Tenet Healthcare Corporation was created in March 1995 through the merger of health care provider National Medical Enterprises (NME), Inc. and the parent company of American Medical International (AMI), Inc., which was founded in 1960 as the nation’s first investor-owned hospital management company. 

In the late 1990s and early 2000s, Tenet grew through the acquisition of a number of investor-owned and not-for-profit hospitals and hospital systems, ultimately becoming the second largest investor-owned hospital company in the United States.

In late 2002, Tenet was faced with a number of investigations brought by the U.S. Department of Justice and various state and federal agencies.  Tenet’s board asked Trevor Fetter, its former Chief Financial Officer, to return to the company as President.  The board then replaced virtually all of its own members, fired the Chairman and CEO, appointed a non-executive Chairman, and appointed Mr. Fetter as Chief Executive Officer to resolve these investigations and lead Tenet’s turnaround. 

The investigations included:

·        Engaging in an aggressive and unsustainable pricing strategy between 2000 and 2002 in which the company took advantage of an obscure provision (“Outlier payments”) in the Medicare program at some of its hospitals.

·        Failure to detect the possibility that two physicians were performing cardiac surgeries on patients who could have been treated with less invasive procedures at its hospital in Redding, California, bringing into question the quality standards at Tenet’s hospitals.

·        Allegations that physician recruitment agreements at a Tenet hospital in San Diego, California, provided kick-backs to physicians. 

With an entirely new leadership team in place eager to restore the company’s reputation, Tenet launched its Commitment to Quality initiative in 2003.  C2Q is a multi-faceted program with targeted initiatives designed to improve quality throughout the organization, including critical areas such as clinical quality, patient care, patient safety, nursing practices and medical staff governance.  Shortly after implementing C2Q, Tenet surpassed the national average in adherence to the Centers for Medicare and Medicaid Services (CMS) core quality measures.  Today, C2Q remains central to Tenet’s strategy as patients and payers look to the CMS’ core measures scores when choosing their health care providers.  Tenet continues to perform well above the national average on its CMS scores, and the company has been widely recognized for the program with numerous quality designations and accolades including:

·        8 Aetna Center of Excellence designations for bariatrics

·        4 Anthem Centers for Medical Excellence in Transplant

·        CIGNA Centers of Excellence - 27 hospitals received a total of 71 COE designations

·        6 Humana Centers of Excellence in Transplant

·        National Blue Distinction Centers, Blue Cross and Blue Shield, Bariatric Surgery – 11, Cardiac Care – 14, Hip/Knee – 15, Spine – 11

·        UnitedHealth Premium Specialty Center Designations – 29 hospitals received a total of 73 designations: 20 orthopedic designations for Surgical Spine and/or Total Joint Replacement Specialty Centers, 29 cardiac designations for Cardiovascular Surgery, Electrophysiology and/or Interventional Cardiology

·        Recognition for outstanding clinical achievement in the areas of coronary artery disease, heart failure and stroke, Get With The Guidelines^SM  participation by the American Heart Association and the American Stroke Association, with Tenet hospitals earning performance achievement awards in at least one or more category – 48 for a total of 74 cumulative awards

·        Recognition from HealthGrades (2010/2011) – 9 hospitals recognized for placing in the top 5 percent or 10 percent nationally in 37 clinical categories; 84 five-star designations: 27 specialty excellence awards; 2 distinguished hospital awards

·        9 Centers of Excellence designations in the Coventry National Transplant Network

·        14 Centers of Excellences, American Society for Bariatric Surgery

·        16 Accredited Chest Pain Centers, Society of Chest Pain Centers

·        10 Quality Respiratory Care Recognitions, American Association for Respiratory Care

·        5 Organ Donation Medals of Honor, U.S. Department of Health and Human Services

Also in 2003, the company rebuilt its ethics and compliance program with an independent Chief Compliance Officer reporting directly to the Board of Directors.  Tenet also addressed the challenges posed by the nation’s growing number of uninsured patients.  Through the introduction of its Compact with Uninsured Patients, Tenet took an industry-leading role in offering managed care-style discounted pricing to patients without insurance.  In 2010, Tenet’s charity care and uninsured patients accounted for more than 34,000 admissions and 400,000 outpatient visits.  The estimated cost of caring for these patients was $500 million. In addition to providing care for patients with limited means, Tenet also helps them qualify for a variety of programs including Medicaid, state Children’s Health Insurance Programs (CHIP), and county-based programs.

