Tenet Healthcare Corporation · NYSE:THC
Tenet Healthcare — Investor Presentation (March 2016)
48 slides from Tenet Healthcare's investor presentation, Mar 9, 2016
Slide 1: Tenet Healthcare Investor Presentation
Tenet Healthcare Investor Presentation March 9, 2016
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS Certain statements in this presentation constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements are based on management’s current expectations and involve known and unknown risks,
Slide 3: Strategic Overview
Strategic Overview
Slide 4: 2015 Strategic and Financial Highlights
2015 Strategic and Financial Highlights Positioning Tenet for Long-Term Sustainable Growth Created leading Sharpened acute Redeployed cash generated from Improved market position through Dallas U.S. ambulatory care portfolio transaction proceeds to areas where joint venture with Baylor Scott & White
Slide 5: Tenet Healthcare Today
Tenet Healthcare Today 84 Acute Care Hospitals 20 Short-Stay Surgical Hospitals 476 Outpatient Facilities* 6 Health Plans 9 U.K. Hospitals and Clinics 20 Conifer Health Solutions Client Service Centers Conifer Clients in 43 States Acute Care: Leading USPI: Leading Ambulatory Conifer: Leading Busines
Slide 6: Tenet is Aligned with Key Trends Shaping Healthcare
Tenet is Aligned with Key Trends Shaping Healthcare Healthcare coverage expected to expand further through Exchange enrollment Tenet’s uninsured and charity care and Medicaid expansion, presenting growth opportunities for providers admissions have declined by more than 25% since 2013* Tenet offers p
Slide 7: Partnership Strategy to Drive Growth Across Business Lines
Partnership Strategy to Drive Growth Across Business Lines Providing Enterprise Solutions for Challenges Facing Not-for-Profit Health Systems Not-for-Profit Systems Represent 80% of U.S. Hospitals 7
Slide 8: Trusted Partner to Leading Not-for-Profit Health Systems
Trusted Partner to Leading Not-for-Profit Health Systems Existing partners represent ~10% of the U.S. hospital industry, as measured by both revenue and beds 8
Slide 9: Strong, Integrated Business Model: Well-Positioned for the Future
Strong, Integrated Business Model: Well-Positioned for the Future Solid positions in our three operating segments anchored by acute care hospitals Offering solutions to help health systems navigate the rapidly changing healthcare model Growth channels for each segment through M&A and partnership act
Slide 10: Financial Overview
Financial Overview
Slide 11: Demonstrated Record of EBITDA Growth and Margin Improvement
Demonstrated Record of EBITDA Growth and Margin Improvement USPI JV Vanguard 6/16/15 $ Millions Acquisition 10/1/13 $2,450 $2,500 12 Consecutive Years of EBITDA Growth $2,276 16% 13.2% $1,952 Adjusted EBITDA $2,000 12.4% 12.9% 12.9% 14% 11.8% 12.1% 12.2% 11.7% 12% $1,500 $1,342 Margin $1,145 $1,203
Slide 12: Tenet Outlook for 2016
Tenet Outlook for 2016* $ in millions, except EPS 2016 Outlook Net Revenue $18,800 - $19,200 Adjusted EBITDA (1) $2,400 - $2,500 (1) EBITDA Margin 12.8% - 13.0% Adjusted E.P.S. (1) $1.18 - $2.25 (1) Adjusted Cash Flow from Operations $1,300 - $1,450 Capital Expenditures $850 - $900 Adjusted Free Cas
Slide 13: Segment Outlook for 2016 and Beyond
Segment Outlook for 2016 and Beyond* Growth in 2016 Hospital Operations and Other Segment Ambulatory Segment Conifer Segment 2016 EBITDA ~$1.6 billion 2016 EBITDA ~$585 million 2016 EBITDA ~$265 million (1) (1) 2016 Noncontrolling Interest ~$30 million 2016 Noncontrolling Interest ~$240 million 2016
Slide 14: Fixed Rate Debt with Staggered Maturities Reduces Interest Rate Risk
