Tenet Healthcare : Presentation PDF 1.40 MB

Tenet Health

J.P. Morgan Healthcare Conference

Ronald Rittenmeyer, Executive Chairman and CEO

January 12, 2021

FORWARD-LOOKING STATEMENTS

This presentation includes "forward-looking statements." These statements relate to future events, including, but not limited to, statements regarding our liquidity, operating results, future earnings, financial position, operational and strategic initiatives, and developments in legislation, regulation, and the healthcare industry more generally. These forward-looking statements represent management's expectations, based on currently available information, as to the outcome and timing of future events, but, by their nature, address matters that are uncertain, particularly for developments related to COVID-19, and are subject to numerous risks and uncertainties, many of which are outside of our control. Actual results, performance or achievements could differ materially from those expressed in any forward- looking statement.

Examples of uncertainties that may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward- looking statements include, but are not limited to, developments related to COVID-19 and the factors described under "Forward-Looking Statements" and "Risk Factors" in our Form 10-K for the year ended December 31, 2019, subsequent Form 10-Q filings and other filings with the Securities and Exchange Commission (SEC).

We assume no obligation to update any forward-looking statements or information subsequent to the dates such statements are made. Investors are cautioned not to place undue reliance on our forward-looking statements.

NON-GAAP FINANCIAL INFORMATION

This presentation contains financial measures that are not in accordance with Generally Accepted Accounting Principles (GAAP). Reconciliations of these non-GAAP

measures to the most comparable GAAP measures and management's reasoning for using them are included in our earnings press release dated October 20, 2020.

All EBITDA figures used in this presentation are Adjusted EBITDA.

TABLE OF

CONTENTS

Tenet Health Today Resiliency and Performance Commitment to Portfolio Evolution Operating Model Advancement Environmental, Social, Governance

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TENET HEALTH

TODAY

65 Acute Care Hospitals

550+ Surgical & Other Facilities

50+ Health System Partners

10M Patient Encounters

Manila

$25B Revenue Managed by Conifer

110K Employees

Note: As of December 31, 2020

Acute Care Hospitals Surgical & Other Facilities Corporate Offices

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A DIVERSIFIED

HEALTHCARE

COMPANY

HOSPITALS	USPI
Competitive acute care		Leading surgical facility
portfolio positioned #1 or		platform with nearly 350
#2 in 70% of markets		facilities across 33 states

2019 STATS

CONIFER

High performing revenue cycle company managing ~$25B of revenue

Tenet is a uniquely

positioned healthcare

services company with a

high-growth, high margin

ambulatory surgery division

Net Revenue

EBITDA

Margin

3 YEAR GOALS

EBITDA Growth

Portfolio

EBITDA Mix

CapEx/EBITDA

$14.9B

$1.4B

10%

2-3% p.a.

53% ~35%

35-45%

$2.2B

$0.9B

41%

10-15% p.a.

33% ~50%

5-10%

$1.4B

$0.4B

28%

4-7% p.a.

14% ~15%

5-10%

Note: Hospital segment includes corporate overhead and intersegment revenue eliminations	5

RESILIENCY

AND

PERFORMANCE

SUSTAINED VOLUME RECOVERY

Demonstrated recovery despite COVID-19 resurgences by providing safe care settings, pivoting service line strategies, physicians choosing our care sites

STRONG PERFORMANCE MANAGEMENT

Quickly implemented cost management tactics, maintained ability to tightly

flex costs with proven record of achieving goals

CONSISTENT SAFETY AND CLINICAL OPERATIONS

Deployed protocols to keep staff infection rates in single digits, maintained

access to PPE and testing, administered ~50K COVID-19 vaccine doses

IMPROVED FINANCIAL POSITION

Maintained focus on cash flow through operations recovery and financing to continue to make strategic investments and debt repayments

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SUSTAINED RECOVERY IN PERFORMANCE

Care delivery demonstrated

ability to safely recover

volumes, despite COVID-19

resurgences across markets

2020 Volume Statistics vs. Prior Year

101%	85%	89%	89%
	67%

IP Admits

106%				85%
			69%	84%
OP Visits	39%
100%		85%	89%	90%
Hospital	45%
Surgeries
102%		80%	94%	95%
USPI
Surgeries	20%
	Pre-pandemic	April	May-June	Q3	Q4E

Note: Same-hospital basis for hospital statistics, same-facilitysystem-wide basis for USPI surgical cases	7

IMPROVED

FINANCIAL

POSITION

Tenet is well positioned to make strategic investments to increase free cash flow, reduce debt and remains committed to the pathway to

