Community Health Systems, Inc. · NYSE:CYH
Community Health Systems — Proxy Contest (April 2011)
110 slides from Community Health Systems's proxy contest presentation, Apr 28, 2011
Slide 1: CHS Response Presentation April 28, 2011
CHS RESPONSE PRESENTATION APRIL 28, 2011
Slide 2: Forward-Looking Statements
Any statements made in this presentation that are not statements of historical fact, including statements about our beliefs and expectations, including any benefits of the proposed acquisition of Tenet Healthcare Corporation ("Tenet"), are forward-looking statements within the meaning of the federal
Slide 3: Additional Information / Participant Information
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This presentation relates to a business combination transaction with Tenet proposed by Community Health Systems, Inc. ("CHS" or "the Company"), whi
Slide 4: Program Introduction and Overview
Program Introduction and Overview Wayne Smith Chairman, President and Chief Executive Officer Medicare Definitions Barbara Paul, M.D. Senior Vice President and Chief Medical Officer Clinical Review Criteria Lynn T. Simon, M.D. Senior Vice President - Quality and Resource Management Analysis and Stat
Slide 5: Introduction and Overview
Introduction and Overview Annual 2010 revenue - $13 billion 693,000 admissions and 2,700,000 emergency room visits to our hospitals in 2010 64,000 full-time and 23,000 part-time employees High quality patient care and safety are our top priorities Our organization, employees, and physicians adhere t
Slide 6: Introduction and Overview: Tenet lawsuit
Introduction and Overview We believe that Tenet's lawsuit against CHS in this proxy contest has negatively affected the entire health care sector. CHS will cooperate with regulators and assist in any investigation. As we will show, we believe Tenet's lawsuit has no merit and, while distracting, will
Slide 7: Introduction and Overview: Our beliefs
Introduction and Overview We believe: Tenet's allegations of inappropriate admissions are based on contrived and biased metrics leading to a conclusion of implausibly inflated financial exposure. If Tenet believes "observation rate" is a material statistic, then why did Tenet not disclose this metri
Slide 8: Tenet's Allegation of Inappropriate Admissions
Tenet's Allegation of Inappropriate Admissions "Observation rate" * Biased metric Omits an industry peer with an "observation rate" much closer to CHS. Faulty inference Compares low "observation rate" to a national average and to the hospital system with the highest "observation rate". Concludes tha
Slide 9: Tenet's Allegations Lead to an Implausible Result
12.43% (National Average) The result of this pro-forma adjustment: CHS one-day stays as a percentage of total admissions would now range from an implausibly low 8.1% to 4.5%, versus a 29-state statewide-average of 12.5%. Clearly, the Tenet analysis contains significant flaws. 2009 Medicare One-Day S
Slide 10: Inpatient Admissions vs. Observation Status
Tenet's allegations fail to balance the CMS rules regarding the use of observation status with the CMS position regarding inpatient admissions: If the physician determines that the patient's assessment and treatment are likely to take more than 24 hours (or that the patient is expected to remain ove
Slide 11: Medicare Definitions: Inpatient and Outpatient
Inpatient "An inpatient is a person who has been admitted to a hospital for bed occupancy for purposes of receiving inpatient hospital services. Generally, a patient is considered an inpatient if formally admitted as inpatient with the expectation that he or she will remain at least overnight and oc
Slide 12: Outpatient Observation Services
Outpatient Observation Services "Observation care is a well-defined set of specific, clinically appropriate services, which include ongoing short term treatment, assessment, and reassessment before a decision can be made regarding whether patients will require further treatment as hospital inpatient
Slide 13: Use of Clinical Review Criteria
Use of Clinical Review Criteria We believe that Tenet implies a requirement that hospitals use vendor-supplied clinical review criteria and that there is something nefarious about the clinical review criteria developed over time by CHS physicians and other health care professionals. CMS does not dic
Slide 14: Role / Purpose of Clinical Review Criteria
CMS requires that hospitals adopt clinical criteria for use by each hospital's utilization review committee or department.1 25% of hospitals in the U.S. use criteria other than InterQual or Milliman (formerly known as Milliman & Robertson).2 CMS contractors [e.g., Medicare Administrative Contractors
Slide 15: CHS Clinical Guidelines for Inpatient Care
CHS Clinical Guidelines for Inpatient Care "CHS Clinical Guidelines for Inpatient Care" commonly known as the "Blue Book" Developed around late 1999 at a time when CHS-affiliated hospitals were primarily rural At the end of 1999, CHS operated 46 hospitals in 20 states with 4,115 licensed beds At the
Slide 16: Goals for CHS Clinical Guidelines
CHS Clinical Guidelines for Inpatient Care Goals for "CHS Clinical Guidelines for Inpatient Care" (Blue Book) One set of criteria for all payors Easy to use and understand by case manager Based on current clinical practice Affordable and cost effective
Slide 17: Process for Blue Book development
CHS Clinical Guidelines for Inpatient Care Process for Blue Book development Selected top 20 most frequent conditions needing inpatient care for initial data set Conducted literature search Developed draft guidelines Created design and layout for ease of use Submitted to CHS Regional then National P
Slide 18: Blue Book regularly updated
CHS Clinical Guidelines for Inpatient Care Blue Book regularly updated Six revisions August 2001 March 2003 August 2006 December 2007 August 2009 July 2010 Updates included review of other sources (professional medical organizations such as American College of Cardiology, InterQual, Milliman, and ot
Slide 19: CHS Provides Better Emergency Room Service
CHS Provides Better Emergency Room Service CHS tracks patient ER wait time and other important service metrics. By improving information collection and analysis, CHS provides more efficient and effective health care. One information tool is Pro-MED.
