Apr 28, 2011 - vendor-supplied clinical review criteria and that there is something nefarious about the .... Emergency R
CHS RESPONSE PRESENTATION APRIL 28, 2011
Forward-Looking Statements Any statements made in this presentation that are not statements of historical fact, including statements about our beliefs and expectations, including any benefits of the proposed acquisition of Tenet Healthcare Corporation (“Tenet”), are forward-looking statements within the meaning of the federal securities laws and should be evaluated as such. Forward-looking statements include statements that may relate to our plans, objectives, strategies, goals, future events, future revenues or performance, and other information that is not historical information. These forward-looking statements may be identified by words such as “anticipate,” “expect,” “suggest,” “plan,” believe,” “intend,” “estimate,” “target,” “project,” “could,” “should,” “may,” “will,” “would,” “continue,” “forecast,” and other similar expressions. These forward-looking statements involve risks and uncertainties, and you should be aware that many factors could cause actual results or events to differ materially from those expressed in the forward-looking statements. Factors that may materially affect such forward-looking statements include: our ability to successfully complete any proposed transaction or realize the anticipated benefits of a transaction, our ability to obtain stockholder, antitrust, regulatory and other approvals for any proposed transaction, or an inability to obtain them on the terms proposed or on the anticipated schedule, uncertainty of our expected financial performance following completion of any proposed transaction and other risks and uncertainties referenced in our filings with the Securities and Exchange Commission (“the SEC”). Forward-looking statements, like all statements in this presentation, speak only as of the date of this presentation (unless another date is indicated). We do not undertake any obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.
11
Additional Information This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This presentation relates to a business combination transaction with Tenet proposed by Community Health Systems, Inc. (“CHS” or “the Company”), which may become the subject of a registration statement filed with the SEC. CHS intends to file a proxy statement with the SEC in connection with Tenet’s 2011 annual meeting of shareholders. Any definitive proxy statement will be mailed to shareholders of Tenet. This material is not a substitute for any prospectus, proxy statement or any other document which CHS may file with the SEC in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ ANY SUCH DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Such documents would be available free of charge through the web site maintained by the SEC at www.sec.gov or by directing a request to Community Health Systems, Inc. at 4000 Meridian Boulevard, Franklin, TN 37067, Attn: Investor Relations. Community Health Systems, Inc. trades on the New York Stock Exchange under the ticker symbol CYH. Community Health Systems, Inc. is a holding company. Each hospital owned (or leased) by CHS is owned and operated by a separate and distinct legal entity.
Participant Information CHS, its directors and executive officers and nominees may be deemed to be participants in the solicitation of proxies in connection with Tenet’s 2011 annual meeting of shareholders. The directors of CHS are: Wayne T. Smith, W. Larry Cash, John A. Clerico, James S. Ely III, John A. Fry, William N. Jennings, M.D., Julia B. North and H. Mitchell Watson, Jr. The executive officers of CHS are: Wayne T. Smith, W. Larry Cash, David L. Miller, William S. Hussey, Michael T. Portacci, Martin D. Smith, Thomas D. Miller, Rachel A. Seifert and T. Mark Buford. The nominees of CHS are: Thomas M. Boudreau, Duke K. Bristow, Ph.D., John E. Hornbeak, Curtis S. Lane, Douglas E. Linton, Peter H. Rothschild, John A. Sedor, Steven J. Shulman, Daniel S. Van Riper, David J. Wenstrup, James O. Egan, Jon Rotenstreich, Gary M. Stein and Larry D. Yost. CHS and its subsidiaries beneficially owned approximately 420,000 shares of Tenet common stock as of January 7, 2011. Additional information regarding CHS’s directors and executive officers is available in its proxy statement for CHS’s 2011 annual meeting of stockholders, which was filed with the SEC on April 7, 2011. Other information regarding potential participants in such proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in any proxy statement filed with the SEC in connection with Tenet’s 2011 annual meeting of shareholders. 22
Program
Introduction Introduction and and Overview Overview Wayne Wayne Smith Smith
Chairman, Chairman, President President and and Chief Chief Executive Executive Officer Officer
Medicare Medicare Definitions Definitions Barbara Barbara Paul, Paul, M.D. M.D.
Senior Senior Vice Vice President President and and Chief Chief Medical Medical Officer Officer
Clinical Clinical Review Review Criteria Criteria Lynn Lynn T. T. Simon, Simon, M.D. M.D.
Senior Senior Vice Vice President President -- Quality Quality and and Resource Resource Management Management
Analysis Analysis and and Statistics Statistics W. W. Larry Larry Cash Cash
Executive Executive Vice Vice President President and and CFO CFO
Compliance Compliance Andi Andi Bosshart Bosshart
Vice Vice President President -- Corporate Corporate Compliance Compliance and and Privacy Privacy Officer Officer
Closing Closing Comments Comments Wayne Wayne Smith Smith
Chairman, Chairman, President President and and Chief Chief Executive Executive Officer Officer 33
Introduction and Overview Annual 2010 revenue - $13 billion 693,000 admissions and 2,700,000 emergency room visits to our
hospitals in 2010
64,000 full-time and 23,000 part-time employees High quality patient care and safety are our top priorities Our organization, employees, and physicians adhere to high ethical
standards
Our voluntary compliance program is a model for other organizations Our management team has high credibility and a strong reputation in
the industry
44
Introduction and Overview We believe that Tenet’s lawsuit against CHS in this proxy contest
has negatively affected the entire health care sector.
CHS will cooperate with regulators and assist in any investigation. As we will show, we believe Tenet’s lawsuit has no merit and, while
distracting, will have no material impact on CHS operations going forward. We have moved to dismiss that case in its entirety and expect a decision before the November 2011 Tenet shareholder meeting.
Over the past two weeks, many independent financial analysts and
industry consultants have reviewed and tested Tenet’s hypothesis and found it implausible and unsupported. We have reconstructed and tested many of these analyses and done our own work which, while preliminary, leads us to believe that Tenet is misguided and wrong.
55
Introduction and Overview We believe:
Tenet's Tenet's allegations allegations of of inappropriate inappropriate admissions admissions are are based based on on contrived contrived and and biased biased metrics metrics leading leading to to aa conclusion conclusion of of implausibly implausibly inflated inflated financial financial exposure. exposure. `` IfIf Tenet Tenet believes believes “observation “observation rate” rate” is is aa material material statistic, statistic, then then why why did did Tenet Tenet not not disclose disclose this this metric metric in in its its own own SEC SEC filings? filings?
Tenet Tenet is is misleading misleading about about CMS's CMS's rules rules and and guidance guidance relating relating to to the the timing timing and and utilization utilization of of observation observation status. status. Also, Also, Tenet Tenet omits/understates omits/understates the the role role and and importance importance of of physician physician judgment judgment and and decision decision making making in in the the treatment treatment of of patients. patients.
Tenet's Tenet's biased biased use use of of its its selected selected statistical statistical analysis analysis and and failure failure to to review review and and apply apply relevant relevant statistics statistics lead lead to to aa series series of of materially materially false false conclusions. conclusions.
Tenet's Tenet's assertions assertions and and analyses analyses regarding regarding the the Triad Triad Hospitals Hospitals transition transition following following the the July July 2007 2007 merger merger are are skewed skewed and and incorrect. incorrect.
66
Tenet’s Allegation of Inappropriate Admissions
“Observation rate” * `
Biased metric – Omits an industry peer with an “observation rate” much closer to CHS.
`
Faulty inference – Compares low “observation rate” to a national average and to the hospital system with the highest “observation rate”. – Concludes that all absent observation cases are inappropriate admissions; ignores patients treated and released from ER. – Ignores any threshold for statistical significance between low “observation rate” and national average.
Flawed analysis ` ` ` `
Tenet alleges 20,000 to 31,000 inappropriate admissions in 2009, which we regard as illogical and not supported by the facts. Actual total Medicare one-day stay admissions in 2009 were 38,000 (after appropriate exclusions). We believe Tenet’s analysis concludes that 45% to 69% of the total one-day stays were inappropriate – an absurdly high percentage. No statistically significant correlation exists between outpatient “observation rate” and the one-day stay inpatient admission rate at 3,540 hospitals.
* Tenet Healthcare Corporation vs. Community Health Systems, Inc., filed April 11, 2011, Complaint ¶ 98 chart, defines “observation rate” as “total unique observation claims divided by the sum of total unique observation claims and total inpatient short-stay acute care hospital claims.” We believe that “inpatient short-stay acute care hospital claims” as used in Tenet’s ¶ 98 chart, equals all inpatient admissions regardless of length of stay. Tenet’s Complaint elsewhere defines “observation rate” as “the number of Medicare outpatient observation claims divided by the sum of Medicare outpatient observation claims plus Medicare inpatient claims.” (Tenet Complaint at page 9, note 6.)
77
Tenet’s Allegations Lead to an Implausible Result 2009 2009 Medicare Medicare One-Day One-Day Stays Stays Minus Minus 85% 85% Pro-Forma Pro-Forma Removal Removal of of Alleged Alleged Inappropriate Inappropriate Admissions Admissions 20%
14.7%
15%
13.7% 11.5%
11.7%
12.5%
12.4%
12.43% (National Average)
10.7%
10%
8.1% 4.5%
5%
0% HCA
THC
HMA
LPNT
UHS
CHS
States with CHS (Tenet CHS (Tenet CHS Allegation Allegation Hospitals 85% 20K) 85% 31K)
The result of this pro-forma adjustment: CHS one-day stays as a percentage of total admissions would now range from an implausibly low 8.1% to 4.5%, versus a 29-state statewide-average of 12.5%. Clearly, the Tenet analysis contains significant flaws. Source: American Hospital Directory, CHS analysis reviewed by an outside consultant. Tenet lawsuit, April 11, 2011. Medicare One-Day Stays is a ratio of (a) Medicare one-day stays for short term acute care hospitals, excluding distinct part units and excluding discharges for transfers to other acute care hospitals, deaths, and left against medical advice; divided by (b) total Medicare discharges for short-term acute care hospitals, excluding distinct part units and excluding transfers to other acute care hospitals. Tenet Allegation - CHS Medicare one-day stays have been reduced by 85% of Tenet’s estimate of between 20,000 and 31,000 inappropriate admissions.
88
Inpatient Admissions vs. Observation Status Tenet's Tenet's allegations allegations fail fail to to balance balance the the CMS CMS rules rules regarding regarding the the use use of of observation observation status status with with the the CMS CMS position position regarding regarding inpatient inpatient admissions: admissions: IfIf the the physician physician determines determines that that the the patient's patient's assessment assessment and and treatment treatment are are likely likely to to take take more more than than 24 24 hours hours (or (or that that the the patient patient is is expected expected to to remain remain overnight), overnight), the the patient patient should should be be admitted admitted as as an an inpatient. inpatient.
99
Medicare Definitions Inpatient “An “An inpatient inpatient is is aa person person who who has has been been admitted admitted to to aa hospital hospital for for bed bed occupancy occupancy for for purposes purposes of of receiving receiving inpatient inpatient hospital hospital services. services. Generally, Generally, aa patient patient is is considered considered an an inpatient inpatient ifif formally formally admitted admitted as as inpatient inpatient with with the the expectation expectation that that he he or or she she will will remain remain at at least least overnight overnight and and occupy occupy aa bed bed even even though though itit later later develops develops that that the the patient patient can can be be discharged discharged or or transferred transferred to to another another hospital hospital and and not not actually actually use use aa hospital hospital bed bed overnight.” overnight.”
Outpatient “A “A hospital hospital outpatient outpatient is is aa person person who who has has not not been been admitted admitted by by the the hospital hospital as as an an inpatient inpatient but but is is registered registered on on the the hospital hospital records records as as an an outpatient outpatient and and receives receives services services (rather (rather than than supplies supplies alone) alone) from from the the hospital hospital or or CAH. CAH. Where Where the the hospital hospital uses uses the the category category ‘day ‘day patient,’ patient,’ i.e., i.e., an an individual individual who who receives receives hospital hospital services services during during the the day day and and is is not not expected expected to to be be lodged lodged in in the the hospital hospital at at midnight, midnight, the the individual individual is is considered considered an an outpatient.” outpatient.”
