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, 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. C2Q remains central to Tenet’s strategy today, and the company has been widely recognized for the program with numerous quality designations and accolades including:
· Aetna Institutes of Excellence Centers - 12 Institutes of Excellence Center designations
· Anthem Centers for Medical Excellence in Transplant - Two Transplant Centers for Medical Excellence Center designations
· Blue Cross & Blue Shield National Blue Distinction Centers - 52 Blue Distinction Center Designations
· CIGNA Centers of Excellence - 42 hospitals received a total of 257 COE designations
· Humana National Transplant Network - Nine Centers of Excellence Transplant Program designations
· 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, 29cardiac 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 GuidelinesSM 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 – 40 for a total of 72 cumulative awards
· Recognition from HealthGrades (2009/2010) – 41 hospitals recognized for placing in the top 5 percent or 10 percent nationally in 24 clinical categories; 257 five-star designations: 41 specialty excellence awards; three distinguished hospital awards
· Coventry National Transplant Network - Eight Centers of Excellence Transplant Program designations
· Center of Excellence, American Society for Bariatric Surgery – 12
· Accredited Chest Pain Center, Society of Chest Pain Centers – 15
· Quality Respiratory Care Recognition, American Association for Respiratory Care – 12
· Organ Donation Medal of Honor, U.S. Department of Health and Human Services – five
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 June 2006, Tenet closed the chapter on the most significant of its legacy issues 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 pursuant to which the U.S. government regularly evaluates Tenet’s ethics and compliance program. One of Tenet’s predecessor companies, NME, had previously operated under a corporate integrity agreement related to its former psychiatric division, which had overbilled and provided medically unnecessary services to psychiatric patients in the 1980s and early 1990s.
Following the announcement of the settlement, Tenet enhanced capital spending at its core hospitals in an effort to regain the confidence of its physicians, patients and investors. Since that time, the company has invested more than $1.7 billion in infrastructure and technology. 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 made 2009 a difficult year to navigate, the company managed to deliver very solid progress by continuing to focus on the basics. Tenet extended its strong record of growth in both EBITDA (earnings before interest, taxes, depreciation and amortization) and EBITDA margin. The company’s 2009 EBITDA was more than twice what it was in 2004 when it had 40 percent more hospitals than it has today. Through a combination of improved earnings performance and balance sheet transactions, Tenet went from being one of the most-highly leveraged companies in its sector to being one of the least leveraged.
Today Tenet is a different company with a bright future:
· The company has rationalized its hospital portfolio which currently consists of 49 hospitals in 11 states and 63 outpatient centers in 12 states.
· Tenet’s clinical quality scores as ranked by United States Department of Health and Human Services Centers for Medicare and Medicaid Studies (CMS) well exceed the national average.
· Tenet ranks first in Corporate Governance among all U.S. public companies in the Healthcare Equipment & Services industry and second among all U.S. public companies in the S&P 500.
· 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.