Slide 20: Patient Status and Emergency Room Flow
Patient arrives at Emergency Room Patient Status and Emergency Room Flow Triage ED physician examination / testing and treatments Attending physician / hospitalist 0 Patient's condition can be evaluated / treated within 24hrs and / or rapid improvement anticipated within 24 hrs Home Inpatient admiss
Slide 21: Pro-MED Clinical System at CHS
Pro-MED Clinical System at CHS What is the Pro-MED emergency room electronic health record? Pro-MED Clinical Systems L.L.C. was formed in 1991 to market a clinical information system for hospital emergency rooms. The Pro-MED Clinical System has been deployed to most but not all CHS affiliated hospit
Slide 22: CHS Use of Pro-MED System
CHS Use of Pro-MED System Standardized tools for managing patients during and after ER visit Status board showing location and status of each patient Patient tracking includes, length of stay and wait times for critical stages in ER visit: Wait time to triage Wait time to be placed in exam room or s
Slide 23: CHS Use of Pro-MED System
What the Pro-MED system does not do: Does not order tests Does not contain admission or observation criteria from any source * Does not make any recommendation to physicians to admit patients, place patients in observation, or discharge patients * * Excludes three CHS hospitals where system flags cr
Slide 24: Physician Decision to Admit
Physician Decision to Admit The decision to admit a patient to a hospital is a clinical assessment of medical necessity made by the admitting physician. Attending physicians order admissions; it is the essence of medical judgment. Physicians rely on their education, training, and experience, and bas
Slide 25: Criteria for Observation and Inpatient Care
Criteria for Observation and Inpatient Care Source: "Recent Growth in Hospital Observation Care," MedPAC, September 13, 2010 General guidance: Reasonable & necessary 8 or more hours of service Medical record must contain: physician order, written request for observation, and timeframe Timing: not ri
Slide 26: "Observation Rate" is a Contrived Statistic
"Observation Rate" is a Contrived Statistic Tenet's contrived "observation rate" is not an industry term and we believe it is not a useful metric We believe that inpatient rates matter, "observation rate" does not Tenet excludes a key industry peer in calculating its "observation rate" That peer com
Slide 27: "Observation Rate" Internet Search Results
"Observation Rate" is a Contrived Statistic Internet Search Results Surgery 109,000,000 Admission 30,900,000 Emergency Room Visits 1,600,000 One-Day Stay 1,350,000 "Observation Rate" 1,720 Source: Google web search engine on 4/17/2011 at 10:15 PM CDT, http://www.google.com/ Note (1): Required words
Slide 28: Analysts Seek Relevant Statistics
Analysts Seek Relevant Statistics Gary Taylor, Citigroup April 15, 2011 "We believe the ratio of 1-day Medicare admissions divided by total admissions is the most relevant statistic to analyze when considering such an allegation. In fact, this is a key ratio used by Medicare RAC auditors to flag pot
Slide 29: Industry Comments on "Observation Rate"
Industry Comments on "Observation Rate" Vanguard Health Systems April 12, 2011 "Medicare Observation Rate is not a statistic that the Company normally reports." Iasis Healthcare April 13, 2011 "Medicare observation rate is not something it customarily reports." LifePoint Hospitals April 14, 2011 The
Slide 30: Tenet Does Not Disclose "Observation Rate"
Tenet Does Not Disclose "Observation Rate" Document Review: Tenet Healthcare Corp. SEC 10-K Filings from December 31, 2006, through December 31, 2010. If Tenet believes "observation rate" is a material statistic, then why did Tenet not disclose this metric in its own SEC filings? Tenet has not discl
Slide 31: Medicare Observation Rate with Relevant Peer Group
Public Co Average Medicare "Observation Rate" with Total Relevant Peer Group Source: American Hospital Directory, Robert W. Baird, April 13, 2011; company reports, reviewed by an outside consultant. Baird data includes distinct part units and includes discharges for transfers to other acute care hos
Slide 32: Observation Rate Including UHS
Additional analyses verify that the "observation rate" for UHS, excluded from the Tenet analysis, has a similar value to that for CHS. Source: American Hospital Directory, Morgan Stanley, April 13, 2011 "Observation Rate": Outpatient Observation Visits divided by the sum of Outpatient Observation Vi