Source: CMS, Medicare Benefit Policy Manual, Chapter 1 (Rev. 1, 10-01-03); Chapter 6, 20.2, (Rev. 82; Issued: 02-08-08; Effective: 01-01-08; Implementation: 03-10-08); www.cms.gov CAH: Critical Access Hospital
10 10
Medicare Definitions Outpatient Observation Services “Observation “Observation care care is is aa well-defined well-defined set set of of specific, specific, clinically clinically appropriate appropriate services, services, which which include include ongoing ongoing short short term term treatment, treatment, assessment, assessment, and and reassessment reassessment before before aa decision decision can can be be made made regarding regarding whether whether patients patients will will require require further further treatment treatment as as hospital hospital inpatients inpatients or or ifif they they are are able able to to be be discharged discharged from from the the hospital. hospital. Observation Observation services services are are commonly commonly ordered ordered for for patients patients who who present present to to the the emergency emergency room room and and who who then then require require aa significant significant period period of of treatment treatment or or monitoring monitoring in in order order to to make make aa decision decision concerning concerning their their admission admission or or discharge.” discharge.” “Observation “Observation services services are are covered covered only only when when provided provided by by the the order order of of aa physician physician or or another another individual individual authorized authorized by by State State licensure licensure law law and and hospital hospital staff staff bylaws bylaws to to admit admit patients patients to to the the hospital hospital or or to to order order outpatient outpatient tests. tests. In In the the majority majority of of cases, cases, the the decision decision whether whether to to discharge discharge aa patient patient from from the the hospital hospital following following resolution resolution of of the the reason reason for for the the observation observation care care or or to to admit admit the the patient patient as as an an inpatient inpatient can can be be made In only only rare rare and and exceptional exceptional cases cases do do reasonable reasonable made in in less less than than 48 48 hours, hours, usually usually in in less less than than 24 24 hours. hours. In and and necessary necessary outpatient outpatient observation observation services services span span more more than than 48 48 hours.” hours.” Source of citation for outpatient care and observation services: CMS, Medicare Claims Processing Manual and Medicare Benefit Policy Manual Chapter 6, 20.6, (Rev. 107, Issued: 05-22-09, Effective: 07-01-09, Implementation: 07-06-09) Additional reference for observation services: Medicare Claims Processing Manual, Chapter 12, Section 30.6.8 – Payment for Hospital Observation Services. See also, July 7, 2010, letter from CMS Acting Administrator Marilyn Tavenner to Richard Umbdenstock, President and Chief Executive Officer, American Hospital Association, stating in part “[a]s it is not in the hospital’s or the beneficiary’s interest to extend observation care rather than either releasing the patient from the hospital or admitting the patient as an inpatient, we are interested in learning more about why this trend is occurring and would appreciate any information you can share to better inform further actions CMS can take on this issue.” Centers for Medicare & Medicaid Services website: www.cms.gov
11 11
Use of Clinical Review Criteria We believe that Tenet implies a requirement that hospitals use
vendor-supplied clinical review criteria and that there is something nefarious about the clinical review criteria developed over time by CHS physicians and other health care professionals.
CMS does not dictate or endorse any particular criteria. CMS
does not endorse any particular brand of screening guidelines.
12 12
Role / Purpose of Clinical Review Criteria CMS requires that hospitals adopt clinical criteria for use by each
hospital’s utilization review committee or department.11
25% of hospitals in the U.S. use criteria other than InterQual or
Milliman (formerly known as Milliman & Robertson).22
CMS contractors [e.g., Medicare Administrative Contractors or
MACs, Recovery Audit Contractors (RACs)] are not required to use any specific admission criteria.
In 2011, prior to the filing of the Tenet lawsuit, CHS had made the
decision and signed a contract to begin using third-party vendor criteria for admission and procedure appropriateness review.
Source: MLN Matters® Number: SE1037, Guidance on Hospital Admission Decisions (1) Hospitals are required by CMS Conditions of Participation to have procedures for conducting admission review (although not all admissions must be reviewed pursuant to those procedures. 42 CFR 482.30 -- Utilization Review (2) Tenet Healthcare Corporation vs. Community Health Systems, Inc, filed April 11, 2011
13 13
CHS Clinical Guidelines for Inpatient Care
“CHS “CHS Clinical Clinical Guidelines Guidelines for for Inpatient Inpatient Care” Care” commonly commonly known known as as the the “Blue “Blue Book” Book”
Developed Developed around around late late 1999 1999 at at aa time time when when CHS-affiliated CHS-affiliated hospitals hospitals were were primarily primarily rural rural ``
At At the the end end of of 1999, 1999, CHS CHS operated operated 46 46 hospitals hospitals in in 20 20 states states with with 4,115 4,115 licensed licensed beds beds
At At the the time, time, payors payors were were utilizing utilizing aa wide wide variety variety of of criteria criteria `` `` `` ``
PROs-InterQual PROs-InterQual Some Some Managed Managed Care-Milliman Care-Milliman & & Robertson Robertson Other Other Managed Managed Care-Proprietary Care-Proprietary Criteria Criteria Medicaid-InterQual Medicaid-InterQual or or Proprietary Proprietary Criteria Criteria
Challenging Challenging for for staff staff to to keep keep up up with with varied varied criteria criteria based based on on payor payor preference preference
Determination Determination that that Medical Medical Necessity Necessity should should not not vary vary by by payor payor
Purchasing Purchasing from from aa third third party party all all sets sets of of criteria criteria for for all all CHS CHS facilities facilities was was cost cost prohibitive prohibitive and and unnecessary unnecessary
Determined Determined that that CHS CHS could could work work with with physicians physicians to to develop develop appropriate appropriate guidelines guidelines for for case case management management
14 14
CHS Clinical Guidelines for Inpatient Care Goals for “CHS Clinical Guidelines for Inpatient Care” (Blue Book)
`` One One set set of of criteria criteria for for all all payors payors `` Easy Easy to to use use and and understand understand by by case case manager manager `` Based Based on on current current clinical clinical practice practice `` Affordable Affordable and and cost cost effective effective
15 15
CHS Clinical Guidelines for Inpatient Care Process for Blue Book development
`` Selected Selected top top 20 20 most most frequent frequent conditions conditions needing needing inpatient inpatient care care for for initial initial data data set set `` Conducted Conducted literature literature search search `` Developed Developed draft draft guidelines guidelines `` Created Created design design and and layout layout for for ease ease of of use use `` Submitted Submitted to to CHS CHS Regional Regional then then National National Physician Physician Advisory Advisory Board Board for for clinical clinical review review and and approval approval –– Board Board of of Regional Regional or or National National physician physician representatives representatives –– Provide Provide input, input, advice advice and and clinical clinical expertise expertise to to CHS CHS –– Assist Assist with with development development of of clinical clinical criteria criteria for for admissions, admissions, diagnostic diagnostic testing, testing, and and resource resource management management
16 16
CHS Clinical Guidelines for Inpatient Care Blue Book regularly updated
`` Six Six revisions revisions –– –– –– –– –– ––
August August 2001 2001 March March 2003 2003 August August 2006 2006 December December 2007 2007 August August 2009 2009 July July 2010 2010
Updates included review of other sources
(professional (professional medical medical organizations organizations such such as as American American College College of of Cardiology, Cardiology, InterQual, InterQual, Milliman, Milliman, and and others) others)
Regular input and approval by physicians through CHS regional
and national Physician Advisory Boards (PABs)
We We believe believe that that Tenet’s Tenet’s complaint complaint misleads misleads readers readers by by citing citing only only
the the original original version version (2000) (2000) of of the the CHS CHS review review criteria, criteria, but but then then quoting quoting from from or or referring referring to to aa later later version, version, which which is is also also outdated. outdated. 17 17
CHS Provides Better Emergency Room Service CHS tracks patient ER wait time and other
important service metrics. By improving information collection and
analysis, CHS provides more efficient and effective health care. One information tool is Pro-MED.
18 18
Patient Status and Emergency Room Flow Patient arrives at Emergency Room
Inpatient admission
Triage
ED physician examination / testing and treatments
Condition requires treatment / further evaluation that can only be provided in a hospital setting
Attending physician / hospitalist
Patient’s condition can be evaluated / treated within 24hrs and / or rapid improvement anticipated within 24 hrs
Yes or Unsure Observation: Additional time necessary to determine if inpatient admission is medically necessary
Alternate level of care is appropriate Outpatient: home health care, extended care facility, or home
0
2
Patient Improved or Stable
4-6 Timeline in Hours (Not to Scale)
8
No
Patient not improving or not stable for discharge within 24 hrs
Home
19 19
Pro-MED Clinical System at CHS What is the Pro-MED emergency room electronic health record?
“. “. .. .. .A .A unique unique system system which which automates automates many many important important functions functions to to assist assist the the Healthcare Healthcare Team Team in in Administering Administering Appropriate Appropriate Cost Cost Effective Effective and and Consistently Consistently High High Quality Quality Patient Patient Care. Care. .. .. .” .” ** Pro-MED Clinical Systems L.L.C. was formed in 1991 to market a
clinical information system for hospital emergency rooms.
The Pro-MED Clinical System has been deployed to most but not all
CHS affiliated hospitals to improve patient care and assist in the management of ER operations.
* Source for Pro-MED quote and other information: www.promed-services.com
20 20
CHS Use of Pro-MED System Standardized tools for managing patients during and after ER visit
`` Status Status board board showing showing location location and and status status of of each each patient patient `` Patient Patient tracking tracking includes, includes, length length of of stay stay and and wait wait times times for for critical critical stages stages in in ER ER visit: visit: –– ––
Wait Wait time time to to triage triage Wait Wait time time to to be be placed placed in in exam exam room room or or seen seen by by primary primary nurse nurse
–– Wait Wait time time to to be be seen seen by by physician physician –– Wait Wait time time for for disposition disposition or or time time that that patient patient waited waited to to be be discharged, discharged, admitted admitted or or transferred. transferred.
More efficient ER patient management (through Pro-MED system and
other processes), shortened ER length of stay and possibly reduced the need for use of observation status
Source for Pro-MED information: www.promed-services.com
21 21
CHS Use of Pro-MED System What the Pro-MED system does not do: Does not order tests Does not contain admission or observation criteria from any source * Does not make any recommendation to physicians to admit patients,
place patients in observation, or discharge patients *
* Excludes three CHS hospitals where system flags criteria. The Pro-MED Qual Check Module uses predetermined clinical decision-making criteria to make recommendations to providers regarding patient disposition. CHS began a test of the module in mid-2007. The module was installed at four hospitals and later shut down in one of the four. Blue Book (version 2006) criteria was used in part to establish clinical parameters for the pilot. Use of the system was never expanded beyond those three facilities. An internal review of the 2009 Reports indicated that the three hospitals and providers were underutilizing this module.
22 22
Physician Decision to Admit
The The decision decision to to admit admit aa patient patient to to aa hospital hospital is is aa clinical clinical assessment assessment of of medical medical necessity necessity made made by by the the admitting admitting physician. physician.
Attending Attending physicians physicians order order admissions; admissions; itit is is the the essence essence of of medical medical judgment. judgment. Physicians Physicians rely rely on on their their education, education, training, training, and and experience, experience, and and base base their their decisions decisions on on the the clinical clinical picture picture presented presented by by each each individual individual patient. patient. Emergency Emergency room room physicians physicians very very rarely, rarely, and and in in very very few few hospitals, hospitals, have have authority authority to to admit. admit.
These These doctors doctors have have all all made made individual, individual, personal personal commitments commitments to to medical medical ethics ethics and and professional professional responsibility. responsibility.
The The vast vast majority majority of of attending attending physicians physicians at at CHS-affiliated CHS-affiliated hospitals hospitals are are not not our our employees; employees; rather rather they they are are independent independent practitioners practitioners with with medical medical staff staff privileges. privileges.
Inappropriate Inappropriate admissions admissions would would be be contrary contrary to to sound sound medical medical practice, practice, raise raise costs, costs, and and waste waste resources. resources.