Tenet closed the chapter on the most significant of its legacy issues in 2006 when the company announced a $900 million dollar settlement with the U.S. Department of Justice that concluded its investigations across the country.  As part of the settlement, Tenet entered into a five-year corporate integrity agreement, which expired on September 27, 2011.  Tenet will file its final Annual Report under the CIA in January 2012.  Following the end of the CIA, Tenet adopted a Quality, Compliance and Ethics Program Charter that voluntarily continues the safeguards contained in the CIA.  Today, Tenet is a recognized industry leader in cost management, operational efficiency, supply chain management, revenue cycle management and information technology.

Tenet’s turnaround was not without unexpected challenges.  In late August 2005, as Hurricane Katrina headed toward the company’s six New Orleans Gulf Coast hospitals, the hospitals implemented their long-standing hurricane emergency response plans.  When the levees were unexpectedly breached and severe and long-lasting flooding occurred, one of the company’s hospitals, Memorial Medical Center, was cut off from land access and all services.  With the safe evacuation of patients, families and employees being the company’s top priority, Tenet quickly sent helicopters, air ambulances and supplies to the region and within 48 hours of being informed that Memorial had been cut off, Tenet was able to safely evacuate approximately 2,000 people from the region.

Though the global recession has been difficult, the company has managed to deliver very solid progress by continuing to focus on the basics.  In recent years, Tenet extended its strong record of growth in both EBITDA (earnings before interest, taxes, depreciation and amortization) and EBITDA margin.  Since the beginning of 2007, Tenet has ranked first in same-hospital EBIDTA growth more than half the time (in eight of 15 quarters) compared with its largest peers.  Through a combination of improved earnings performance and balance sheet transactions, Tenet has gone from being one of the most-highly leveraged companies in its sector to being one of the least leveraged.

In 2010, the uncertainties of a difficult economic environment and federal health care reform required renewed focus on providing high-quality, low-cost care at a time when consumers are placing increasing importance on quality and cost when making their health care decisions.  That focus was rewarded with improvements in quality measures, patient and physician satisfaction scores and workforce retention, as well as improved financial metrics.  Also in 2010, Tenet presented a five-year company outlook to shareholders based on seven drivers of growth that form the core of Tenet’s business strategy.  One of those drivers is health information technology (HIT).  In 2009, Tenet’s board of directors approved funding to broaden and accelerate Tenet’s health information technology program to take advantage of incentives established under health care reform.  Tenet will invest more than $620 million to implement electronic health records (EHRs) and computerized provider order entry (CPOE) in all of its hospitals by the end of 2014.

Today, through all of these efforts, Tenet is a different company with a bright future:

·        The company has rationalized its hospital portfolio which currently consists of 50 hospitals and 90 outpatient centers in 13 states.

 ·        Tenet’s clinical quality scores as ranked by United States Department of Health and Human Services Centers for Medicare and Medicaid Studies (CMS) exceed the national average.  In 2010, 25 Tenet hospitals were in the top 25 percent on their aggregate score across all measures.

·       Tenet earned Institutional Shareholder Services’ highest corporate governance scores in 2010.  

·        The company’s financial metrics are much improved, with consistent and positive trends across many financial measures.

·        Tenet’s operating strategy has positioned the company to perform well in a post-healthcare reform environment.

 ·        The company’s Commitment to Quality remains at the core of everything Tenet does.