Slide 33: Medicare Observation Rate Variance
THC HMA LPNT CYH UHS Observation Rate 0.1144 0.1056 0.1721 0.0604 0.0645 Public Co Wtd Avg 0.096 0.096 0.096 0.096 0.096 +/- 1 Std Dev, Hospital Level 0.166 0.166 0.166 0.166 0.166 0.026 0.026 0.026 0.026 0.026 2009 Medicare "Observation Rate," Peer Group Including UHS Medicare "Observation Rate" Va
Slide 34: Observation Rate Not Correlated with Inpatient Admissions
CHS "Observation Rate" Not Correlated with Inpatient Admissions Correlation study of "observation rate" An analysis of inpatient admissions for CHS hospitals, found no statistically significant correlation exists between outpatient "observation rate" and inpatient admissions for all lengths of stay.
Slide 35: Other Metrics Are More Relevant than Observation Rate
Other Metrics Are More Relevant than "Observation Rate" Medicare ER Admission Rate Medicare ER Discharge Rate Average Length of Stay (ALOS) Medicare One-Day Stays Specified Medicare One-Day Stay Admission Ratio of Medicare One-Day Stays to Total Medicare ER Visits Medicare One-Day Stays to ER Admiss
Slide 36: 2009 Medicare Emergency Room Admission Rate
Catholic Health East Adventist UHS HCA THC Ascension Trinity Health HMA Mayo CYH Sutter Health Catholic Health Init Catholic HC West LPNT ER Admit Rate 0.335 0.308 0.298 0.292 0.292 0.284 0.284 0.281 0.279 0.268 0.267 0.251 0.239 0.208 Natl AveAll Hospitals 0.285 0.285 0.285 0.285 0.285 0.285 0.285
Slide 37: Medicare Prompt ER Discharge Rate
In 2009, 55.7% of CHS Medicare ER patients were neither admitted as inpatients nor placed in observation status; rather, they were discharged from the hospital promptly after emergency room treatment. Medicare Prompt ER Discharge Rate Source: American Hospital Directory, Credit Suisse, April 17, 201
Slide 38: Medicare Inpatient Average Length of Stay
Medicare Inpatient Average Length of Stay CHS In Line With Peers Source: American Hospital Directory Additional Sources: Robert W. Baird & Co. April 13, 2011 report, company reports, reviewed by an outside consultant. Data: Includes distinct part units and excludes discharges for transfers to other
Slide 39: One-Day Stays to Inpatient Admissions
Source: Cost Report Data (Inpatient, Medicare Provider Analysis and Review File), Citigroup, April 15, 2011 Data: Includes distinct part units and excludes discharges for transfers to other acute care hospitals, left against medical advice, and deaths. One-day stays to inpatient admissions: Medicare
Slide 40: 2009 Medicare One-Day Stays Compared to National Average
2009 Medicare One-Day Stays to Medicare Total Admissions Compared to National Average Statistically valid approach shows CHS Medicare one-day stay percentage of 13.7% in line with national average of 11.6% (variance to national average within one standard deviation). Mayo Sutter Health CYH Trinity H
Slide 41: Triad Same-Store Medicare One-Day Stays 2006-2009
Medicare One-Day Stays 2006-2009 2006-2009 Triad Same-Store Medicare One-Day Stay to Inpatient Admissions Parameters Reflect One Standard Deviation Above and Below the Mean Despite a slight trended rise, Triad same-store one-day stays from 2006 to 2009 remain well within industry averages and variab
Slide 42: Medicare One-Day Stays 2005-2009
Medicare One-Day Stays 2005-2009 Source: American Hospital Directory, UBS Estimates, April 18, 2011. Formula: Medicare one-day stays to Medicare inpatient admissions. Data: One-day stays (numerator) exclude transfer codes, but inpatient admissions (denominator) include transfer codes. Transfer Codes
Slide 43: Medicare One-Day Stays to ER Visits
The ratio of Medicare one-day stays to total Medicare ER visits for CHS is in line with that of the peer group. Ratio of Medicare One-Day Stays to Total Medicare ER Visits 2006 2007 2008 2009 CYH 0.085 0.08 0.087 0.082 HMA 0.082 0.075 0.068 0.066 LPNT 0.069 0.058 0.048 0.04 HCA 0.108 0.089 0.086 0.0
Slide 44: Medicare Case Mix Index for Short-Stay Admissions
Source: American Hospital Directory, company disclosures, J.P. Morgan estimates Short-Stay Admissions: One-Day Stay Admissions plus Two-Day Stay Admissions Data: Includes distinct part units and excludes discharges for transfers to other acute care hospitals, left against medical advice, and deaths.