Fixed Rate Debt with Staggered Maturities Reduces Interest Rate Risk 94% of our debt has a fixed rate Over 80% of our debt matures in 2020 or beyond (1) $4,500 $4,000 $1,050 Fixed Rate $3,500 Secured $3,000 Debt, Fixed Rate $2,500 $5.241B(1) Unsecured 38% $2,000 Debt, $7.780B $1,500 56% $430 $1,000
Slide 15: Capital Allocation and Refinancing – Remaining Flexible in a Changing Environment
Capital Allocation and Refinancing – Remaining Flexible in a Changing Environment No near-term need to raise additional debt in the high-yield market − Our next maturity is $1.0 billion of senior secured notes due in 2018 Free cash flow generation expected to be sufficient to self-fund our cash
Slide 16: Hospital Overview
Hospital Overview
Slide 17: Overview of Acute Care Hospitals
Overview of Acute Care Hospitals Operator of 84 hospitals that serve as the hub of Tenet’s Licensed Beds by State+ healthcare delivery system Focus on urban and suburban markets Other* IL 5% 11% TX 26% 60% of licensed beds located in states that have yet to expand GA 5% Medicaid MI 8% High-q
Slide 18: Strategic Priorities for Acute Care Hospitals
Strategic Priorities for Acute Care Hospitals 1 Focus investment on higher-growth inpatient service lines Organize our portfolio to enhance scale and build strong regional networks through 2 acquisitions, partnerships and joint ventures 3 Improve operational effectiveness, capital efficiency and mar
Slide 19: Driving Growth in High-Acuity Inpatient Services
Driving Growth in High-Acuity Inpatient Services Deploying service line experts to develop and Growth in Key Service Lines* enhance services in a consistent manner Adopting market-wide service line strategies so that ~10% Neurosurgery neighboring Tenet hospitals offer complementary ~4% Ortho
Slide 20: Improving our Hospital Portfolio
Improving our Hospital Portfolio St. Louis, MO Sale of Saint Louis University Hospital Joshua Tree, CA Acquisition of Hi- Hickory & Sanford, NC Desert Medical Sale of facilities to Duke Center, pairing with LifePoint Healthcare two existing Tenet (two hospitals) hospitals Atlanta, GA Tucson & Nogale
Slide 21: Focused on Operating Efficiencies
Focused on Operating Efficiencies Enhancing Optimizing Supply Driving Labor Throughput (1) Chain Improvement • Reduced Medicare Excess Days • GPO consolidation effective • Drove 9% YOY reduction in by 4% from 2014 2/1/16 contract labor utilization in • Drove 12% increase in Q4’15 (same-store) • Inso
Slide 22: Hospital Operations & Other Segment
Hospital Operations & Other Segment <---------------------------- Restated (1) ----------------------------> <--- As Reported ---> Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Adjusted Admissions 0.1% 3.9% 4.8% 4.3% 5.9% 2.3% 0.7% 0.3% Admissions -0.9% 2.8% 3.9% 4.0% 4.9% 1.7% -0.6% -1.8% Revenue
Slide 23: Uncompensated Care Trends
Uncompensated Care Trends $ in millions Q1'13 Q2'13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Bad Debt Expense $359 $391 $415 $348 $380 $320 $249 $356 $363 $352 $371 $391 % of revenue before bad debt 8.5% 9.0% 9.5% 8.2% 8.8% 7.3% 5.6% 7.4% 7.6% 7.3% 7.3% 7.2% (1) % of adj
Slide 24: Conifer Health Solutions
Conifer Health Solutions
Slide 25: Deeply Rooted and Future Focused
Deeply Rooted and Future Focused $ 20 + BILLION MEDICALLY MANAGED SPEND FOR EMPLOYERS $ 29 + BILLION NET REVENUE PROCESSED ANNUALLY 5.7 MILLION MANAGED LIVES + 14,500+ EMPLOYEES 20 SERVICE CENTERS 800+ CLIENTS IN 40+ STATES Headquarters 25 + MILLION PATIENT TOUCH-POINTS ANNUALLY Facts based on data
Slide 26: Performance Improvement Solutions