CHS CHS and and its its affiliated affiliated hospitals hospitals do do not not dictate dictate admission admission decisions decisions by by physicians. physicians.
CHS CHS maintains maintains strong strong controls controls regarding regarding hospital hospital physician physician contracts contracts designed designed to to prevent prevent any any inappropriate inappropriate payments payments or or incentives incentives to to physicians. physicians.
23 23
Criteria for Observation and Inpatient Care Observation Criteria
Inpatient Admission Criteria
General guidance: `` Reasonable & necessary `` 8 or more hours of service `` Medical record must contain: physician order, written request for observation, and timeframe
General guidance: Physicians should also consider predictability of adverse outcomes, severity, hospital resources, and other factors
Timing: not rigidly specified
Timing: admit patients expected to need hospital care for 24 hours or more
Decision Decision to to admit, admit, place place in in observation, observation, or or discharge discharge the the patient patient is is made made by by attending attending physician physician at at the the front-end front-end of of each each patient’s patient’s care. care. Source: “Recent Growth in Hospital Observation Care,” MedPAC, September 13, 2010
24 24
“Observation Rate” is a Contrived Statistic Tenet’s contrived “observation rate” is not an industry term and we
believe it is not a useful metric We believe that inpatient rates matter, “observation rate” does not Tenet excludes a key industry peer in calculating its “observation rate” That peer company, UHS, has an “observation rate” close to CHS
25 25
“Observation Rate” is a Contrived Statistic Internet Search Surgery Admission
Results 109,000,000 30,900,000
Emergency Room Visits
1,600,000
One-Day Stay
1,350,000
“Observation Rate”
1,720
Millions of Internet search results appear for Surgery, Admission, ER Visits, and One-Day Stay, but only 1,720 results appear for the contrived “Observation Rate”. Source: Google web search engine on 4/17/2011 at 10:15 PM CDT, http://www.google.com/ Note (1): Required words - all searches require use of the word: "hospital“ Note (2): Results List - Exact word or multi-word placed inside quotation marks: “”
26 26
Analysts Seek Relevant Statistics Frank Morgan, RBC Capital
April 18, 2011
“We continue to believe that the measure Tenet touts is meaningless (as confirmed by most hospital operators) and Community is within an acceptable range of its peers on more commonly recognized measures.”
Gary Taylor, Citigroup
April 15, 2011
“We believe the ratio of 1-day Medicare admissions divided by total admissions is the most relevant statistic to analyze when considering such an allegation. In fact, this is a key ratio used by Medicare RAC auditors to flag potentially unnecessary hospital stays.”
A.J. Rice, Susquehanna
April 17, 2011
“No red flags appear to have been raised on the metrics that are most commonly looked at when testing whether someone is being too lenient on its inpatient admissions criteria such as the percentage of admissions with an average length of stay of one day or the company’s ER conversion rate.”
Tom Gallucci, Lazard Capital
April 15, 2011
“Based on substantial analysis in recent days of a variety of Medicare cost report data, it is our view that no single statistic tells the entire story as everything can be naturally skewed by various nuances.” Source: Equity analyst research reports; CHS does not purport to speak for, or claim endorsements by, any of the equity analysts quoted or cited in this presentation.
27 27
Industry Comments on “Observation Rate” LifePoint Hospitals
April 14, 2011
The company does not believe that the observation rate, as presented by THC, is a relevant statistic.
Universal Health Services
April 14, 2011
The observation rate is not indicative of the appropriateness of admissions.
Vanguard Health Systems
April 12, 2011
“Medicare Observation Rate is not a statistic that the Company normally reports.”
Iasis Healthcare
April 13, 2011
“Medicare observation rate is not something it customarily reports.”
Note: LifePoint Hospitals comment made during dialogue with investors on April 14, 2011 (as reported by Frank Morgan) and Universal Health Services comment made during a dialogue with investors on April 14, 2011 (as reported by Robert W. Baird). Vanguard and Iasis comments from public filings.
28 28
Tenet Does Not Disclose “Observation Rate” If Tenet believes “observation rate” is a material statistic, statistic, then then why why did did
Tenet not disclose this metric in its own SEC filings? Tenet has not disclosed statistics for “observation rate” in any annual
report SEC 10-K filings or quarterly report SEC 10-Q filings for the reporting periods from December 31, 2006, through December 31, 2010.
Document Review: Tenet Healthcare Corp. SEC 10-K Filings from December 31, 2006, through December 31, 2010.
29 29
Medicare “Observation Rate” with Total Relevant Peer Group 17.04%
17.21%
HMA
Baird Estimate
LPNT THC Estimate
5.11%
6.04%
THC
CYH
6.45%
Tenet analysis fails to include UHS acute care hospitals
10.92%
10.56%
12.08%
11.44%
20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
2009 2009 Medicare Medicare “Observation “Observation Rate” Rate”
9.6% Peer Group Average
UHS Public Co Average
Tenet’s analysis does not include UHS acute care hospitals, which have total revenue similar to peer companies which Tenet includes. The relevant peer group for CHS should include UHS. Including UHS in the analysis and weighting the peer group averages provides a more representative and reliable peer group comparison. Source: American Hospital Directory, Robert W. Baird, April 13, 2011; company reports, reviewed by an outside consultant. Baird data includes distinct part units and includes discharges for transfers to other acute care hospitals, left against medical advice, and deaths. “Observation Rate”: Independent research analysts and CHS have not, to date, been able to replicate Tenet’s calculations and assumptions as defined in its Complaint (¶ 98 and page 9, note 6). As a comparable formula, analysts and CHS use the following definition for “Observation 30 Rate”: Outpatient Observation Visits divided by the sum of Outpatient Observation Visits plus Inpatient Admissions for All Lengths of Stay. 30
Medicare “Observation Rate” 2009 2009 Medicare Medicare “Observation “Observation Rate,” Rate,” Peer Peer Group Group Including Including UHS UHS 17.0%
18.0% 16.0%
13.6%
14.0%
Tenet failed to include UHS acute care hospitals in its analysis
12.1% 10.9%
12.0% 10.0%
6.5%
8.0% 5.1%
6.0% 4.0% 2.0% 0.0%
HCA
THC
HMA
LPNT
CYH
UHS
Additional Additional analyses analyses verify verify that that the the “observation “observation rate” rate” for for UHS, UHS, excluded excluded from from the the Tenet Tenet analysis, analysis, has has aa similar similar value value to to that that for for CHS. CHS. Source: American Hospital Directory, Morgan Stanley, April 13, 2011 “Observation Rate”: Outpatient Outpatient Observation Observation Visits Visits divided divided by by the the sum sum of of Outpatient Outpatient Observation Observation Visits Visits plus plus Inpatient Inpatient Admissions Admissions for for All All Lengths Lengths of of Stay. Stay.
31 31
Medicare “Observation Rate” Variance 2009 2009 Medicare Medicare “Observation “Observation Rate,” Rate,” Peer Peer Group Group Including Including UHS UHS Upper and lower limits reflect one standard deviation above and below the mean with the assumption that companies within these peer group parameters exhibit metrics that do not differ from that of the peer average in a statistically meaningful way.
17.21%
18%
16.6% (+1 sd)
16% 14% 12%
11.44%
10.56%
10%
9.6% Peer Group Average
8%
6.04%
6.45%
6% 4% 2.6% (-1 sd)
2% 0% THC
HMA
LPNT
CYH
UHS
The difference between the 6.0% Medicare “observation rate” for CHS and the 9.6% peer group average “observation rate” is not statistically significant. One cannot reliably infer any difference between CHS and the peer group from this statistic alone as Tenet has sought to do. The CHS “observation rate” easily falls within the range bound by 2.6% to 16.6% (one standard deviation above and below the mean, where standard deviation equals 7.0%). Source: American Hospital Directory, Robert W. Baird, April 13, 2011; company reports, reviewed by an outside consultant. Data: Includes distinct part units and includes discharges for transfers to other acute care hospitals, left against medical advice, and deaths. “Observation Rate”: Outpatient Outpatient Observation Observation Visits Visits divided divided by by the the sum sum of of Outpatient Outpatient Observation Observation Visits Visits plus plus Inpatient Inpatient Admissions Admissions for for All All Lengths Lengths of of Stay. Stay. Note: Standard deviation is measurement of variability or "dispersion" from the average (mean or expected value).
32 32
CHS “Observation Rate” Not Correlated with Inpatient Admissions
Correlation Correlation study study of of “observation “observation rate” rate” ``
An An analysis analysis of of inpatient inpatient admissions admissions for for CHS CHS hospitals, hospitals, found found no no statistically statistically significant significant correlation correlation exists exists between between outpatient outpatient “observation “observation rate” rate” and and inpatient inpatient admissions admissions for for all all lengths lengths of of stay. stay. A A similar similar analysis analysis of of inpatient inpatient admissions admissions at at 3,540 3,540 hospitals, hospitals, showed showed aa small small statistically statistically significant significant correlation correlation exists exists between between outpatient outpatient “observation “observation rate” rate” and and inpatient inpatient admissions admissions for for all all lengths lengths of of stay. stay. While While this this small small correlation correlation was was found found to to be be statistically statistically significant, significant, the the strength strength of of the the correlation correlation does does not not suggest suggest itit is is meaningful. meaningful. As As used used in in statistics, statistics, “significant” “significant” does does not not mean mean important important or or meaningful, meaningful, as as itit does does in in everyday everyday speech. speech. –– An An analysis analysis seeking seeking to to find find aa relationship relationship between between 1) 1) the the contrived contrived Medicare Medicare “observation “observation rate”, rate”, defined defined as as outpatient outpatient observation observation visits visits divided divided by by the the sum sum of of outpatient outpatient observation observation visits visits plus plus inpatient inpatient admissions admissions for for all all lengths lengths of of stay, stay, and and 2) 2) inpatient inpatient admissions admissions for for all all lengths lengths of of stay stay found found no no statistically statistically significant significant correlation correlation upon upon review review of of CHS CHS hospitals hospitals analyzed analyzed using using data data from from 2009. 2009. –– An An outside outside consultant consultant reviewed reviewed this this research research methodology methodology and and agreed agreed with with this this finding. finding.
Correlation: the extent of correspondence between the ordering of two variables. Significance: a result is called statistically significant if it is unlikely to have occurred by chance. “Observation Rate:” outpatient observation visits divided by the sum of outpatient observation visits plus inpatient admissions for all length of stays.
33 33
Other Metrics Are More Relevant than “Observation Rate” Tenet’s allegations ignore the most relevant statistics that provide a more accurate picture of CHS. For each of the following accepted industry metrics, CHS is in line with other for-profit hospital companies and/or within one standard deviation of industry-wide norms, based on available data.
Medicare ER Admission Rate
Medicare ER Discharge Rate
Average Length of Stay (ALOS)
Medicare One-Day Stays
Specified Medicare One-Day Stay Admission
Ratio of Medicare One-Day Stays to Total Medicare ER Visits
Medicare One-Day Stays to ER Admissions
Net Revenue Per Adjusted Admission
34 34
Medicare Emergency Room Admission Rate 2009 2009 Medicare Medicare Emergency Emergency Room Room Admission Admission Rate Rate Peer Peer Group Group with with Parameters Parameters for for Standard Standard Deviation Deviation 45%
Upper and lower limits reflect one standard deviation above and below the mean with the assumption that companies within these peer group parameters exhibit metrics that do not differ from that of the peer average in a statistically meaningful way.
40%
39.4% 39.4% (+1 (+1 sd) sd)
35% 30%
26.8% 26.8%
28.5% 28.5% Peer Peer Group Group Average Average
25% 20%
17.7% 17.7% (-1 (-1 sd) sd)
15% 10% 5% 0%
Catholic Adventist Health East
UHS
HCA
THC Ascension Trinity Health
HMA
Mayo
CYH
Sutter Catholic Catholic Health Health Init HC West
LPNT
The The CHS CHS emergency emergency room room admission admission rate rate of of 26.8% 26.8% is is in in line line with with the the peer peer group group and and well well within within plus plus or or minus minus one one standard standard deviation deviation of of the the mean, mean, which which spans spans 17.7% 17.7% to to 39.4%. 39.4%. Source: American Hospital Directory, Robert W. Baird, April 18, 2011; reviewed by an outside consultant. Data: Includes distinct part units and excludes discharges for transfers to other acute care hospitals, left against medical advice, and deaths. Formula: Medicare admissions from ER divided by Medicare ER visits. Note: “sd” represents one standard deviation.