Slide 45: 2010 Net Revenue Per Adjusted Admission
CYH HMA LPNT THC UHS Avg ex-CHS Revenue Per Adjusted Admission 9930 8697 8015 11824 10260 9699 Source: Morgan Stanley, April 13, 2011 report Formula: Net Revenue divided by the number of adjusted admissions CHS net revenue per adjusted admission in line versus above peers, given location. 2010 Net R
Slide 46: Medicare One-Day Stays to ER Admissions
The CHS ratio of one-day stays to ER admissions is slightly below the competitive market (defined as competing hospitals [n=193] within a 15-mile radius of CHS facilities). Medicare One-Day Stays to ER Admissions 2009 Medicare One-Day Stays to ER Admissions Medicare Patients Admitted thru the ER wit
Slide 47: Specified Medicare One-Day Stay Admissions
Specified Medicare One-Day Stay Admissions 2009 Six Specified One-Day Stays to Total Medicare Admissions Tom Galluci, Lazard Capital, April 15, 2011: "Our analysis reflects that in four of six specific conditions [noted in the THC allegations], CYH's admissions as a percent of the total were very mu
Slide 48: Equity Analyst Comments After Reviewing Proper Metrics
Equity Analyst Comments After Reviewing Proper Metrics Whit Mayo, Robert W. Baird & Co. April 18, 2011 "Plausible perceived risk dramatically higher than real risk, fueled by biases and drama. We are increasingly comfortable with our confidence anchored to legitimate (and sound) statistical analysis
Slide 49: CHS Data and Analysis
CHS Data and Analysis Our work confirms independent analysts' conclusions. CHS financial data shows no outliers.
Slide 50: CHS Same Store Net Revenue Growth
CHS Same Store Net Revenue Growth CHS same store net revenue growth compares to that of the industry. Same Store CHS THC HCA HMA LPNT UHS Net Revenue Growth 2010 3.9% 1.8% 2.1% 4.1% 6.9% 2.4% 2009 5.9% 4.1% 6.1% 5.4% 5.3% 3.6% 2009-2010 Same Store Net Revenue Growth Source: Annual Reports - Company
Slide 51: CHS Same Store Admissions Growth
CHS Same Store Admissions Growth CHS same store admissions growth compares to that of the industry. Admission Rates CHS THC HCA HMA LPNT UHS 2010 -2.5% -2.4% 0.1% -1.6% -2.2% -0.3% 2009 -1.5% -0.6% 1.2% 2.9% -4.5% 0.6% 2009-2010 Same Store Admissions Growth Source: Annual Reports - Company SEC Form
Slide 52: CHS Consolidated EBITDA Margins
CHS Consolidated EBITDA Margins CHS EBITDA margins compare with those of the industry. 2009-2010 Consolidated EBITDA Margins EBITDA Margin CHS THC HCA HMA LPNT UHS 2010 13.6% 11.4% 19.1% 14.4% 15.3% 13.2% 2009 13.8% 10.9% 18.2% 14.7% 15.8% 13.1% Source: Annual Reports - Company SEC Form 10-K Filings
Slide 53: CHS Medicare Emergency Room Admission Rates
CHS Medicare Emergency Room Admission Rates 2006 2007 2008 2009 CHS 0.277 0.275 0.279 0.264 Bed Range (15-400) 0.328 0.295 0.29 0.278 2006-2009 CHS vs. Hospitals with 15 to 400 Beds Limited to 29 States in which CHS Operates Source: American Hospital Directory, CHS Analysis reviewed by an outside co
Slide 54: Medicare Short-Stay Case Mix Index vs Nationwide
2006 2007 2008 2009 CHS 1.11 1.09 1.07 1.05 1.00-1.50 Range 1.02 1.03 1.01 0.99 2006-2009 CHS vs. Nationwide Hospitals with an Overall CMI between 1.00 and 1.50 Source: American Hospital Directory, CHS Analysis reviewed by an outside consultant Medicare Short-Stay Case Mix Index is the average weigh
Slide 55: Medicare Short-Stay Case Mix Index
Medicare Short-Stay Case Mix Index 2006 2007 2008 2009 CHS 1.11 1.09 1.07 1.05 1.00-1.50 Range 1.04 1.04 1.02 0.99 2006-2009 CHS vs. Hospitals Limited to 29 States in which CHS Operates and with an Overall CMI between 1.00 and 1.50 Source: American Hospital Directory, CHS Analysis reviewed by an out
Slide 56: The Fallacy Of Tenet's Thesis
The Fallacy Of Tenet's Thesis: Lower Observations ^ Inappropriate Admissions We believe that Tenet's allegation that lower "observation rate" results in inappropriate admissions is illogical and misleading. Applying Tenet's theory and calculating the ratio of Medicare one-day stay admissions to Medi
Slide 57: Medicare One-Day Stays to Total Admissions
