Bank of America Merrill Lynch 2013 Leveraged Finance Conference

Transcription

1 Bank of America Merrill Lynch 2013 Leveraged Finance Conference December 3, 2013

2 Disclosures / Forward-Looking Statements This presentation includes forward-looking statements. Forward-looking statements are based on current expectations and involve known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from those expressed or implied. These factors include, among others, our ability to realize fully or at all the anticipated benefits of our merger with Vanguard and to successfully integrate the operations of our business and Vanguard s business; changes in health care and other laws and regulations; changes in economic conditions; adverse litigation or regulatory developments; the ability to enter into managed care provider arrangements on acceptable terms; changes in Medicare and Medicaid payments or reimbursement; adverse litigation or regulatory developments; competition; our success in implementing our business development plans and integrating newly acquired businesses; our ability to hire and retain qualified personnel; our significant indebtedness; the availability and terms of capital to fund the expansion of our business, including the acquisition of additional facilities; adverse fluctuations in interest rates and other risks related to interest rate swaps or any other hedging activities; the ability to continue to expand and realize earnings contributions from the revenue cycle management, health care information management, management services, 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 our ability to identify and execute on measures designed to save or control costs or streamline operations. These 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. These and other risks and uncertainties are described in Risk Factors under Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2012 ( Annual Report ) and Vanguard s Annual Report on Form 10-K for the year ended June 30, 2013, Forward-Looking Statements under Item 1 of Part I of our Annual Report, and Forward-Looking Statements under Item 2 of Part I of our Quarterly Report on Form 10-Q for the quarter ended September 30, We disclaim any obligation to update any forward-looking statement in this presentation, whether as a result of changes in underlying factors, new information, future events or otherwise. 2

3 Well-Positioned for New Healthcare Environment Scale & Scope 78 hospitals (a) and 176 outpatient centers Applying proven cost management, quality improvement, care integration and network development strategies across a broader platform Geographic Breadth Tenet has #1 or #2 position in 19 important markets Geographic diversification with operations in 42 states Strong Competitive Positions in Attractive Markets Geographies including TX, FL and CA could see strong benefit from the evolution of healthcare and implementation of ACA CA an example of where exchanges are working Innovative Reimbursement And Risk-Sharing Models ACO and CIO risk-sharing projects are achieving notable success Experience with both payer-led and provider-led integrated networks Integrated Service Offering Conifer Health Solutions has clients and attractive growth momentum Conifer providing value-based care and population health management capabilities (a) Includes hospital under construction in New Braunfels, TX and excludes four Connecticut Hospitals currently under LOI 3

4 Established Positions in Key Markets Diversified opportunities for revenue growth Connecticut (LOI) California 11 Hospitals 29 Outpatient Ctrs Illinois 4 Hospitals 4 Outpatient Ctrs Missouri 2 Hospitals 5 Outpatient Ctrs Michigan 8 Hospitals 9 Outpatient Ctrs Tennessee 2 Hospitals 5 Outpatient Ctrs 4 Hospitals Massachusetts 3 Hospitals 4 Outpatient Ctrs Pennsylvania 2 Hospitals 3 Outpatient Ctrs N. Carolina 2 Hospitals 4 Outpatient Ctrs S. Carolina Arizona 6 Hospitals 2 Outpatient Ctrs 78 Hospitals (a) (b) 176 Outpatient Centers 20 Conifer Service Centers Conifer Health Solutions Operates in 42 States New Mexico 2 Outpatient Ctrs Texas 18 Hospitals 56 Outpatient Ctrs Alabama 1 Hospitals 5 Outpatient Ctrs Florida 10 Hospitals 29 Outpatient Ctrs 4 Hospitals 10 Outpatient Ctrs Georgia 5 Hospitals 9 Outpatient Ctrs (a) Excludes 4 Connecticut hospitals currently under LOI (b) Includes the Resolute Health Hospital and Wellness Campus under construction in New Braunfels, Texas 4

5 Attractive Balance of Market Concentration Plus Geographic Diversity Sales Revenues from #1 or #2 Market Share (a) (%) Other Markets 70% of Revenues from Markets with #1 or #2 Market Share Revenues by State (a) (%) Illinois 5% Other (b) 23% California 15% Florida 12% Massachusetts 5% Texas 21% (a) (b) Revenues from CY 2012; Vanguard acute care revenues only. Markets with less than 5% of revenue Michigan 13% Pennsylvania 6% 5

6 Commercial Covered Lives (Projected Growth: ) Geographic Footprint Creates Substantial Benefit from the Affordable Care Act Projected expansion of insurance coverage with Healthcare Reform (a) 30% 25% Palm Beach County 20% 15% 10% Coachella Valley South Texas Rock Hill Phoenix San Luis Obispo Hilton Head Central Carolina Miami San Antonio North Central CA Atlanta Orange County Nacogdoches San Ramon Hickory NW Houston El Paso County Dallas Downtown Houston East Cooper 5% Chicago Memphis Spalding Detroit U.S. Average 0% -5% Connecticut Massachusetts Philly Children s Market Philadelphia Birmingham Saint Louis -10% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% (a) Projections assume all Tenet states implement Medicaid expansion. Source: McKinsey Medicare and Medicaid Covered Lives (Projected Growth: ) 6

