rates and other risks related to interest rate swaps or any other hedging activities the Company undertakes; the ability to continue to expand and realize earnings contributions from the revenue cycle management, health care information management, capitation management, and patient communications services businesses under our Conifer Health Solutions ( Conifer ) subsidiary by marketing these services to third party hospitals and other health care-related entities; and its ability to identify and execute on measures designed to save or control costs or streamline operations. Such factors also include the positive and negative effects of health reform legislation on reimbursement and utilization and the future designs of provider networks and insurance plans, including pricing, provider participation, coverage and co-pays and deductibles, all of which contain significant uncertainty, and for which multiple models exist which may differ materially from the company's expectations. 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. The information contained in this presentation is as of November 7, 2012. The Company specifically disclaims any obligation to update any forward-looking statement, whether as a result of changes in underlying factors, new information, future events or otherwise. Non-GAAP Information This presentation includes certain financial 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 Company s third quarter earnings release issued on November 7, 2012. 2
Overview Highlight of External Factors and Internal Focus Tenet s Quality Agenda 1.0 vs. 2.0 Delivering Results Looking to 2014 and Beyond Key Takeaways Open Discussion and Q&A 3
The Changing Environment of Healthcare Driven by private and public payer-led initiatives to contain costs and improve quality, three trends have emerged: Reimbursement focused on value Renewed focus on safety and the prevention of hospitalacquired conditions and preventable readmissions; and Greater alignment of providers of care through clinical integration models like accountable care organizations. We believe these trends will continue 4
Our Strategy is Clear Tenet s Strategy is to: Differentiate our hospitals through superior quality and service, growing our business by providing greater value to customers Align physicians more closely with our facilities in order to improve quality and efficiency Control cost through our Medicare Performance Initiative and other initiatives designed to increase the efficiency and costeffectiveness of care provided to our patients Acquire acute care hospitals to strengthen our markets or as opportunities emerge in new markets Grow Conifer Health Solutions both in number of customers and services we offer to third-party health care providers Grow our outpatient footprint through acquisitions to develop new channels for our hospitals and patients 5
Clinical Quality: Quality Agenda 1.0 Process Focused Commitment to Quality Key Strategic Initiative Focused on Core Process Measures Performance Early adopter of these proxy measures for associated outcomes Continue to exceed the national average Dedicated to creating industry leading ED and OR throughput times Center of Excellence Designations by Managed Care Strategy to differentiate Tenet hospitals Anticipation of narrow networks/steering Measuring Satisfaction of Patients and Physicians Absence of industry comparative benchmarking Relationship between satisfaction and engagement unclear 6
CMS Hospital Compare- Core Measures Tenet Trend vs. National Average 99 97.0 97.2 97.5 98.0 98.2 98.3 98.5 98.5 98.5 97 95 93 93.8 93.1 92.2 96.2 96.6 95.7 94.4 94.7 95.1 93.2 93.5 94.1 94.6 95.0 95.3 95.5 95.7 97.5 96.9 97.1 96.6 96.0 91 89 87 90.4 89.7 89.6 88.8 88.5 87.2 88.0 91.2 90.8 92.2 91.3 90.3 89.3 88.6 87.0 86.7 84.7 86.2 85 85.9 83 81 82.8 84.7 83.3 81.5 82.3 80.5 81.1 Tenet % National Average % 79 80.0 77 Q204-Q105 Q304-Q205 Q404-Q305 Q105-Q405 Q205-Q106 Q305-Q206 Q405-Q306 Q106-Q406 Q206-Q107 Q306-Q207 Q406-Q307 Q107-Q407 Q207-Q108 Q307-Q208 Q407-Q308 Q108-Q408 Q208-Q109 Q308-Q209 Q408-Q309 Q109-Q409 Q209-Q110 Q309-Q210 Q409-Q310 Q110-Q410 Q210-Q111 Q310-Q211 Q410-Q311 Q111-Q411 Q211-Q112 Q311-Q212 Note: 1. Source Data: CMS Hospital Compare website. 7
Tenet Quality Is Recognized By Insurers Centers of Excellence and Other Quality Designations for Tenet Hospitals and Service Lines 260 306 305 308 166 202 2007 2008 2009 2010 2011 2012 8
Clinical Operations: Quality Agenda 2.0 Improving Outcomes, Driving Value Clinical Operations Refreshed Commitment to Quality Reduction of Health Care Associated Infections Elimination of Never Events Service measurement and improvement targeted at gaining engagement and loyalty Generation of internal evidence using tools and data Outcomes improvement incorporating functionality, mortality, morbidity and management metrics Standards and Standardization Reduction of non-value added care variability Improved clinical infrastructure and competency Yearly agenda setting for local governing boards Service line evaluation and approval that improves likelihood of program success and return on investment External work to harmonize metrics Engaged in Driving Business Pursuit of certifications that differentiate care environments Marketing of performance and recognitions that create a competitive advantage Joint Operating Committees with selected managed care clinical leaders Employer engagement to garner large contracts 9