35 35
Medicare Prompt ER Discharge Rate 2006-2009 2006-2009 Medicare Medicare Prompt Prompt ER ER Discharge Discharge Rate Rate These patients are neither admitted nor observed 70.0% 65.0% 60.0%
LPNT CYH HMA UHS HCA THC
2006 52.8% 49.5% 49.3% 40.5% 39.4% 25.5%
55.0%
LPNT CYH HMA UHS HCA THC
50.0% 45.0% 40.0% 35.0% 30.0% 25.0%
2009 64.1% 55.7% 52.5% 47.1% 42.2% 31.8%
20.0%
2006
HMA
LPNT
2007
2008
HCA
UHS
2009
THC
CYH
In In 2009, 2009, 55.7% 55.7% of of CHS CHS Medicare Medicare ER ER patients patients were were neither neither admitted admitted as as inpatients inpatients nor nor placed placed in in observation observation status; status; rather, rather, they they were were discharged discharged from from the the hospital hospital promptly promptly after after emergency emergency room room treatment. treatment. Source: American Hospital Directory, Credit Suisse, April 17, 2011 Data: Includes distinct part units and excludes discharges for transfers to other acute care hospitals, left against medical advice, and deaths. Medicare Immediate ER Discharge Rate: 1 – (ER Admits / ER Visits) – (ER Observations / ER Visits)
36 36
Medicare Inpatient Average Length of Stay CHS In Line With Peers 2009 2009 Average Average Length Length of of Stay Stay (ALOS) (ALOS) Upper and lower limits reflect one standard deviation above and below the mean with the assumption that companies within these peer group parameters exhibit metrics that do not differ from that of the peer average in a statistically meaningful way. 6.00
5.49
5.00
4.85
4.62 4.20
6.00
5.48 5.48 (+1 (+1 sd) sd)
5.00
4.53 4.53 Average Average
4.17
3.58 3.58 (-1 (-1 sd) sd)
3.00
2.00
1.00
1.00
0.00
0.00
HMA
LPNT
CYH
UHS
4.32
4.25
4.38
4.42
HMA
LPNT
CYH
UHS
AVG ex-CHS
3.00
2.00
THC
4.17
4.00
Days
Days
4.00
4.82
THC
Source: American Hospital Directory
Source: American Hospital Directory
Additional Sources: Robert W. Baird & Co. April 13, 2011 report, company reports, reviewed by an outside consultant. Data: Includes distinct part units and excludes discharges for transfers to other acute care hospitals, left against medical advice, and deaths. Note: “sd” represents one standard deviation.
Additional Sources: Morgan Stanley, April 13, 2011 report.
CHS CHS average average Medicare Medicare inpatient inpatient length length of of stay stay is is in in line line with with peer peer group. group. 37 37
Medicare One-Day Stays within Industry National Weighted-Average and Standard Deviation 2009 2009 Medicare Medicare One-Day One-Day Stays Stays to to Medicare Medicare Total Total Discharges Discharges Compared Compared to to National National Weighted-Average Weighted-Average 25%
Upper and lower limits reflect one standard deviation above and below the mean with the assumption that companies within these peer group parameters exhibit metrics that do not differ from that of the peer average in a statistically meaningful way. 20.8% 20.8% (+1 (+1 sd) sd)
20% 15.5% 15.5%
15%
13.3% 13.3% Average Average
10% 5.8% 5.8% (-1 (-1 sd) sd)
5% 0%
Kaiser
M ayo
Stanfo rd
UHS
Sutter
CHW
CYH
CHI
M ichigan
THC
A scensio n HM A
Clvlnd Cl
LP NT
B aylo r
Statistically valid approach shows CHS Medicare one-day stay percentage Adj 1-Day Stay % Wtd Avg - All Hospitals +/- 1 Std Dev of 15.5% in line with industry national weighted-average of 13.3% (variance to industry national weighted-average within one standard deviation). Source: Cost Report Data (Inpatient, Medicare Provider Analysis and Review File), Citigroup, April 15, 2011 Data: Includes distinct part units and excludes discharges for transfers to other acute care hospitals, left against medical advice, and deaths. One-day stays to inpatient admissions: Medicare one-day stays divided by Medicare total inpatient admissions. Note: Standard deviation is measurement of variability or "dispersion" from the average (mean or expected value).
38 38
Medicare One-Day Stays to National Average 2009 2009 Medicare Medicare One-Day One-Day Stays Stays to to Medicare Medicare Total Total Admissions Admissions Compared Compared to to National National Average Average 20% 18%
Upper and lower limits reflect one standard deviation above and below the mean with the assumption that companies within these peer group parameters exhibit metrics that do not differ from that of the peer average in a statistically meaningful way.
16.4% 16.4% (+1 (+1 sd) sd)
16% 13.7% 13.7%
14%
11.6% 11.6% Average Average
12% 10% 8%
6.7% 6.7% (-1 (-1 sd) sd)
6% 4% 2% 0%
M ayo
Sutter Health
CYH
Trinity Health
Catho lic Catho lic HC West Health Init
UHS
A scensio n A dventist
HM A
THC
HCA
Catho lic Health East
LP NT
Statistically valid approach shows CHS Medicare one-day stay percentage of 13.7% in line with national average of 11.6% (variance to national average within one standard deviation). Source: American Hospital Directory Other Sources: Robert W. Baird & Co., April 18, 2011, reviewed by an outside consultant. Data: Includes distinct part units and excludes discharges for transfers to other acute care hospitals, left against medical advice, and deaths. One-day stays to inpatient admissions: Medicare one-day stays divided by Medicare total inpatient admissions. Note: Standard deviation is measurement of variability or "dispersion" from the average (mean or expected value).
39 39
Medicare One-Day Stays 2006-2009 2006-2009 2006-2009 Triad Triad Same-Store Same-Store Medicare Medicare One-Day One-Day Stay Stay to to Inpatient Inpatient Admissions Admissions Parameters Parameters Reflect Reflect One One Standard Standard Deviation Deviation Above Above and and Below Below the the Mean Mean Upper and lower limits reflect one standard deviation above and below the mean with the assumption that companies within these peer group parameters exhibit metrics that do not differ from that of the peer average in a statistically meaningful way. 20%
2009 2009 18%
16.4% 16.4% (+1 (+1 sd) sd)
16%
13.1%
14% 12%
10.5%
13.3%
11.6% 11.6% Average Average
10.8%
10% 8%
6.7% 6.7% (-1 (-1 sd) sd)
6% 4% 2% 0% 2006
2007
2008
2009
Despite a slight trended rise, Triad same-store one-day stays from 2006 to 2009 remain well within industry averages and variability. The Triad same-store one-day stay ratio equates to 13.3% in 2009, which falls well within the plus or minus one standard deviation range of 6.7% to 16.4%. Source: American Hospital Directory Other Sources: Robert W. Baird & Co., April 18, 2011, reviewed by an outside consultant. Data: Includes distinct part units and excludes discharges for transfers to other acute care hospitals, left against medical advice, and deaths. One-day stays to inpatient admissions: Medicare one-day stays divided by Medicare total inpatient admissions. Note: Standard deviation is measurement of variability or "dispersion" from the average (mean or expected value).
40 40
Medicare One-Day Stays 2005-2009 2005-2009 2005-2009 Medicare Medicare One-Day One-Day Stays Stays to to Medicare Medicare Inpatient Inpatient Admissions Admissions Community Health Systems, Inc.
HCA
HMA
LPNT
THC
UHS
Nation Ex-UBS Cov’g Group
Total
Year
Triad
Legacy
Total
2005
12.1%
11.7%
11.9%
11.4%
11.6%
10.5%
10.0%
11.7%
12.0%
11.9%
2006
12.1%
12.5%
12.3%
11.7%
12.3%
10.8%
10.6%
12.0%
12.3%
12.2%
2007
12.0%
13.2%
12.7%
11.2%
12.4%
11.4%
10.9%
12.1%
12.2%
12.2%
2008
14.2%
13.7%
13.9%
10.9%
11.8%
10.6%
11.1%
12.8%
11.9%
11.9%
2009
14.1%
13.5%
13.8%
10.9%
11.6%
9.8%
11.1%
12.5%
11.7%
11.7%
American Hospital Directory Data, UBS Analysis, April 18, 2011. Community Health Systems Total Medicare: One‐Day Stays / Admissions 2005 2006 2007 2008 2009 Medicare IPPS Cases 291,464 283,184 277,176 277,080 269,698 IPPS 1‐Day Stays 34,626 34,891 35,151 38,618 37,106 % 1‐Days Stays to Mcare IPPS Cases 11.9% 12.3% 12.7% 13.9% 13.8%
During the four years from 2006 to 2009, the ratio of Medicare one-day stays to inpatient admissions for CHS has not meaningfully changed (only a 1.5% increase since 2006 in the ratio of one-day stays to inpatient admissions, despite size and service mix for CHS). Source: American Hospital Directory, UBS Estimates, April 18, 2011. Formula: Medicare one-day stays to Medicare inpatient admissions. Data: One-day stays (numerator) exclude transfer codes, but inpatient admissions (denominator) include transfer codes. Transfer Codes: Discharges for transfers to other acute care hospitals, left against medical advice, and deaths. Distinct Part Units: Included in both one-day stays (numerator) and inpatient admissions (denominator). Excludes critical access hospitals.
41 41
Ratio of Medicare One-Day Stays to Total Medicare ER Visits 2006-2009 2006-2009 Medicare Medicare One-Day One-Day Stays Stays to to Medicare Medicare ER ER Visits Visits 12.0% 10.0% LPNT CYH HMA UHS HCA THC
2006 6.9% 8.5% 8.2% 10.1% 10.8% 9.7%
8.0%
LPNT CYH HMA UHS HCA THC
6.0% 4.0%
2009 4.0% 8.2% 6.6% 9.1% 8.6% 9.3%
2.0% 0.0%
2006
CYH
HMA
2007
LPNT
2008
HCA
2009
UHS
THC
The The ratio ratio of of Medicare Medicare one-day one-day stays stays to to total total Medicare Medicare ER ER visits visits for for CHS CHS is is in in line line with with that that of of the the peer peer group. group. Source: American Hospital Directory, Credit Suisse, April 17, 2011. Data: Includes distinct part units and excludes discharges for transfers to other acute care hospitals, left against medical advice, and deaths. Medicare One-Day Stays to Total Medicare ER Visits: Medicare Inpatient One-Day Stays divided by Total Medicare ER Visits.