7 Outreach in Support of ACA Enrollment Expect ACA implementation to continue and enrollment to increase Beneficial for hospital operators, particularly in geographies with high numbers of uninsured patients Hospitals have long been carrying burden of the uninsured: Tenet alone incurred expense of approximately $570 million to care for uninsured and charity patients in 2012 Working with local hospitals in our system to help inform and enroll patients: Currently working with more than 50 community partners including religious organizations, organizations in underserved communities, and those that target specific diseases. Examples include the YMCA and local churches. Produced and delivered to our hospitals almost 600,000 pieces of educational materials for distribution through partner groups and hospitals Developed and launched a bilingual web site, social media channels and toll-free number for patients to call with questions and be directed to local certified application counselors (CACs) Deploying more than 300 CACs throughout Tenet markets to help patients enroll in exchange products 7

8 Significant Upside from Acquisition Synergies Synergy Area Estimated Timing Projected Synergies $ million Revenue Cycle Management Efficiency and Improvement Overhead Reduction Supply Chain Management and Other Operational Improvement months 6-18 months months 50% Projected to be Achieved by the end of

9 Significant Health Plan Expertise Competitive Scale and New Opportunities California ~52,200 lives Michigan ~18,000 lives Massachusetts ~9,000 lives (b) Illinois ~32,000 lives Georgia ~13,000 lives Vanguard health plan skills and capabilities diversify Tenet s service offerings Arizona ~101,000 lives (a) ACO Health Plan CIO Texas ~24,000 lives (a) Excludes member lives lost from Phoenix Health Plan, with exception of Maricopa County (b) To be launched in 2014 Source: Company website, Company financials, Vanguard management presentation Florida ~18,000 lives Successful experience with clinical integration and ACO models Capabilities can be leveraged in managing next generation payment models and population health 9

10 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 Q411-Q312 Clinical Quality is Central to Everything We Do Commitment to Quality Key Strategic Initiative Core Measures Performance Early adopter of these proxy measures for associated outcomes Sustained outperformance of national average Center of Excellence Designations by Managed Care Strategy to differentiate Tenet hospitals Anticipation of narrow networks/steering COE achieving superior rates of designation Physician Satisfaction 6 th consecutive year of improvement CMS Hospital Compare - Core Measures Tenet Trend vs. National Average Tenet % 98.5 National Average %

11 Conifer s Strategic Position Strengthened, Energized, and Building Momentum Post-Visit Patient Outreach Marketing Campaign Support Patient Communications Outpatient Imaging Scheduling Patient Financial Services Revenue Cycle Management Patient Access Clinical Admission Reviews Health Information Management Risk-Based Payment Models Population Management Payment Bundling Clinical Integration Financial Risk Management Value-Based Care Solutions Population Health Management Pay-for-Performance Health Insurance Exchanges Clinical Integration Services 11

12 Conifer s Skill Set Well-Positioned for Growth 700+* Clients $25 Billion* Net Revenue Processed $900mm Revenues (Q annualized) 12mm+* Patient Accounts Cost Quality Access $127mm EBITDA (LTM) 17.5mm* Patient Touch Points 50% EBITDA Growth (Q3 12 to Q3 13) 11,000+* Employees *Values include Vanguard 12

13 Year over Year Growth Volume Growth has Encountered Headwinds in 2013 Adjusted Admissions Growth (Same Hospital) Strong growth trend through 2009 Recession Effects Growth Resumes 2013 Headwinds 5.0% 2.5% THC 0.0% -2.5% -5.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Industry Average Tenet Industry Average (CYH, HCA, LPNT, and UHS) 13

14 Year over Year Growth Tenet s Emergency Department Volume Growth Remains Robust Strong growth trend through 2009 Recession Effects Growth Resumes 2013 Headwinds 10.0% 5.0% 0.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3-5.0% % 14

15 (millions) Minimal Near-Term Debt Maturities $3,000 Weighted Average Maturity = 7.4 years 8.125% $2,500 $2, % $1,500 $1, % 8.0% 4.50% 4.375% $500 $0 4.75% 9.25% 6.875% 6.75% 9.875% $1.8B 6% Sr. Secured Notes maturing 10/1/2020 and $2.8B 8.125% Sr. Unsecured Notes maturing 04/01/2022 incurred October 1, 2013 as part of Vanguard acquisition financing. 15

16 Strong Cash Flow Growth Expectation Track Record of Superior Growth Diversified Earnings Streams Transparent Disclosure Shareholder Value Proven Strategies for Further Growth NOL Enhances Cash Flow ($1.5 billion balance, as of 12/31/12) Upside from Affordable Care Act Upside Potential from Economic Cycle 16