Tenet Healthcare Corporation · NYSE:THC
Tenet Healthcare — Investor Day (2006)
16 slides from Tenet Healthcare's investor day presentation, Nov 11, 2006
Slide 1: California and TGI
California and TGI Stephen L. Newman, M.D. Senior Vice President 1
Slide 2: California Operations – Overview
California Operations – Overview Hospitals Northern CA San Ramon, Los Gatos, Modesto, Manteca 4 Central Coast Sierra Vista 2 Twin Cities So Cal Fountain Valley, Irvine, 7 Garden Grove, Los Alamitos, Placentia, Lakewood, San Dimas Inland Desert, JFK 2 TOTAL 15 2
Slide 3: California Overview
California Overview 2005 Acute Hospitals 15 Beds 2,900 Admissions 134,000 Outpatient Visits* 1,100,000 Net Revenue $1.9 B * Down 1.9% when adjusted for HHA sales 3
Slide 4: Northern California
Northern California Hospitals Characteristics Northern CA Affluent community with over San Ramon, 6% population growth. Los Gatos, 4 Technology and Agriculture Modesto, leading industries Manteca Tenet distinguished by niche services. Market leader in Modesto market Heavy Kaiser concentration. High
Slide 5: California - Central Coast
California - Central Coast Hospitals Characteristics Central Growth slower compared to CA; Coast 2 on par with U.S @ ~4%. Cost of living/Housing/Limited jobs Sierra Vista hinders area growth Twin Cities Tenet largest area provider and share leader CHW & physician-entrepreneurs leading competitors. 5
Slide 6: Southern California
Southern California Hospitals Characteristics So Cal Densely populated. Growth Fountain Valley, 7 projected at 6%. Hispanic Irvine, Garden Population ~3x: U.S. Population Grove, Los Alamitos, Tenet largest system within Placentia, Orange County; highly Lakewood, San recognized USCUH/Norris AMC Dimas
Slide 7: Inland S. California
Inland S. California Hospitals Characteristics Inland Tremendous growth ~17%; Desert, 2 Seasonal population est. ~128K JFK Tenet largest area provider Major NFP tertiary and AMC competitors 7
Slide 8: Structural Market Issues
Structural Market Issues • Tight Labor Market • Unions • Mandated Staffing Ratios • Seismic Compliance Costs • Managed Care 8
Slide 9: California Market's Opportunities
California Market’s Opportunities • Population Growth • Above Corporate Average Reimbursement/Case • ER Services/Tobacco Tax Initiative • Targeted Growth Allows for Selective Investment and Service Enhancement with Quality Emphasis 9
Slide 10: Targeted Growth Initiative
Targeted Growth Initiative Stephen L. Newman, M.D. Senior Vice President 10
Slide 11: Targeted Growth Initiative
Targeted Growth Initiative • Cost Accounting Refinement • Hospital-Specific Analytics • Disease-Incidence Prediction • Fact-Based Development of Future Services 11
Slide 12: Sample TGI Product Line "Heat Map"
Sample TGI Product Line “Heat Map” G Grow/Invest in product D Improve within 12 * Sample Heat Map months or exit product Product not offered 12 O Optimize economics R Remove immediately
Slide 13: TGI Optimizing: Comparison of Joint Programs Underscores Low Cost Structure
TGI Optimizing: Comparison of Joint Programs Underscores Importance of a Low Cost Structure 2004 inpatient volumes; major joint orthopedic surgeries only $ Thousands Net Variable Fixed costs VC/NR Hospital name revenue costs and overhead EBITDA Percent ALOS A 13.2 13.3 4.8 -4.9 100.3 4.4 B 16.0 14.6
Slide 14: Hospital 1: ED Service Growth Can be Profitable
Hospital 1: ED Service Growth Can be Profitable Profitability of the ED is high Current utilization is 97% Potential opportunity given expansion EBITDA* EBITDA 100% = 17,520 $ Thousands Margin Each additional bed = 2,502 Additional 3.0 cases per year capacity 13.9 Overall incremental EBITDA** = -4.9
Slide 15: Hospital 2 – Making Tough Decisions for Future Growth
Hospital 2 – Making Tough Decisions for Future Growth OB inpatients seen in 2005* represented Overall impact on hospital inpatient significant losses financials with closure of this product $ Thousands (annualized) Annualized 2005 EBITDA**; $ Thousands 2,856 672 2,740 221 -1,833 -1,266 EBITDA EBITDA
Slide 16: Summary: California
Summary: California • Challenging structural market issues • Significant progress on cost realignment and reinventing the care delivery system • Population growth and demographic payer trends make California an attractive place to be for the long term • TGI: Converting general acute care hospitals t