Defining Value Value = Outcomes Achieved Cost to Deliver those Outcomes Delivering improved outcomes at a lower total cost of care or reducing costs while maintaining the current level of outcomes Key Components: Patient Baseline Health Status Safety First doing no harm Care Variability and Quality - Care that is consistent with the latest evidence, science or demonstrated best practices Service Person centered care, delivered with dignity, respect and desired engagement of the patient and their families Care setting / Level of care Intensity of services Resource utilization Throughput, turn around time and cycle times Patient Outcomes Cost Risk Mitigation (Compliance and Malpractice) 10
Clinical Operational Performance Improvement Objectives Framework Unifying Purpose Safest, high quality, most efficient provider of health care services. Categories Safety Clinical Variability & Quality Service Operational Efficiency Performance Areas Healthcare Associated Infections (HAIs) Hospital Acquired Conditions (HACs) Cardiac Care Appropriateness Stroke Care Patient Satisfaction Turn around time (TAT) ED Throughput Elective Deliveries Diabetes Care Employee Engagement Supply Utilization Patient Falls Heart Failure Management Physician Satisfaction Formulary Standardization Never Events Venous Thromboembolism Telemetry Care Ventilator Management Clinical Leadership Turnover Imaging Efficiency Lab Ordering Blood Product Utilization Antibiotic Administration Physician Leadership Engagement Physician Preference Items Preventable Readmissions Core Process Measures Nursing Retention Clinical Workflow Patient Mortality Sepsis Care Resource Consumption Medication Errors Perinatal Care Nursing Education Business Continuity 11
How We are Working Together to Increase Value Supporting reporting of publicly required data Participating in relevant external registries Aggregating, analyzing and distributing data Identifying and sharing best practices Establishing internal collaboratives Providing support and expertise for sustainable clinical operational improvement 12
Driving Outcomes Patient Safety Serious Reportable Patient Safety Events: Decreasing Events and Continuously Learning Patient Safety Performance Improvement Initiatives: Rapid Response Process quickly determines if the risk exposure extends beyond a single site Reduces cycle time to identify and address cause Centralized mechanism to capture and share best practices Do we send a detailed safety alert? Patient Safety Improvement Process Does it require a safety flash memo? 13
Business Risk: October 2012 Meningitis Outbreak Daily CEO Updates Engaged Conifer for response call center and patient letters Incident Command Center Communication with FDA and State Depts. Of Health October 4 th 29 th All Tenet facilities sequestered all NECC products Inventory Assessment of all Facilities for NECC and Ameridose Products Daily communication with all hospitals Incident Command Center Deployed and Patient Hotline Activated Customized Facility FAQs and Patient Letters All Patient Notification Letters Mailed Monitoring system and patient screening exams implemented 14
Demonstrable Results Patient Safety Initiatives since 2011 have resulted in significant improvements in key areas: Ventilator Associated Pneumonias reduced by 46% 46% Catheter Associated Urinary Tract Infection reduced by 31% 31% Falls with Injury reduced by 41% 41% Vascular Catheter Associated 64% Infection reduced by 64% Retained Foreign Objects reduced by 57% 57% Pressure Ulcer Stages III & IV reduced by 36% 36% The above rates are per 1000 device days and patient days. The above rates are per 1000 patient discharges. 15
Avoiding Potential Readmissions CMS Readmission Reduction Program initiated a penalty for avoidable readmissions beginning October 2012, with an initial associated penalty of 1% of total base operating DRG as a withhold. Action Created a task force in Q4 2009 Distributed best practices in Q1 2010 Incorporated predictive tools in 2011 To increase accountability, we included readmissions in our incentive plans starting in 2010 Initiated pilots with external and post acute care vendors in 2011 Results Only 2 Tenet hospitals received the maximum penalty of 1%. Acute Myocardial Infarction and Pneumonia Readmissions continue to be better than the national average and continue to improve 16
The Enabling Role of Technology: HIT Health Information Technology (HIT) Advances in health information technology continue to improve care and help us to better inform clinical processes. Clinical Apparatus Tenet HIT Roadmap Phase 1 EHRs Core clinicals 26 completed as of 10/2012 Phase 2 CPOE 26 completed as of 10/2012 Satisfied CMS HIT targeted incentives Targeted Completion: 2014 17
Driving Value Future Measures Beginning January 2013, Tenet hospitals will be required to submit VTE and Stroke Measure data to CMS. Failure to submit this data will result in a loss of 2% of the Annual Payment Update (APU) in 2014. What have we done to prepare and focus on improvement? Stroke Venous Thromboembolism (VTE) New Readmissions Measures Stroke is the 4 th leading cause of death. About 795,000 Americans each year suffer a new or recurrent stroke. 41 Tenet hospitals participate in the American Heart Association Get With The Guidelines program. St Louis University Hospital created and leads the Mid American Stroke Network, which includes 45 regional hospitals. Estimates range from 300,000 to 600,000 people are affected by VTE each year in the United States VTE is the 2nd most common cause of excess length of stay due to complication after surgery Since 2009, we have had a system wide focus that includes process redesign, practices and policies Results: 96% compliance with VTE policies and practices Readmissions measures will now include all unplanned readmissions for all conditions hospital wide, as well as total knee / total hip arthroplasty complication and 30 day readmission. Systems are being developed to address these measures, including predictive analytics tools which have been beta tested in 2012 and are in implementation phases. 18
QUESTIONS? 19