Medicare One-Day Stays to Total Admissions 2009 One-Day Stays to Total Admissions Compared to Peers and State-wide Averages * CHS has approximately 6% of its one-day stay volume in CHS hospitals using InterQual with a one-day stay percentage of 13.1% for 2009. Source: American Hospital Directory, CH
Slide 58: Pro-Forma Adjustment for Tenet's Allegations
The Tenet allegations focus on a low "observation rate" and its effect on all acute care admissions. The following pro-forma information compares CHS one-day stays as a percentage of total admissions with an adjustment for Tenet's inaccurate estimates of inappropriate short-stay admissions for 2009,
Slide 59: Tenet's Allegations Lead to an Implausible Result
12.43% (National Average) The result of this pro-forma adjustment: CHS one-day stays as a percentage of total admissions would now range from an implausibly low 8.1% to 4.5%, versus a 29-state statewide-average of 12.5%. Clearly, the Tenet analysis contains significant flaws. 2009 Medicare One-Day S
Slide 60: Observation Rate Not Correlated with One-Day Stays
"Observation Rate" Not Correlated with One-Day Stay Inpatient Admissions Correlation study of "observation rate" No statistically significant correlation exists between the outpatient "observation rate" and the one-day stay inpatient admission rate at CHS hospitals. No statistically significant corr
Slide 61: CHS Improved Operations at Triad
We believe that Tenet is wrong in claiming CHS forced observations into inappropriate admissions at Triad. In fact, CHS improved coding, case management, documentation, streamlined observation stays, invested capital, recruited physicians, and generally worked to improve customer service and patient
Slide 62: Tenet Errs in Making Triad Allegations
Tenet Errs in Making Triad Hospital Integration Allegations We believe: Tenet used a selective set of data that skewed the analysis and led to faulty conclusions about observation and other statistics. Case management programs and other operational improvements led to more appropriate use of observa
Slide 63: CHS Transition Activities with Triad
CHS Transition Activities with Triad External vendor coding review completed for Triad for 2005 and 2006 noted opportunities for coding education and improved coding accuracy. As is general practice on all acquisitions, all Triad hospital inpatient coders were put through extensive coding training f
Slide 64: Room for improvement in case management
There was room for improvement in case management The facilities lacked certain documentation of processes related to admission status, utilization review, length of stay or resource management Triad had no formal, standardized case management model There were no corporate case management training m
Slide 65: CHS Transition Activities with Triad
Implementation of CHS's Case Management Program reduced observation status by: Improvements in Case Management staffing, including ER Case Managers Implementing tools (Blue Book, although InterQual(r) and others were also utilized) and processes that would ensure patients were placed in the appropri
Slide 66: Reasons for Decrease in Medicare Observation Visits
Reasons for Decrease in Medicare Observation Visits Year-Over-Year 2007 to 2008 12 hospitals contributed 63% of the 2007-2008 decline in observation visits. Recent feedback from selected Triad hospitals
Slide 67: Appropriate Use of Medicare Observation
"In only rare and exceptional cases do reasonable and necessary outpatient observation services span more than 48 hours. In the majority of cases, the decision whether to discharge a patient from the hospital following resolution of the reason for observation care or to admit a patient as an inpatie
Slide 68: Triad Observation Data
1-7 8-15 16-24 25-34 35-48 >48 2007 253 657 1971 810 929 349 2008 147 338 989 338 299 70 67 Triad Observation Data There were more patients that were kept in observation greater than 24 or 48 hours at Triad hospitals prior to acquisition by CHS. 2007-2008 Medicare Observation Cases By Duration of Ti
Slide 69: Duration of Time for Observation Care
Duration of Time for Observation Care 2007 2008 2009 Same Store TRI 28.3 25.5 26.6 CHS Total 26.9 24.4 25 CHS average time in observation has been within CMS expectations: 2007 through 2009 - 27 hours to 25 hours. 2007-2009 Average Observation Hours per Patient Claim Source: Information obtained fro