Performance Improvement Solutions Better Financial Performance and Clinical Outcomes Within a health system … And across the local community. 26
Slide 27: Overview of Conifer Health Solutions
Overview of Conifer Health Solutions Market & Engage • Marketing Consumer • Scheduling & Referrals Experience • Eligibility & Enrollment • Outreach & Engagement • Satisfaction Measurement Document & Coordinate Clinical • Medical Necessity Case Mgmt Revenue • Coding Services • Clinical Documentation
Slide 28: Strategic Priorities for Conifer Health
Strategic Priorities for Conifer Health Capture additional share of the revenue cycle management market that is currently 1 insourced today Generate new client relationships through opportunities from USPI and acute care 2 portfolio activities Expand revenue cycle management and value-based care ser
Slide 29: Conifer is Well-Positioned to Succeed in Growing Markets
Conifer is Well-Positioned to Succeed in Growing Markets Total U.S. RCM addressable market1 U.S. Employers – changing value-based needs care services market Revenue, $ in Billions Revenue by service segment, $ in Billions $56 $52 +4% CAGR $43 +15% CAGR $20 Outsourced $12 +10% CAGR $29 Population $42
Slide 30: Revenue and EBITDA Trend 2012-2015
Revenue and EBITDA Trend 2012-2015 1,600 300 2012 - 2015 CAGR Tenet Other EBITDA Revenue 43% $265 1,400 EBITDA 36% 250 $203 1,200 200 1,000 $747 Revenue $ in Millions $132 EBITDA $ in Millions $602 800 150 600 $105 $515 100 400 $117 $591 $666 50 200 $371 $404 0 0 2012 2013 2014 2015 EBITDA Margin %
Slide 31: Conifer
Conifer Delivered 30% EBITDA growth in 2015 − Anticipate approximately $265 million of EBITDA in 2016, up 4% as compared to $255 million of EBITDA in 2015 after adjusting for $10 million of customer incentive revenues in 1Q15 that are not expected to recur. − Note that $265 million of EBITDA in 2016
Slide 32: United Surgical Partners International
United Surgical Partners International
Slide 33: Overview
Overview USPI is an experienced and trusted partner with some of the nation’s most successful health systems, well positioned for current and future environments • Industry leader of health system and physician partnerships in short-stay facilities with both local market Trusted strength and a natio
Slide 34: Strategic Priorities for Ambulatory Care Segment
Strategic Priorities for Ambulatory Care Segment Build and expand relationships with health system partners through further 1 development of ambulatory offerings Capture consolidation opportunities of fragmented ASC market with compelling 2 economics Leverage national presence, operational expertise
Slide 35: USPI is the largest operator of ASCs and surgical hospitals
USPI is the largest operator of ASCs and surgical hospitals USPI’s portfolio includes 250 ASCs, 20 surgical hospitals, 20 imaging centers and 82 urgent care centers in 28 states (1) Key ASCs Surgical Hospitals Imaging Centers Urgent Care Centers Local market presence provides attractive solutions to
Slide 36: USPI surgical at a glance (2015)
USPI surgical at a glance (2015) 270 surgical facilities ~10,000 physicians on staff 50+ health system partners 1.2M surgeries/year Key 20 surgical hospitals ~4,000 physician partners 161 facilities in JVs 28 states metrics 250 ASCs ~6,000 other utilizers 109 independent 74% of revenue is commercial
Slide 37: Leading operator of ASCs and surgical hospitals
Leading operator of ASCs and surgical hospitals Growing complex cases: • Total joints • Spine • Bariatrics Low risk cash flows from high margin specialties & reliable payers • High margin, elective procedures o 54% of revenue mix from musculoskeletal procedures • Diversification of specialties insul