<5x leverage

Actions Taken		~$2.5B
Improved cash collection		In debt restructured to provide
performance; $1.3B of Notes issued		~$50M of interest expense savings
to enhance liquidity; Revolver		and eliminated all significant debt
capacity increased $400M		maturities until 2023

~$900M		~$140M
Increase in secured debt capacity post		In anticipated proceeds from
SCD surgery center portfolio		divesting urgent care and completing
acquisition		MOB sale

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COMMITMENT TO PORTFOLIO EVOLUTION

SCALE AMBULATORY SURGERY

Continue to accelerate investments in USPI's strong pipeline of acquisitions and de novos as well as organic growth to meet growing patient demand

OPTIMIZE HOSPITAL MARKET PORTFOLIO

Strategically expand clinical programs to serve community needs as well as

selectively divest and optimize the hospital portfolio

STRENGTHEN CONIFER TO SPIN

Improve leadership, capabilities and performance to ensure Conifer is

prepared to spin

COMMITMENT TO QUALITY & EXPERIENCE

Continue to track and improve internal as well as external measures on

quality, safety, patient experience and physician experience

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EXPANDING IN AMBULATORY SURGERY

Continuing to grow USPI's leadership in segment with high growth, high margin, strong cash flow and attractive return on invested

capital

Note: Tenet acquired USPI in 2015

Adjusted EBITDA from Ambulatory

% EBITDA
			45%
		~33%
	~25%
~4%
2014	2016	2019	2021E

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ACQUIRED 45 CENTERS FROM SCD

Portfolio of predominantly

musculoskeletal centers

maintained strong

performance in December

and integration is tracking

~$1.1B

~$210M

~60%

~$40 - 50M

~10%

Purchase price for the portfolio

Acquired 100% SCD interest and additional interest from physicians

EBITDA generated by 45 acquired centers

~$430M in center-level net revenue and healthy EBITDA margins

Maximum center ownership acquired by USPI

EBITDA-NCI of ~$130M; Tenet consolidates substantially all of the centers

Synergies estimated at ~20-25% EBITDA

Conservative pathway to high 6x EBITDA-NCI multiple by year 3

Estimated return on invested capital by year 3

Note: As of December 31, 2020

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The portfolio added three types of opportunities

Network states - example

Pioneering center - example

New market entry - example

Added 10 centers to the network in Florida		White Fence, over 10K total joints performed		Entered in Indiana at scale with 7 centers

Pictured left to right: SurgCenter of Palm Beach Gardens, White Fence Surgical Suites in Ohio, Munster Specialty Surgery Center	12

Built upon USPI's premier network in 2020

61

73

3,700+

New, high-quality surgical	New service line starts	New physicians on medical
facilities added to the portfolio,	including orthopedics, spine,	staff, maintaining culture of
including five under construction	robotics and bariatrics	quality and patient experience

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Furthering USPI's growth in 2021

$150M+ ~25-40 6%+

Planned acquisition capital, with	Tuck-in acquisitions and de	Expected annual same-store
the potential for more with the	novo to be funded; excludes	surgical revenue growth given
right opportunities	potential corporate acquisitions	track-record of organic growth

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ENHANCING CARE PROVIDED BY OUR HEALTH SYSTEMS

Investing in high-quality clinical programs to serve growing acute and chronic care needs in strategic hospital markets

San Antonio, TX	Palm Beach, FL
Launched CT surgery at North Central and a	Achieved additional Comprehensive Stroke
market-wide neurosciences program	certifications at Delray and St. Mary's

Phoenix, AZ	Palm Springs, CA
Achieved Comprehensive Stroke certification	Recognized for 30 years of award winning care
at Abrazo Central Campus	at the Comprehensive Cancer Center

El Paso, TX	Rock Hill, SC
Launched bariatrics program at East Campus	Started construction of a new medical campus
and expanded market-wide MFM program	in Fort Mill, South Carolina

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Continue to enrich specialty medical group complement

Dr. Matt Dobbs, Orthopedics	Dr. Sonia Eden, Neurosurgery	Dr. Emun Abdu, Neurosurgery
The Paley Institute, Palm Beach	DMC Medical Group, Detroit	Abrazo Neuroscience Institute, Phoenix

Dr. Richard Farnum, Urogynecology	Dr. David Fox, Orthopedics	Dr. Kapil Lotun, Interventional Cardiology
Providence Medical Partners, El Paso	Northeast Orthopedics, San Antonio	Carondelet Heart & Vascular Institute, Tucson

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STRENGTHENING CONIFER PRIOR TO THE SPIN