Slide 70: One-Day Stays Same Store Triad Hospitals
One-Day Stays Same Store Triad Hospitals 2007-2008 Same Store Triad Hospitals Net Change in One-Day Stays Medicare Acute Only 2007 2008 Difference Percentage Same Store Triad 15,534 18,085 2,551 16.4% Same Store CHS Total 33,727 36,864 3,137 9.3% (includes same store Triad) Source: CHS Data Warehous
Slide 71: Triad One-Day Stay DRGs 2007-2008
Triad One-Day Stay DRGs 2007-2008 Triad Same Store Hospitals Triad same store hospitals experienced an increase of 624 one-day stays from 2007 to 2008 for the 7 DRG categories cited in the Tenet lawsuit. A year-over-year increase from 2007 to 2008 equal to 624 one-day stays, in aggregate, from 43 Tr
Slide 72: Total Number of Unique DRGs and One-Day Stays
Total Number of Unique DRGs and One-Day Stays 747 2,551 Number of DRGs Not Used for One-Day Stays 172 - Number of DRGs Used and One-Day Stays 575 2,551 Increases from DRGs Used in Both 2007 and 2008 245 3,494 Increases from DRGs Used Only in 2008 55 90 DRGs without a Year-Over-Year Net Change in One
Slide 73: Growth in Triad Hospital One-Day Stays
Growth in Triad Hospital One-Day Stays Growth of Medicare one-day stays at same store Triad hospitals from calendar year 2007 to calendar year 2008 totaled 2,551 admissions The following commentary describes some drivers of this growth: Improved case management Flu and respiratory volume increase wi
Slide 74: CHS Current Trends Are Reversing
CHS Current Trends in Both One-Day Stays and Observations are Reversing A review of calendar year end CHS data for 2008, 2009, and 2010 shows that one-day stay Medicare admissions are declining and that Medicare observation visits are increasing, both of which are consistent with national trends. At
Slide 75: CHS One-Day Stays and Observation Cases
CHS One-Day Stays and Observation Cases One-Day Stay Admits % Change 2010 2009 2008 '09-'10 '08-'09 CHS Total Same Store 41,567 42,133 44,729 -1.3% -5.8% 3-Year Trend, Same Store Medicare One-Day Stay Admits 3-Year Trend, Same Store Medicare Observation Visits Observation Visits % Change 2010 2009 2
Slide 76: CHS One-Day Stays to Total Admissions
CHS One-Day Stays to Total Admissions Source: CHS Analysis Medicare One-Day Stays is a ratio of (a) Medicare one-day stays for short term acute care hospitals, excluding distinct part units and excluding discharges for transfers to other acute care hospitals, deaths, and left against medical advice;
Slide 77: CHS One-Day Stays to Total Admissions
CHS One-Day Stays to Total Admissions Source: CHS Analysis Medicare One-Day Stays is a ratio of (a) Medicare one-day stays for short term acute care hospitals, excluding distinct part units and excluding discharges for transfers to other acute care hospitals, deaths, and left against medical advice;
Slide 78: Other Data Points Refute Tenet's Allegations
Other Data Points Refute Tenet's Allegations Amounts recovered by the Recovery Audit Contractors (RACs) in the demonstration project were not material. This refutes Tenet's allegation of inappropriate admissions. CHS maintains strong controls regarding hospital physician contracts that are designed
Slide 79: CHS Hospitals Participated in RAC Demonstration Project
7 CHS Hospitals Participated in RAC Demonstration Project States - Florida and South Carolina # of Former States CHS Hospitals Triad Total Florida 2 2 South Carolina 3 2 5 7 Three Years: Inpatient Medicare Admissions 63,000 Inpatient Medicare Revenue $510.0 Million Total Accounts Selected For Review
Slide 80: CHS Maintains Strong Controls Regarding Physician Contracts
Based on stringent controls regarding contracts with and payments to any physician, and further reviews in connection with Tenet's allegations, we do not believe there have been any bonus payments to physicians related to ER admissions. CHS Maintains Strong Controls Regarding Physician Contracts
Slide 81: CHS / Triad Synergies
CHS / Triad Synergies In reporting the synergies of over $275 million, referenced in CHS public statements about the Triad acquisition, CHS did not include any synergies related to improvement in ER admissions.