42 42
Medicare Case Mix Index for All Admissions and Short-Stay Admissions 2009 2009 Medicare Medicare Case Case Mix Mix Index, Index, Admissions Admissions and and Short-Stays Short-Stays CHS Acute Care CMI 1.38 2009
F ig u r e 6 : W e ig h t e d C M I A l l M e d i c a r e IP P S C a s e s H o s p it a l S y s t e m 2 006 L e g a c y C Y H H o s p it a l s 1 .2 8 L e g a c y T r i a d H o s p i t a ls 1 .4 7 C o m m u n i t y H e a lt h S y s t e m s 1 .3 6 HCA 1 .5 0 H e a l t h M a n a g e m e n t A s s o c ia t e s 1 .3 1 L i f e P o in t H o s p i ta l s 1 .2 2 T e n e t H e a lt h c a r e 1 .4 8 U n i v e r s a l H e a l t h S e r v i c e s 1 .4 5 A ll P u b l ic ly ‐T r a d e d H o s p i t a ls 1 .4 2 L a r g e N o n ‐P r o fi t S y s t e m s A d v e n t i s t H e a l th S y s t e m 1 .4 5 A s c e n s io n H e a l t h 1 .5 8 B a p t i s t H e a lt h 1 .5 7 B JC H e a l t h C a r e 1 .6 6 C a t h o li c H e a l th E a s t 1 .5 9 C a t h o li c H e a l th In it ia t i v e s 1 .5 9 C a t h o li c H e a l th c a r e W e s t 1 .5 5 M e m o r ia l H e r m a n n 1 .6 0 N e w Y o r k ‐ P r e s b y t e r ia n 1 .5 2 S u t t e r H e a l th 1 .5 1 T r in i ty H e a l t h 1 .4 8 A ll H o s p it a ls T o t a l 1 .4 8
200 7 1 .2 6 1 .4 9 1 .3 6 1 .5 1 1 .3 2 1 .2 2 1 .4 9 1 .4 5 1.43
2 008 1 .2 8 1 .4 7 1 .3 6 1 .5 5 1 .3 5 1 .2 5 1 .5 2 1 .4 7 1 .4 6
20 09 1 .3 1 1 .4 8 1 .3 8 1 .6 0 1 .3 8 1 .2 8 1 .5 5 1 .5 0 1.49
1 .4 4 1 .5 7 1 .5 7 1 .6 8 1 .5 6 1 .5 8 1 .5 6 1 .5 9 1 .5 2 1 .5 1 1 .4 8 1.48
1 .4 8 1 .6 0 1 .6 3 1 .7 0 1 .5 8 1 .6 1 1 .6 2 1 .6 7 1 .5 8 1 .5 6 1 .5 2 1 .5 2
1 .5 3 1 .6 4 1 .6 5 1 .7 6 1 .5 9 1 .6 6 1 .6 9 1 .7 9 1 .6 0 1 .6 3 1 .5 7 1.56
F ig u r e 7 : W e ig h t e d C M I IP P S S h o r t S t a y C a s e s H o s p it a l S y s t e m 2 006 L e g a c y C Y H H o s p it a l s 0 .9 9 L e g a c y T r i a d H o s p i t a ls 0 .8 1 C o m m u n i t y H e a l t h S y s t e m s 0 .9 0 HCA 0 .8 1 H e a l t h M a n a g e m e n t A s s o c ia t e s 0 .9 2 L i fe P o in t H o s p it a l s 1 .0 0 T e n e t H e a lt h c a r e 0 .8 3 U n i v e r s a l H e a l t h S e r v i c e s 0 .8 2 0 .8 6 A ll P u b lic ly ‐T r a d e d H o s p it a ls L a r g e N o n ‐ P r o fi t S y s t e m s A d v e n t is t H e a lt h S y s t e m 0 .8 6 A s c e n s io n H e a l t h 0 .7 6 B a p t is t H e a lt h 0 .7 8 B J C H e a l t h C a r e 0 .7 3 C a t h o l i c H e a lt h E a s t 0 .7 0 C a t h o l i c H e a lt h In i t i a t i v e s 0 .7 4 C a t h o l i c H e a lt h c a r e W e s t 0 .8 1 M e m o r i a l H e r m a n n 0 .7 8 N e w Y o r k ‐ P r e s b y t e r ia n 0 .8 3 S u t t e r H e a lt h 0 .8 2 T r i n it y H e a l th 0 .8 3 A ll H o s p i t a ls T o t a l 0 .8 3
200 7 1 .0 1 0 .8 1 0 .9 2 0 .8 2 0 .9 2 1 .0 0 0 .8 4 0 .8 2 0.87
2 008 1 .0 2 0 .8 6 0 .9 4 0 .8 3 0 .9 2 1 .0 0 0 .8 4 0 .8 6 0 .8 8
20 09 1 .0 3 0 .8 8 0 .9 6 0 .8 6 0 .9 6 1 .0 2 0 .8 8 0 .9 1 0.91
0 .8 8 0 .7 9 0 .7 9 0 .7 6 0 .7 3 0 .7 4 0 .8 2 0 .7 9 0 .8 5 0 .8 4 0 .8 5 0.84
0 .9 1 0 .8 1 0 .7 9 0 .8 2 0 .7 7 0 .7 5 0 .8 2 0 .8 0 0 .8 6 0 .8 5 0 .8 6 0 .8 5
0 .9 2 0 .8 3 0 .8 4 0 .8 2 0 .8 1 0 .7 8 0 .8 3 0 .8 3 0 .9 0 0 .8 5 0 .8 6 0.87
A ll H o s p it a ls (< 5 0 b e d s ) A ll H o s p it a ls (5 0 ‐ 1 0 0 b e d s ) A ll H o s p it a ls (1 0 0 ‐1 5 0 b e d s )
1 .1 5 1 .2 6 1 .3 0
1.16 1.27 1.31
1 .1 8 1 .2 9 1 .3 5
1.20 1.32 1.39
A ll H o s p i t a ls (< 5 0 b e d s ) A ll H o s p i t a ls (5 0 ‐ 1 0 0 b e d s ) A ll H o s p i t a ls (1 0 0 ‐ 1 5 0 b e d s )
1 .0 1 0 .9 3 0 .9 5
0.99 0.94 0.94
0 .9 7 0 .9 6 0 .9 4
0.99 0.97 0.96
A ll R u r a l H o s p it a l s A ll N o n ‐R u r a l H o s p it a ls
1 .2 6 1 .5 2
1.27 1.52
1 .2 9 1 .5 5
1.32 1.60
A ll R u r a l H o s p it a ls A ll N o n ‐ R u r a l H o s p it a ls
0 .9 7 0 .8 1
0.97 0.82
0 .9 7 0 .8 4
0.99 0.86
R u r a l H o s p it a ls ( < 5 0 b e d s ) R u r a l H o s p it a ls ( 5 0 ‐ 1 0 0 b e d s ) R u r a l H o s p it a ls ( 1 0 0 ‐ 1 5 0 b e d s )
1 .0 7 1 .1 8 1 .2 6
1.08 1.19 1.28
1 .0 8 1 .2 2 1 .3 0
1.09 1.24 1.32
R u r a l H o s p it a ls (< 5 0 b e d s ) R u r a l H o s p it a ls (5 0 ‐1 0 0 b e d s ) R u r a l H o s p it a ls (1 0 0 ‐ 1 5 0 b e d s )
1 .1 3 1 .0 5 0 .9 6
1.12 1.03 0.96
1 .1 2 1 .0 3 0 .9 8
1.14 1.05 1.01
A ll F o r ‐ P r o fit H o s p it a ls A ll N o t ‐ F o r ‐ P r o f it H o s p it a ls
1 .4 3 1 .4 9
1.43 1.49
1 .4 6 1 .5 3
1.50 1.57
A ll F o r ‐ P r o f it H o s p it a ls A ll N o t ‐F o r ‐ P r o f it H o s p i t a ls
0 .8 3 0 .8 3
0.84 0.84
0 .8 6 0 .8 5
0.88 0.87
S o u r c e : A m e r i c a n H o s p it a l D ir e c t o r y, c o m p a n y d is c lo s u r e s , J . P . M o r g a n e st i m a t e s .
CHS Short stay CMI 0.96 2009
S o u r c e : A m e r ic a n H o s p it a l D ir e c t o r y , c o m p a n y d is c lo s u re s , J .P . M o r g a n e s t im a te s .
John John Rex, Rex, J.P.Morgan, J.P.Morgan, April April 18, 18, 2011: 2011: ““We look at both the overall CMI [case mix index] of the system as well
as the CMI for the short-stay admission population. Community, shows as having somewhat of a lower overall CMI which would be expected due to its geography (large urban hospitals should see greater acuity) as well as its higher short day stays which would typically have a lower acuity given the short length of stay. Looking at just the CMI for the short-stay category only, Community actually shows a bit higher than many of the other hospitals especially when we look at the legacy CHS hospitals (so ex Triad).”
Source: American Hospital Directory, company disclosures, J.P. Morgan estimates
Short-Stay Admissions: One-Day Stay Admissions plus Two-Day Stay Admissions Data: Includes distinct part units and excludes discharges for transfers to other acute care hospitals, left against medical advice, and deaths. Case mix index (CMI) is the average diagnosis-related group weight for all of a hospital's Medicare volume.
43 43
Net Revenue Per Adjusted Admission 2010 2010 Net Net Revenue Revenue Per Per Adjusted Adjusted Admission Admission $14,000 $11,824
$12,000 $10,000
$10,260
$9,930
$9,699
$8,697 $8,015
$8,000 $6,000 $4,000 $2,000 $0 CYH
HMA
LPNT
THC
UHS
Avg ex-CHS
CHS net revenue per adjusted admission in line versus above peers, given location. Source: Morgan Stanley, April 13, 2011 report Formula: Net Revenue divided by the number of adjusted admissions
44 44
Medicare One-Day Stays to ER Admissions 2009 2009 Medicare Medicare One-Day One-Day Stays Stays to to ER ER Admissions Admissions Medicare Patients Admitted thru the ER with One-Day Stay 24.0% 22.0% 21.3%
22.0%
20.0%
19.4%
19.2% 18.5%
18.7% 18.2%
18.0% 16.5%
16.9%
17.3%
15.7%
16.0% 14.5% 14.0%
12.0%
LPNT
THC
Company
HMA CYH
HCA
UHS
CYH
Competitive Market
The CHS ratio of one-day stays to ER admissions is slightly below the competitive market (defined as competing hospitals [n=193] within a 15-mile radius of CHS facilities). Source: American Hospital Directory, Credit Suisse, April 17, 2011
Data: Includes distinct part units and excludes discharges for transfers to other acute care hospitals, left against medical advice, and deaths. 45 One-Day Stays to ER Admissions: Medicare Inpatient One-Day Stays divided by Medicare Inpatient Admissions from ER. 45
Specified Medicare One-Day Stay Admissions 2009 2009 Six Six Specified Specified One-Day One-Day Stays Stays to to Total Total Medicare Medicare Admissions Admissions Specified Medicare One-Day Stay Admissions in Proportion to Total Medicare Admissions % IPPS Cases by Type Chest Pain
Syncope & Collapse
Simple Pneumonia
Cardiac Arrhythmia
GI Hemorrhage
Cellulitis
CYH HMA LPNT THC UHS
2.1% 1.8% 1.0% 1.2% 2.0%
1.2% 1.4% 0.8% 1.2% 1.2%
3.9% 3.2% 5.9% 3.4% 3.3%
2.7% 2.6% 2.5% 2.3% 2.2%
2.0% 2.0% 2.4% 1.8% 2.0%
1.0% 1.2% 1.4% 1.0% 0.8%
AVERAGE ex CYH
1.5%
1.1%
4.0%
2.4%
2.1%
1.1%
Source: American Hospital Directory, Lazard Capital Research, April 15, 2011
CHS believes that its 2009 calculated percentage of one-day, chest pain stays divided by total discharges compared to over 3,500 hospitals same percentage would indicate approximately 500 additional CHS one-day, chest pain stays for 2009. CHS one-day chest pain stays are approximately 9% of CHS one-day stays. Tom Galluci, Lazard Capital, April 15, 2011: ”Our ”Our analysis analysis reflects reflects that that in in four four of of six six specific specific conditions conditions [noted [noted in in the the THC THC allegations], allegations], CYH’s CYH’s admissions admissions as as aa percent percent of of the the total total were were very very much much in in line line with with the the peer peer group, group, and and in in several several cases cases were were actually actually aa tad tad below below average.” average.” “As “As aa matter matter of of perception, perception, chest chest pain pain represents represents 2% of total inpatient cases at CYH versus 1.5% among the peers; peers; aa 1% 1% difference difference equal equal to to about about 2,500 2,500 admissions.” admissions.” Source: American Hospital Directory, Lazard Capital, April 15, 2011. Reviewed by independent consultant.
46 46
Equity Analyst Comments After Reviewing Proper Metrics Whit Mayo, Robert W. Baird & Co.
April 18, 2011
“Plausible perceived risk dramatically higher than real risk, fueled by biases and drama. We are increasingly comfortable with our confidence anchored to legitimate (and sound) statistical analysis and the fact that so many parties are biased.”