Slide 38: Health system partners
Health system partners USPI partners with some of the nation’s most progressive health systems, providing long-term growth opportunities in surgical space as well as ancillary opportunities Long-lasting existing partnerships as well as a robust pipeline for additional joint ventures and consolidatio
Slide 39: Macro trends affecting multiple segments
Macro trends affecting multiple segments Payers Patients Physicians Health Systems Pushing capitated risk Growing out-of-pocket Payment is migrating Population Health is on PCPs & providing costs driving greater to value-based strategic imperative data to support care seasonality for systems
Slide 40: Orthopedics and Spine Specialties Provide for Attractive Growth Opportunities
Orthopedics and Spine Specialties Provide for Attractive Growth Opportunities Four forces driving future orthopedic growth 1 2 3 4 Demographics Co-Morbidities Revisions & Replacements Clinical Innovations • Aging population • Smoking, diabetes, • Expected increase in • Technology driving joint obesi
Slide 41: Where USPI is today and where USPI is headed
Where USPI is today and where USPI is headed Today 2020 Surgical facility management company Enterprise ambulatory partner Market-leading Every Day Giving Excellence (EDGE™) USPI’s EDGE™ leveraged for publicly-reported metrics, system with reputation for high quality, patient Quality safety and expe
Slide 42: Enterprise Ambulatory Partner
Enterprise Ambulatory Partner Health systems are increasingly seeking an enterprise ambulatory partner, not just a surgical partner Outpatient / ambulatory Inpatient Post-acute Keys to a successful joint venture: • Joint quality and patient satisfaction efforts • Common branding • Clinical integrati
Slide 43: Attractive Consolidation Opportunities in ASC Market
Attractive Consolidation Opportunities in ASC Market Highly Fragmented ~$24B Market1 – Top Six Companies Own <20% Purchase centers at attractive EBITDA less NCI multiples and reduce multiple below 5x by year two Pursue acquisitions with and without not-for-profit partners Enter attractive new market
Slide 44: Seasonality of Ambulatory EBITDA
Seasonality of Ambulatory EBITDA Change in benefit design has shifted volume and profitability to the second half of the year $180 Legacy USPI EBITDA Ambulatory Segment by Quarter Pro Forma EBITDA by Quarter $160 -30% $140 $120 -38% -36% $100 -22% Q1 -11% Q2 $80 Q3 Q4 $60 $40 $20 $0 2011: USPI Only
Slide 45: Key Performance Indicators
Key Performance Indicators 2011 2012 2013 2014 2015 USPI Only USPI Only USPI Only USPI Only Pro forma (1) Revenue ($000s) Systemwide $1,975,715 $2,203,577 $2,329,143 $2,523,000 $3,579,000 Growth 13% 12% 6% 8% 15% GAAP $499,178 $540,235 $616,231 $641,000 $1,366,000 Growth 5% 8% 14% 4% 18% EBITDA ($00
Slide 46: Ambulatory Care Segment Volumes
Ambulatory Care Segment Volumes (2) (3) <---------------------- USPI only ----------------------> <----- Pro forma -----> (1) Same-facility system-wide growth Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Revenue -0.3% 3.1% 5.1% 8.9% 8.8% 6.9% 10.1% 12.5% Cases -3.1% -0.4% 2.9% 2.7% 4.7% 6
Slide 47: Ambulatory Segment Pro Forma Results
Ambulatory Segment Pro Forma Results $ in millions Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Net operating revenues $259 $286 $287 $308 $295 $322 $329 $397 % growth 13.9% 12.6% 14.6% 28.9% Equity in earnings of unconsolidated affiliates $18 $28 $27 $43 $21 $28 $30 $47 EBITDA $79 $110 $104 $134
Slide 48: Faru
Faru tenet
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