Improving Conifer with a

stronger leadership team,

"client-first" mindset, and

focus on operational

excellence

	End to End			Tech-Enabled			Financial
	Revenue Cycle			Point Solutions			Services
	Optimize performance and			Activate a more focused		Launch financial services for
	client experience			growth pipeline			health systems
•	Focus on cash		•	Prioritize best-in-class		•	Deliver efficient and
	performance and			services such as Coding			effective support for
	maintain cash collections			with Coding Quality			function such as
	at ~100% targets			above 97%			accounting, AP, payroll
•	Continue to invest in		•	Customize offerings to		• Co-brand and operate as
	offshoring and			address a client's			an extension of the
	automation			specific challenge			health system client
•	Maintain client		•	Continue to invest in		•	Leverage Tenet offshore
	reference-ability >85%			technology			expertise

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TENET

ENTERPRISE OPERATING MODEL ADVANCEMENT

GLOBALIZING & IMPROVING SERVICES

Mature the Global Business Center to increase functions supported as well

as continue to realize efficiencies and process improvements

DELIVERING CONTINUOUS IMPROVEMENT

Continue to utilize analytical insights in action-oriented management processes

to identify and implement initiatives to capture additional efficiencies

INVESTING IN TALENT & CULTURE

Cultivate a high-performance culture that embraces data-driven decision

making and talent management processes that promote diversity and inclusion

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SCALING THE GLOBAL BUSINESS CENTER

Tenet Global Business Center

# Employees

~5,000

First large provider to establish a captive center in the Philippines

Over 10 core functions, 30 sub- functions with 2,500+ process flows

All Tenet markets served with over

400 performance metrics in place

~3,000

~1,600

<50

Year end 2019

Year end 2020 Year end 2021E Year end 2023E

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PROMOTING TALENT & CULTURE

We are committed to

developing talent,

recognizing everyday

impact and supporting

our employees

RECOGNIZING TALENT	HEALTHCARE HEROES	TENET CARE FUND
Continuing to promote talent	Expanding a decade-old	Supporting ~1,200 colleagues
from within, as well as attract	tradition in celebrating our	facing hardships with ~$2M
external talent	peer-nominated heroes	raised in 2020

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ENVIRONMENTAL,

SOCIAL,

GOVERNANCE

BUILDING A SUSTAINABLE FUTURE

Includes proactive initiatives with measurable impact, such as the reusable

sharps container program diverting 600K+ pounds of plastic from landfills

RECOGNIZING OUR SOCIAL RESPONSIBILITIES

Includes ensuring access to care with ~$7B in uncompensated care in 2019

and promoting community service, diversity and employee recognition

UPHOLDING SOUND GOVERNANCE

Includes significant Board refreshment with nine new directors since 2017 and

all members who uphold strong principles and high standards of governance

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BUILDING A SUSTAINABLE FUTURE

We understand our responsibility to create the best places to provide care, while minimizing our impact on the environment

Commitment #1

Improving the physical

plant

Commitment #2

Reducing resource

consumption

Commitment #3

Fostering community

alignment & partnerships

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CONTINUING OUR COMMITMENT TO DIVERSITY

We recognize that providing compassionate care to our diverse communities also means embracing diversity within our workplace

47% Of workforce is ethnically diverse

51% Of new hires ethnically diverse

45% Leadership diversity based on gender and / or ethnicity

58% Board diversity based on gender and / or ethnicity

Note: As of January 2021	23

Reflecting the communities we serve within our company

Black Hispanic Asian & Other White

Detroit				El Paso
% Hospital Employees				% Hospital Employees
			13%	2%
	35%	4%
52%
	2%
11%			81%

Orange County

% Hospital Employees

5%

29%21%

46%

Note: As of January 2021	24

SOUND GOVERNANCE

Our governance includes

diversity of experience

and our Board of Director

refreshment has been

strong with 9 new

directors since 2017

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Changes implemented to improve governance practices

1.

2.

3.

4.

Strong Lead Director with defined and robust responsibilities

Active shareholder outreach and engagement

Proxy access on market standard terms

Shareholder right to call special meetings at 25% vote threshold

Tenet was rated in top 10% of peer group by leading proxy advisor

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TENET HEALTH

IN 2021

COMPETITIVE ADVANTAGE & STRATEGY

Enhanced position in higher acuity, high growth specialties with strong

quality, safety, patient and physician experience

HIGH-PERFORMANCE CULTURE

Supported by data-driven decision making, continuous improvement, talent

management, and transparency in all communications

STRONG PORTFOLIO & PERFORMANCE

Higher performing go-forward portfolio with greater free cash flow generation,

capital efficiency and secured debt capacity

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