Doug Simpson, Morgan Stanley
April 13, 2011
“Overall, our own analysis of various operating metrics among the hospitals does not suggest a systematic difference between CYH’s own admissions policies, and those of its peers. In fact, across a variety of different screens, CYH comes close to the average, and in some cases slightly below our expectations, which does not suggest suggest the the level of wrong-doing as implied by the THC lawsuit.”
Gary Taylor, Citigroup
April 15, 2011
“THC explicitly alleged that CYH systemically, unnecessarily, and fraudulently diverts patients from outpatient observation status to inpatient admission in order to boost revenues. The data we have analyzed thus far (ER conversion rates, ALOS, and now 1-day admissions) does not appear to support such an allegation.”
Gary Taylor, Citigroup
April 12, 2011
“THC cites CYH’s lower observation rates and we believe this data is accurate. However, in our view, low observation rates alone do not prove medically unnecessary inpatient stays. A higher rate of ER visits into inpatient admissions and / or a lower ALOS would be more direct evidence of such an allegation. Our preliminary analysis suggests CYH’s Medicare ER rate is lower than nd lowest in the industry) and ALOS is as expected.” expected (2nd
Source: Equity Analyst Research Reports
47 47
CHS Data and Analysis
Our work confirms independent analysts analysts’’
conclusions. CHS financial data shows no outliers.
48 48
CHS Same Store Net Revenue Growth 2009-2010 2009-2010 Same Same Store Store Net Net Revenue Revenue Growth Growth Same Store Net Revenue Growth
CHS
THC
HCA
HMA
LPNT
UHS
2010
3.9%
1.8%
2.1%
4.1%
6.9%
2.4%
2009
5.9%
4.1%
6.1%
5.4%
5.3%
3.6%
CHS same store net revenue growth compares to that of the industry.
Source: Annual Reports – Company SEC Form 10-K Filings
49 49
CHS Same Store Admissions Growth 2009-2010 2009-2010 Same Same Store Store Admissions Admissions Growth Growth Admission Rates
CHS
THC
HCA
HMA
LPNT
UHS
2010
-2.5%
-2.4%
0.1%
-1.6%
-2.2%
-0.3%
2009
-1.5%
-0.6%
1.2%
2.9% -4.5%
0.6%
CHS same store admissions growth compares to that of the industry.
Source: Annual Reports – Company SEC Form 10-K Filings
50 50
CHS Consolidated EBITDA Margins 2009-2010 2009-2010 Consolidated Consolidated EBITDA EBITDA Margins Margins EBITDA Margin
CHS
THC
HCA
HMA
LPNT
UHS
2010
13.6%
11.4%
19.1%
14.4%
15.3%
13.2%
2009
13.8%
10.9%
18.2%
14.7%
15.8%
13.1%
CHS EBITDA margins compare with those of the industry.
Source: Annual Reports – Company SEC Form 10-K Filings
51 51
CHS Medicare Emergency Room Admission Rates 2006-2009 2006-2009 CHS CHS vs. vs. Hospitals Hospitals with with 15 15 to to 400 400 Beds Beds Limited Limited to to 29 29 States States in in which which CHS CHS Operates Operates 35% 30%
32.8% 29.5% 27.7%
27.5%
27.9%
29.0% 26.4%
27.8%
25% 20% 15% 10% 5% 0%
2006
2007
CHS
2008
2009
Bed Range (15-400)
The CHS Medicare ER admission rate is slightly below the same rate for hospitals with 15 to 400 beds in the 29 states in which CHS operates hospitals. Source: Source: American American Hospital Hospital Directory, Directory, CHS CHS Analysis Analysis reviewed reviewed by by an an outside outside consultant consultant Data: Data: Includes Includes distinct distinct part part units, units, excludes excludes critical/access critical/access hospitals hospitals and and excludes excludes discharges discharges for for transfers transfers to to other other acute acute care care hospitals, hospitals, left left against against medical medical advice, advice, and and deaths. deaths. Medicare Medicare ER ER Admission Admission Rate Rate calculated calculated as as IPPS IPPS cases cases admitted admitted from from ER ER // [OPPS [OPPS ER ER claims claims ++ IPPS IPPS cases cases admitted admitted from from ER] ER] Medicare Medicare IPPS IPPS == Medicare Medicare Inpatient Inpatient Prospective Prospective Payment Payment System, System, i.e., i.e., Diagnosis-Related Diagnosis-Related Group Group case-based case-based reimbursement reimbursement
52 52
Medicare Short-Stay Case Mix Index 2006-2009 2006-2009 CHS CHS vs. vs. Nationwide Nationwide Hospitals Hospitals with with an an Overall Overall CMI CMI between between 1.00 1.00 and and 1.50 1.50 1.15 1.11 1.09
1.10 1.05
1.07 1.05 1.03
1.02
1.01 0.99
1.00 0.95 0.90 2006
2007 CHS
2008
2009
1.00-1.50 Range
CHS case mix index is higher for short-stay admissions as compared to the nationwide average, which is a different result than that expected considering Tenet’s allegations predicated on lower-acuity short-stay admissions at CHS hospitals. Source: American Hospital Directory, CHS Analysis reviewed by an outside consultant Medicare Short-Stay Case Mix Index is the average weighted based on total discharges. Short-stay cases are defined as cases with a one or two-day total length of stay, including distinct part units, excluding critical access hospitals and excluding discharges to another short-term hospital, patients who left against medical advice, and deaths. Note: National average Medicare short-state case mix index in 2008 and 2009 are approximately 1.00 and 1.50, respectively. 53
53
Medicare Short-Stay Case Mix Index 2006-2009 2006-2009 CHS CHS vs. vs. Hospitals Hospitals Limited Limited to to 29 29 States States in in which which CHS CHS Operates Operates and and with with an an Overall Overall CMI CMI between between 1.00 1.00 and and 1.50 1.50 1.15 1.11 1.09
1.10 1.05
1.07 1.04
1.05
1.04 1.02
0.99
1.00 0.95 0.90 2006
2007 CHS
2008
2009
1.00-1.50 Range
CHS case mix index is higher for short-stay admissions as compared to the statewide average (constructed from the 29 states in which CHS operates hospitals), which is a different result than that suggested by Tenet’s allegations predicated on lower-acuity short-stay admissions at CHS hospitals. Source: American Hospital Directory, CHS Analysis reviewed by an outside consultant Medicare Short-Stay Case Mix Index is the average weighted based on total discharges. Short-stay cases are defined as cases with a one or two-day total length of stay, including distinct part units, excluding critical access hospitals and excluding discharges to another short-term hospital, patients who left against medical advice, and deaths. Note: Statewide average Medicare short-stay case mix index in 2008 and 2009 are approximately 1.00 and 1.50, respectively. 54
54
The Fallacy Of Tenet's Thesis: Lower Observations ≠ Inappropriate Admissions We believe that Tenet’s allegation that lower “observation rate” results
in inappropriate admissions is illogical and misleading. Applying Tenet’s theory and calculating the ratio of Medicare one-day
stay admissions to Medicare total inpatient admissions results in 4.5% to 8.1%, which is below state-wide averages where CHS operates.
55 55
Medicare One-Day Stays to Total Admissions 2009 2009 One-Day One-Day Stays Stays to to Total Total Admissions Admissions Compared Compared to to Peers Peers and and State-wide State-wide Averages Averages Upper and lower limits reflect one standard deviation above and below the mean with the assumption that companies within these peer group parameters exhibit metrics that do not differ from that of the peer average in a statistically meaningful way.
20%
19.90% (+1 sd)
18% 16% 13.7%
14% 12%
11.5%
11.7%
14.7% 12.5%
12.4%
12.43% National Average
10.7%
10% 8% 6% 4.96% (-1 sd)
4% 2% 0% HCA
THC
HMA
LPNT
UHS
CHS
States with CHS Hospitals
CHS* one-day stays to total admissions is only slightly higher than that of peers and the statewide average (constructed from the 29 states in which CHS operates hospitals). * CHS has approximately 6% of its one-day stay volume in CHS hospitals using InterQual with a one-day stay percentage of 13.1% for 2009. Source: American Hospital Directory, CHS Analysis, reviewed by an outside consultant Ratio of (a) Medicare one-day stays for short term acute care hospitals, excluding discharges for distinct part units and for transfers to other acute care hospitals, left against medical advice, and deaths; divided by (b) Total Medicare Discharges for short term acute care hospitals, excluding discharges for distinct part units and for transfers to other acute care hospitals. 56 56
Tenet’s Allegations are Inaccurate as Illustrated by Medicare One-Day Stays
The The Tenet Tenet allegations allegations focus focus on on aa low low “observation “observation rate” rate” and and its its effect effect on on all all acute acute care care admissions. admissions. The The following following pro-forma pro-forma information information compares compares CHS CHS one-day one-day stays stays as as aa percentage percentage of of total total admissions admissions with with an an adjustment adjustment for for Tenet’s Tenet’s inaccurate inaccurate estimates estimates of of inappropriate inappropriate short-stay short-stay admissions admissions for for 2009, 2009, which which Tenet Tenet alleges alleges range range from from 20,000 20,000 to to 31,000 31,000 admissions. admissions. ``
The The pro-forma pro-forma illustration illustration allocates allocates 85% 85% of of Tenet’s Tenet’s alleged alleged inappropriate inappropriate admissions admissions to to one-day one-day stays. stays. The The 85% 85% allocation allocation is is our our estimated estimated percentage percentage of of these these short short stays stays that that are are one-day one-day stays. stays. The The pro-forma pro-forma analysis analysis eliminates eliminates an an estimated estimated number number of of longer longer stay stay admissions admissions from from these these short-stay short-stay admissions admissions so so as as to to better better approximate approximate appropriate appropriate one-day one-day stay stay admissions admissions per per Tenet’s Tenet’s allegations. allegations.
``
The The revised, revised, pro-forma pro-forma answer answer indicates indicates an an absurd absurd result result after after removing removing the the estimated estimated inappropriate inappropriate admissions admissions and and in in consideration consideration of of the the other other public public companies companies and and the the national national average. average.
Source for Tenet Allegation: Complaint filed by Tenet Healthcare Corp. on April 11, 2011.
57 57
Tenet’s Allegations Lead to an Implausible Result 2009 2009 Medicare Medicare One-Day One-Day Stays Stays Minus Minus 85% 85% Pro-Forma Pro-Forma Removal Removal of of Alleged Alleged Inappropriate Inappropriate Admissions Admissions 20%
14.7%
15%
13.7% 11.5%
11.7%
12.5%
12.4%
12.43% (National Average)
10.7%
10%
8.1% 4.5%
5%
0% HCA
THC
HMA
LPNT
UHS
CHS
States with CHS (Tenet CHS (Tenet CHS Allegation Allegation Hospitals 85% 20K) 85% 31K)
The result of this pro-forma adjustment: CHS one-day stays as a percentage of total admissions would now range from an implausibly low 8.1% to 4.5%, versus a 29-state statewide-average of 12.5%. Clearly, the Tenet analysis contains significant flaws. Source: American Hospital Directory, CHS analysis reviewed by an outside consultant. Tenet lawsuit, April 11, 2011. Medicare One-Day Stays is a ratio of (a) Medicare one-day stays for short term acute care hospitals, excluding distinct part units and excluding discharges for transfers to other acute care hospitals, deaths, and left against medical advice; divided by (b) total Medicare discharges for shortterm acute care hospitals, excluding distinct part units and excluding transfers to other acute care hospitals. Tenet Allegation - CHS Medicare 58 one-day stays have been reduced by 85% of Tenet’s estimate of between 20,000 and 31,000 inappropriate admissions. 58
“Observation Rate” Not Correlated with One-Day Stay Inpatient Admissions Correlation study of “observation rate”
`` No No statistically statistically significant significant correlation correlation exists exists between between the the outpatient outpatient “observation “observation rate” rate” and and the the one-day one-day stay stay inpatient inpatient admission admission rate rate at at CHS CHS hospitals. hospitals. No No statistically statistically significant significant correlation correlation exists exists between between the the outpatient outpatient “observation “observation rate” rate” and and the the one-day one-day stay stay inpatient inpatient admission admission rate rate at at 3,540 3,540 hospitals. hospitals. –– An An analysis analysis seeking seeking to to find find aa relationship relationship between between 1) 1) the the contrived contrived Medicare Medicare “observation “observation rate,” rate,” defined defined as as outpatient outpatient observation observation visits visits divided divided by by the the sum sum of of outpatient outpatient observation observation visits visits plus plus inpatient inpatient admissions admissions for for all all lengths lengths of of stay, stay, and and 2) 2) the the ratio ratio of of Medicare Medicare one-day one-day stays stays to to Medicare Medicare inpatient inpatient admissions admissions for for all all lengths lengths of of stay, stay, found found no no statistically statistically significant significant correlation correlation upon upon review review of of CHS CHS hospitals hospitals using using data data from from 2009. 2009. –– An An outside outside consultant consultant reviewed reviewed this this research research methodology methodology and and agreed agreed with with this this finding. finding. Correlation: the extent of correspondence between the ordering of two variables. Significance: a result is called statistically significant if it is unlikely to have occurred by chance. “Observation Rate:” outpatient observation visits divided by the sum of outpatient observation visits plus inpatient admissions for all length of stays.