Slide 82: ER Management
89% of CHS hospitals outsource the management of physician staffing to regional and national groups. National companies provide this outsourced service to 57% of CHS hospitals. The same national companies also provide services to over 50% of Tenet hospitals. ER Management
Slide 83: CHS ER Malpractice Claims to Benchmarks
CHS ER Malpractice Claims to Benchmarks The frequency and cost of CHS emergency room malpractice claims from 2006 through 2010 compares very favorably to that of industry benchmarks. CHS efforts to better manage the emergency room contribute to these positive results. Source: ASHRM: American Society
Slide 84: CHS Compliance Program
CHS Compliance Program CHS maintains a voluntary compliance program that fully complies with the guidance established by the HHS Office of the Inspector General. The Company has a strong record of cooperation with the federal government and other regulatory agencies.
Slide 85: CHS Compliance Program
84 CHS Compliance Program Robust Compliance Program Implemented in 1997 The CHS Compliance Program contains all seven elements of the Office of Inspector General's ("OIGs") Compliance Program Guidance for Hospitals and has been adopted in furtherance of the commitment of CHS that the activities of i
Slide 86: Management Compliance Committee
Management Compliance Committee Responsible for the adoption, amendment and enforcement of the Compliance Program Corporate Compliance Work Group ("CWG") Initiated in 1997, the CWG is chaired by the Corporate Compliance Officer and includes senior managers from many departments who function as subje
Slide 87: Compliance Committees
Compliance Committees Facility Compliance Committee Ensure implementation of the Compliance Program and Initiatives Distribute and communicate compliance policies to relevant staff Facilitate auditing and monitoring activities Oversee all compliance training and education efforts Identify known or p
Slide 88: Disclosure Program
Confidential Disclosure Program The Confidential Disclosure Program ("CDP") was established as part of the original Compliance Program in 1997 Outsourced Hotline offered via toll-free number 24 / 7 / 365 Emphasis on non-retribution, no retaliation policy Enables anonymous, confidential communication
Slide 89: Policies and Procedures
Policies and Procedures Code of Conduct Includes basic statements of policy Acknowledged upon hire and annually thereafter to all employees, physicians with medical staff privileges, and all contractors and agents with direct responsibility for the delivery, billing, or coding of healthcare services
Slide 90: Auditing and Monitoring
Auditing and Monitoring Established annually after comparing various benchmarks, industry- specific publications, advisory opinions, healthcare industry integrity agreements, and the OIG Work Plan against potential risk to CHS for each issue The Auditing and Monitoring program includes but is not li
Slide 91: Compliance Training and Education
Compliance Training and Education Compliance training began in June 1998 Audience for training includes all employees, physicians with medical staff privileges, and contractors or agents of CHS affiliates who are engaged in coding, billing, the preparation or submission of claims, or the hands-on de
Slide 92: Compliance Training and Education
Compliance Training and Education Specific Compliance Training is job-specific and includes but is not limited to: New Leader Orientation for administrators Coder Training One-on-one on boarding training for new Facility Compliance Officers Monthly compliance education calls Training for jobs such a
Slide 93: Other Compliance Program Elements
Other Compliance Program Elements Eligibility Screening for Excluded Individuals Written disciplinary actions for violating policies including possibility of reporting to appropriate authorities or agencies Reporting non-compliance Self-reporting significant variances from laws, rules, regulations a
Slide 94: CHS Compliance Response
CHS Compliance Response CHS received a letter from CtW Investment Group,* dated September 28, 2010, asking the CHS Board of Directors to investigate ED one-day stay rates and other matters. This letter was promptly disclosed to the CHS Board of Directors. Responsibility for follow-up and response wa
Slide 95: CHS Compliance Response