59 59
CHS Improved Operations at Triad We believe that Tenet is wrong in claiming CHS
forced observations into inappropriate admissions at Triad. In fact, CHS improved coding, case management,
documentation, streamlined observation stays, invested capital, recruited physicians, and generally worked to improve customer service and patient care at Triad. 60 60
Tenet Errs in Making Triad Hospital Integration Allegations We believe: Tenet used a selective set of data that skewed the analysis and led to
faulty conclusions about observation and other statistics.
Case management programs and other operational improvements led
to more appropriate use of observation status at Triad hospitals.
2008 Triad hospital same store Medicare one-day stays increased by
2,551 (vs. 2007).
Less than 25% of the 2008 increase in Medicare one-day stays were
coded with DRG/condition admission criteria that Tenet labeled as having “egregious” deficiencies.
61 61
CHS Transition Activities with Triad
External External vendor vendor coding coding review review completed completed for for Triad Triad for for 2005 2005 and and 2006 2006 noted noted opportunities opportunities for for coding coding education education and and improved improved coding coding accuracy. accuracy.
As As is is general general practice practice on on all all acquisitions, acquisitions, all all Triad Triad hospital hospital inpatient inpatient coders coders were were put put through through extensive extensive coding coding training training from from September September through through December December 2007; 2007; training training included included 88 to to 10 10 hours hours of of intensive intensive coding coding coursework, coursework, standard standard for for all all CHS CHS coders, coders, produced produced by by external external coding coding experts. experts.
In In addition, addition, 23 23 educational educational conference conference calls calls were were held held with with Triad Triad hospital hospital coders coders and and coder coder management management between between September September 2007 2007 and and December December 2008 2008 covering covering coding, coding, documentation documentation and and compliance compliance requirements. requirements.
62 62
CHS Transition Activities with Triad
There was room for improvement in case management `
The facilities lacked certain documentation of processes related to admission status, utilization review, length of stay or resource management
`
Triad had no formal, standardized case management model
`
There were no corporate case management training modules or manuals
`
Management reports did not include any case management metrics such as length of stay
Post-operative cases were classified as observation
The Triad Case Managers’ main responsibility was improving Core Measure performance through their “Top Tier for Excellence” Program `
Case Managers were responsible for the concurrent core measures process and were required to complete a manual abstraction validation tool for these metrics
`
This focus on core measures would limit the time a case manager could dedicate to utilization review activities, discharge planning, length of stay, etc.
63 63
CHS Transition Activities with Triad ` Implementation of CHS’s Case Management Program reduced observation status by: – Improvements in Case Management staffing, including ER Case Managers – Implementing tools (Blue Book, although InterQual® and others were also utilized) and processes that would ensure patients were placed in the appropriate status starting in the ED – Improved Length of Stay in observation, reducing the number of patients that stayed in observation greater than 24-48 hours or more – Reducing inappropriate use of observation
` Implemented Pro-MED emergency room system – 34 hospitals implemented as of June 30, 2008 – Triad hospitals had implemented a similar tracking system in only 12 of their 54 hospitals
` Standardized Health Information Management and Case and Resource Management programs improved Triad operational performance, including reducing inappropriate observation 64 64
Reasons for Decrease in Medicare Observation Visits Year-Over-Year 2007 to 2008 CHS Case Management Improvem ents
Feedback from a Sampling of Former Triad Facilities
Hospital
Decline in Medicare Observation Visits 2007 - 2008
Impact of Change in Decreased Focus on Focus Hospitalist ER Phys Post-Op "Current" on ER Program Group Obs Cases Adm Criteria Case Mgt
Stronger Case Mgt Program
Hospital 1
(394)
Hospital 2
(414)
Hospital 3
(284)
Hospital 4
(274)
Hospital 5
(172)
Hospital 6
(370)
Hospital 7
(209)
Hospital 8
(332)
Hospital 9
(117)
Hospital 10
(354)
Hospital 11
(935)
Hospital 12
(117)
Total
Reduced OBS LOS
Improved Case Mgt Staffing
(3,972)
12 hospitals contributed 63% of the 2007-2008 decline in observation visits. Recent feedback from selected Triad hospitals
65 65
Appropriate Use of Medicare Observation “In only rare and exceptional cases do reasonable and necessary outpatient observation services span more than 48 hours. In the majority of cases, the decision whether to discharge a patient from the hospital following resolution of the reason for observation care or to admit a patient as an inpatient can be made in less than 48 hours, usually in less than 24 hours.” * * Source: Medicare Claims Processing Manual, Chapter 12-Physicians/Nonphysician Practitioners (Rev. 2159, 02-15-11) Source of citation for outpatient care and observation services: CMS, Medicare Claims Processing Manual and Medicare Benefit Policy Manual Chapter 6, 20.6, (Rev. 107, Issued: 05-22-09, Effective: 07-01-09, Implementation: 07-06-09) Additional reference for observation services: Medicare Claims Processing Manual, Chapter 12, Section 30.6.8 – Payment for Hospital Observation Services. Centers for Medicare & Medicaid Services website: www.cms.gov See also, July 7, 2010, letter from CMS Acting Administrator Marilyn Tavenner to Richard Umbdenstock, President and Chief Executive Officer, American Hospital Association, stating in part “[a]s it is not in the hospital’s or the beneficiary’s interest to extend observation care rather than either releasing the patient from the hospital or admitting the patient as an inpatient, we are interested in learning more about why this trend is occurring and would appreciate any information you can share to better inform further actions CMS can take on this issue.” Centers for Medicare & Medicaid Services website: www.cms.gov
66 66
Triad Observation Data 2007-2008 2007-2008 Medicare Medicare Observation Observation Cases Cases By By Duration Duration of of Time Time –– 16 16 Triad Triad Same Same Store Store Hospitals Hospitals Number of Patients
2,500 2,000 1,500
2007 2008
1,000 500 0 1-7
8-15
16-24 25-34 35-48
>48
Hours 1‐7 8‐15 16‐24 25‐34 35‐48 >48
Number of Patients 2007 2008 253 657 1,971 810 929 349 4,969
147 338 989 338 299 70 2,181
Hours in Observation Care
There were more patients that were kept in observation greater than 24 or 48 hours at Triad hospitals prior to acquisition by CHS. Source: CHS Data Warehouse Detail patient claim data was not available in the Medicare OPPS Claims File. Therefore, detail patient claim data was extracted from internal data files and compared to summary data in the Medicare OPPS Claims File. As a result, the information set forth represents patient detail data from sixteen CHS Triad hospitals with less than a 15% variance between Internal Data and the Medicare OPPS File, for both hours and number of patients for 2007 and 2008. Sixteen-hospital sample believed to be representative of all Triad same store hospitals.
67 67
Duration of Time for Observation Care
Observation Hours per Patient Claim
2007-2009 2007-2009 Average Average Observation Observation Hours Hours per per Patient Patient Claim Claim
29 28
Same Store TRI
27
CHS Total
26 25 24 23 22 2007
2008
2009
CHS average time in observation has been within CMS expectations: 2007 through 2009 - 27 hours to 25 hours. Source: Information obtained from the Medicare Outpatient Prospective Payment System (OPPS) Claims File Hours per Patient Claim Calculation: aggregate hours divided by aggregate patient claims.
68 68
One-Day Stays Same Store Triad Hospitals 2007-2008 Same Store Triad Hospitals Net Change in One-Day Stays Medicare Acute Only 2007
2008
Difference
Percentage
Same Store Triad
15,534
18,085
2,551
16.4%
Same Store CHS Total
33,727
36,864
3,137
9.3%
(includes same store Triad)
Analysis of 2007 Medicare one-day stay admits for the four-month period of May-August 2007 as compared to the four-month period of January–April 2007, demonstrates that the growth of 8% in Medicare one-day admissions began before CHS’s first full month of Triad ownership in August 2007. This 8% increase is unrelated to any CHS activities, including case management. Source: CHS Data Warehouse. Note: 1) Medicare one-day stay inpatients exclude newborn DRGs 789-795. 2) The following same store Triad hospitals were not included in the report due to incomplete 2007 data: Affinity Medical Center, Massillon, OH (4/1/2007); Cedar Park Regional Medical Center, Cedar Park, TX (12/15/2007); the Orthopaedic Hospital, Fort Wayne, IN (2/1/2008). 3) Presbyterian Hospital, Denton, TX (divested) not included. 4) Excludes DPUs. 5) Excludes transfers to other acute care hospitals, left against medical advice, and deaths. Calculation: Medicare one-day stays to Medicare total inpatient admissions
69 69
Triad One-Day Stay DRGs 2007-2008 2007-2008 Triad Triad Same Same Store Store Hospitals Hospitals 2007 to 2008 DRG Category
Difference Cases
Percentage
431
16.9%
Syncope Collapse
87
3.4%
Simple Pneumonia
(2)
-0.1%
Cardiac Arrhythmia
65
2.5%
GI Hemorrhage
15
0.6%
6
0.2%
22
0.9%
624
24.5%
1,927
75.5%
2,551
100.0%
Chest Pain
Cellulitis Renal Failure Subtotal All Other DRGs Total
Triad same store hospitals experienced an increase of 624 one-day stays from 2007 to 2008 for the 7 DRG categories cited in the Tenet lawsuit. A year-over-year increase from 2007 to 2008 equal to 624 one-day stays, in aggregate, from 43 Triad hospitals averages fewer than 1.2 cases per month per hospital.
Source: CHS Data Warehouse. Note: 1) Medicare one-day stay inpatients exclude newborn DRGs 789-795. 2) The following same store Triad hospitals were not included in the report due incomplete 2007 data: Affinity Medical Center, Massillon, OH (4/1/2007); Cedar Park Regional Medical Center, Cedar Park, TX (12/15/2007); the Orthopaedic Hospital;, Fort Wayne, IN (2/1/2008). 3) Presbyterian Hospital, Denton, TX (divested) not included. 4) Excludes DPUs. 5) Excludes transfers to other acute care hospitals, left against medical advice, and deaths.