CHS Compliance Response On November 15, 2010, CHS received Civil Investigation Demands from the Texas Attorney General concerning ED procedures and billing. CHS disclosed receipt of the Texas Attorney General CIDs in its 2010 Form 10-K (its next quarterly filing) in accordance with its standard poli
Slide 96: CHS Commitment to Compliance, Quality Care and Patient Safety
CHS Commitment to Compliance, Quality Care and Patient Safety CHS Commitment to Compliance, Quality Care and Patient Safety Process of Care: Core Measures Improvements 16 consecutive quarters of trended improvement in Core Measures Patients' Perspective of Care: Hospital Consumer Assessment of Healt
Slide 97: Accredited Centers and Programs
Accredited Centers and Programs Chest Pain and Primary Stroke Centers - 30 accredited chest pain centers and 8 primary stroke centers Accrediting Body: Society of Chest Pain Centers and The Joint Commission Bariatric Center of Excellence - 10 bariatric centers of excellence Accrediting Body: America
Slide 98: Summary
Summary Tenet Analysis and Allegations We believe that Tenet's contrived statistics lead to faulty and irresponsible conclusions We believe that Tenet makes unreliable and inaccurate statements We believe that Tenet's lawsuit is a direct and unfair attack on the ethics and judgment of 16,000 physici
Slide 99: Summary
Summary "Be assured, we will defend our reputation. We will dedicate whatever resources are required to reach an ultimate resolution of these matters. And we will work tirelessly to restore any erosion of confidence or trust that may have been caused by these accusations." Wayne T. Smith, Chairman,
Slide 100: Appendix
APPENDIX
Slide 101: Variance Among Data Sources
Variance Among Data Sources Inclusion or exclusion of certain hospitals in the portfolio of CHS and comparative hospital systems as well as the portfolio of legacy Triad hospitals, which generally relates to decisions involving acquisitions and divestitures Data qualification for Discharge Status Co
Slide 102: Summary of Source Data for Inclusion and Exclusion
Summary of Source Data for Inclusion and Exclusion Sources of Data from Referenced Analyses: American Hospital Directory, Cost Reports, and CHS Data Warehouse.
Slide 103: Peer Group and Standard Deviation
Peer Group and Standard Deviation We believe the analytical framework applicable for testing the type of systemic actions alleged in the Tenet Complaint involves the following definition for Peer Group. We and equity analysts have quantified the variability of peer group measures in terms of standar
Slide 104: InterQual
InterQual(r) First "severity of illness/intensity of service" published in 1978 for evaluating appropriateness of admissions and level of service 60 professionals including physicians, nurses and allied health professionals currently develop content Reviewed and validated by nationwide network of mo
Slide 105: Comparison of Blue Book and InterQual
Comparison of Blue Book and InterQual(r) Organization By Organ System (Cardiac, Respiratory, Gastrointestinal, etc) By Diagnosis (Chest Pain, Asthma/COPD/Respiratory Failure, GI Bleed, etc) Categories Severity of Illness Admission Justification Intensity of Service Ongoing Plan of Care Discharge Scr
Slide 106: Comparison of Blue Book and InterQual
Comparison of Blue Book and InterQual(r) Acknowledgements-Notes (InterQual(r))/Introduction (Blue Book) The clinical content is reviewed and validated by a national panel of clinicians and medical experts, including those in community and academic practice settings, as well as within the managed car
Slide 107: Comparison of Blue Book and InterQual: Cardiac/Atrial Fibrillation
Comparison of Blue Book and InterQual(r) Cardiac/Atrial Fibrillation Afib/flutter > 120/min, ^ one: One or more of the following: Requiring urgent cardioversion/continuous IV antiarrhymics New onset atrial fibrillation/flutter with apical heart rate greater than 120 Systolic BP < 90/decrease from ba
Slide 108: Comparison of Blue Book and InterQual: Cardiac/Chest Pain
Comparison of Blue Book and InterQual(r) Cardiac/Chest Pain Chest/Jaw/Arm/ Shoulder Pain/Silent ischemia, ^ one: Chest/Jaw/Arm/ Shoulder Pain with one or more of the following: Acute MI confirmed by ECG EKG changes suggestive of ischemia or AMI (ST segment changes, new Q wave, V Tach/ A Fib, new LBB
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Slide 110: Community Health Systems, Inc. www.chs.net
Community Health Systems, Inc. www.chs.net
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