70 70
No Consistent Movement in Triad One-Day Stay DRGs 2007-2008 2007-2008 Same Same Store Store Triad Triad Hospitals Hospitals Number of One-Day Stay Unique DRGs Admissions Total Number of Unique DRGs and One-Day Stays
747
2,551
Number of DRGs Not Used for One-Day Stays
172
-
Number of DRGs Used and One-Day Stays
575
2,551
Increases from DRGs Used in Both 2007 and 2008
245
3,494
Increases from DRGs Used Only in 2008
55
90
DRGs without a Year-Over-Year Net Change in One-Day Stays
71
-
Decreases from DRGs Used Only in 2007 Decreases from DRGs Used in Both 2007 to 2008
58 146
(99) (934)
Of the 747 DRGs applicable in 2007 and 2008, 575 of them applied to the one-day stays at 43 same store Triad hospitals. This year-over-year increase in one-day stays equaled to 2,551 admissions, which reflects the net impact of a 3,584 admission increase offset by a 1,033 admission decrease. Source: CHS Data Warehouse. Note: 1) Medicare one-day stay inpatients exclude newborn DRGs 789-795. 2) The following same store Triad hospitals were not included in the report due incomplete 2007 data: Affinity Medical Center, Massillon, OH (4/1/2007); Cedar Park Regional Medical Center, Cedar Park, TX (12/15/2007); the Orthopaedic Hospital;, Fort Wayne, IN (2/1/2008). 3) Presbyterian Hospital, Denton, TX (divested) not included. 4) Excludes DPUs. 5) Excludes transfers to other acute care hospitals, left against medical advice, and deaths. DRG = Diagnosis-related group, a reimbursement developed for Medicare as part of the hospital inpatient prospective payment system
71 71
Growth in Triad Hospital One-Day Stays Growth of Medicare one-day stays at same store Triad hospitals from
calendar year 2007 to calendar year 2008 totaled 2,551 admissions
The following commentary describes some drivers of this growth:
`` `` `` `` `` ``
Improved Improved case case management management Flu Flu and and respiratory respiratory volume volume increase increase with with strong strong flu flu season season in in 2008 2008 Growth Growth related related to to additional additional volume volume at at replacement replacement hospital hospital in in Clarksville, Clarksville, TN TN Six Six hospitals hospitals had had major major capital capital projects projects completed completed during during 2007 2007 and and were were in in use use for for full full year year of of 2008 2008 Physician Physician relations relations improved improved at at 22 Texas Texas hospitals hospitals where where overall overall volume volume improved improved Growth Growth from from volume volume of of recruited recruited physicians physicians
Source: CHS Data Warehouse. Note: 1) Medicare one-day stay inpatients exclude newborn DRGs 789-795. 2) The following CHS07 hospital were not included in the report due to a full year of 2007 data not being available: Affinity Medical Center, Massillon, OH (4/1/2007); Cedar Park Regional Medical Center, Cedar Park, TX (12/15/2007); the Orthopaedic Hospital;, Fort Wayne, IN (2/1/2008). 3) Presbyterian Hospital, Denton, TX (divested) not included. 4) Excludes Distinct Part Units. 5) Excludes Discharge Statuses: Transfers to acute care hospital, Left against medical advice (AMA), and Deaths. DRG = Diagnosis-related group, a reimbursement developed for Medicare as part of the hospital inpatient prospective payment system. 72 72
CHS Current Trends in Both One-Day Stays and Observations are Reversing A review of calendar year end CHS data for 2008, 2009, and 2010 shows that one-day stay Medicare admissions are declining and that Medicare observation visits are increasing, both of which are consistent with national trends. At the same time, the percentage of one-day stays to total inpatient admissions (Medicare) is also declining.
73 73
CHS One-Day Stays and Observation Cases 3-Year Trend, Same Store Medicare One-Day Stay Admits
One-Day Stay Admits 2010 2009 2008 CHS Total Same Store 41,567 42,133 44,729
% Change ’09-’10 ’08-’09 -1.3% -5.8%
3-Year Trend, Same Store Medicare Observation Visits
Observation Visits 2010 2009 2008 CHS Total Same Store 19,448 14,190 11,435
% Change ’09-’10 ’08-’09 37.1% 24.1%
Similar Similar to to national national trends, trends, CHS one-day one-day stay stay admissions admissions reflect reflect aa trended trended decrease decrease while while observation observation cases cases reflect reflect aa trended trended increase. increase. Source: CHS Data Warehouse Data excludes acquisitions since 2007. Data includes distinct part units (rehab, psych, SNF), transfers to another short-term acute care hospital, patients who left against medical advice, and deaths. Using this approach, the CHS 2009 estimate for one-day stays equates to 42,133 (as listed above). The 2009 CHS estimate of 38,000 one-day stays excludes distinct part units (rehab, psych, SNF), transfers to another short-term acute care hospital, patients who left against medical advice, and deaths. Note: According to MedPAC, Medicare observation care claims increased by 22.4% from 2006 to 2008: “Recent Growth in Hospital Observation Care,” MedPAC, September 13, 2010. 74
74
CHS One-Day Stays to Total Admissions 3-Year 3-Year Trend Trend One-Day One-Day Stays Stays to to Total Total Admissions Admissions
Year
80th Percentile
CHS One-Day Stays Weighted Average
2008
15.85%
15.21%
2009
15.95%
14.69%
2010
16.13%
14.68%
PEPPER National
Since Since 2008, 2008, the the CHS CHS weighted-average weighted-average of of Medicare Medicare one-day one-day stays stays to to Medicare Medicare total total admissions admissions has has declined declined and and has has been been th th below percentile. below the the PEPPER PEPPER national national 80 80 percentile. Source: CHS Analysis Medicare One-Day Stays is a ratio of (a) Medicare one-day stays for short term acute care hospitals, excluding distinct part units and excluding discharges for transfers to other acute care hospitals, deaths, and left against medical advice; divided by (b) total Medicare discharges for short-term acute care hospitals, excluding distinct part units and excluding transfers to other acute care hospitals. PEPPER (“Program for Evaluating Payment Patterns Electronic Report”). Developed and distributed by TMF Health Quality Institute under contract with the Centers for Medicare and Medicaid Services (CMS) to identify areas at risk for Medicare DRG discharge payment errors (i.e. “target areas”). Preset control limits identity outliers with the upper control limit for all target areas set at the 80thth percentile and lower control limit set at the 20thth percentile. PEPPER identifies findings that are at or above the upper control limit or at or below the lower control limit.
75 75
CHS One-Day Stays to Total Admissions 3-Year 3-Year Trend Trend One-Day One-Day Stays Stays to to Total Total Admissions Admissions Over 20% One-Day Admissions
Year Year
## of of Hospitals Hospitals
## of of Admissions Admissions
2008 2008
26 26 // 114 114
1,033 1,033
2009 2009
19 19 // 116 116
697 697
2010 2010
17 17 // 118 118
689 689
Since Since 2008, 2008, CHS CHS has has had had aa trended trended decrease decrease in in the the number number of of Medicare Medicare one-day one-day stays stays exceeding exceeding aa 20% 20% ratio ratio of of one-day one-day stays stays to to inpatient inpatient admissions admissions for for all all lengths lengths of of stay. stay.
Source: CHS Analysis Medicare One-Day Stays is a ratio of (a) Medicare one-day stays for short term acute care hospitals, excluding distinct part units and excluding discharges for transfers to other acute care hospitals, deaths, and left against medical advice; divided by (b) total Medicare discharges for short-term acute care hospitals, excluding distinct part units and excluding transfers to other acute care hospitals.
76 76
Other Data Points Refute Tenet's Allegations
Amounts Amounts recovered recovered by by the the Recovery Recovery Audit Audit Contractors Contractors (RACs) (RACs) in in the the demonstration demonstration project project were were not not material. material. This This refutes refutes Tenet’s Tenet’s allegation allegation of of inappropriate inappropriate admissions. admissions.
CHS CHS maintains maintains strong strong controls controls regarding regarding hospital hospital physician physician contracts contracts that that are are designed designed to to prevent prevent any any inappropriate inappropriate payments payments or or incentives incentives to to physicians. physicians.
The The $275+ $275+ million million in in synergies synergies from from the the Triad Triad Hospitals Hospitals acquisition acquisition did did not not include include any any synergies synergies from from improvements improvements in in ER ER admissions. admissions.
CHS CHS has has contracts contracts with with many many of of the the same same physician physician staffing staffing companies companies as as Tenet. Tenet.
As As an an additional additional and and very very important important point: point: CHS CHS maintains maintains aa strong strong risk risk management management program program and and focuses focuses on on loss loss reduction reduction in in the the ER ER setting; setting; we we believe believe the the successes successes in in these these efforts efforts (average (average loss loss rate rate per per ER ER visit visit is is 21.3% 21.3% below below national national benchmarks) benchmarks) point point to to appropriate appropriate levels levels of of care care for for all all patients. patients.
77 77
Recovery Audit Contractors (RAC) Demonstration Project March 2005- March 2008 7 CHS Hospitals Participated in RAC Demonstration Project States – Florida and South Carolina # of States CHS Hospitals Florida 2 South Carolina 3
Former Triad 2
Total 2 5 7
Three Years: Inpatient Medicare Admissions Inpatient Medicare Revenue Total Accounts Selected For Review by RAC Total Revenue Selected Total Denied % Denied of Accounts Reviewed % Denied of Inpatient Medicare Revenue
63,000 $510.0 Million 1,201 $12.1 Million $ 1.8 Million (a) 15.0% 0.35%
(a) Approximately 50% of denied was for short-day stays with 64% of the short-stay denials at
former Triad Hospitals not acquired until July 2007. Note: Results do not reflect significant denial percentage. Additionally, CHS had five hospitals in Arizona and California, which were part of the demonstration project, but no accounts / records were selected.
78 78
CHS Maintains Strong Controls Regarding Physician Contracts Based on stringent controls regarding contracts with and payments to any physician, and further reviews in connection with Tenet’s allegations, we do not believe there have been any bonus payments to physicians related to ER admissions.
79 79
CHS / Triad Synergies
In reporting the synergies of over $275 million, referenced in CHS public statements about the Triad acquisition, CHS did not include any synergies related to improvement in ER admissions.
80 80
ER Management
89% of CHS hospitals outsource the management of physician staffing to regional and national groups.
National companies provide this outsourced service to 57% of CHS hospitals.
The same national companies also provide services to over 50% of Tenet hospitals.
81 81
CHS ER Malpractice Claims to Benchmarks Malpractice Claims from the Emergency Room
2006 2006 –– 2010: 2010: Loss Loss rate rate per per ER ER visit visit limited limited to to $5 $5 million million per per occurrence: occurrence: ``
CHS CHS 5-year 5-year average average is is 21.3% 21.3% lower lower than than the the overall overall hospital hospital professional professional liability liability ER ER benchmark benchmark average average among among all all for-profit for-profit and and non-profit non-profit hospitals hospitals in in the Aon / ASHRM study. the Aon / ASHRM study.
2006 2006 –– 2010: 2010: Frequency Frequency per per bed bed –– total total indemnity indemnity and and expense expense claims: claims: ``
CHS CHS 5-year 5-year average average is is 16.2% 16.2% lower lower than than for-profit for-profit benchmark benchmark average average in in the the Aon Aon // ASHRM ASHRM study. study.
2006 2006 –– 2010: 2010: Loss Loss rate rate per per bed bed limited limited to to $5 $5 million million per per occurrence occurrence –– total total indemnity indemnity and and expense expense claims claims CHS CHS 5-year 5-year average average is is 40.4% 40.4% lower lower than than for-profit for-profit benchmark benchmark average average in in the the Aon Aon // ASHRM ASHRM study. study.
The frequency and cost of CHS emergency room malpractice claims from 2006 through 2010 compares very favorably to that of industry benchmarks. CHS efforts to better manage the emergency room contribute to these positive results. Source: ASHRM: American Society for Healthcare Risk Management
82 82
CHS Compliance Program
CHS maintains a voluntary compliance program that fully complies with the guidance established by the HHS Office of the Inspector General.
The Company has a strong record of cooperation with the federal government and other regulatory agencies.
83 83
CHS Compliance Program Robust Compliance Program Implemented in 1997
`` The The CHS CHS Compliance Compliance Program Program contains contains all all seven seven elements elements of of the the Office Office of of Inspector Inspector General’s General’s (“OIGs”) (“OIGs”) Compliance Compliance Program Program Guidance Guidance for for Hospitals Hospitals and and has has been been adopted adopted in in furtherance furtherance of of the the commitment commitment of of CHS CHS that that the the activities activities of of its its employees employees and and those those acting acting on on behalf behalf of of CHS CHS shall shall be be conducted conducted in in aa legal legal and and ethical ethical manner. manner. `` Vice Vice President, President, Corporate Corporate Compliance Compliance and and Privacy Privacy Officer Officer –– Reports Reports directly directly to to the the Chairman, Chairman, President President and and CEO CEO of of the the company company and and presents presents to to the the Audit Audit and and Compliance Compliance Committee Committee at at various various corporate corporate board board meetings meetings
`` Ten Ten Corporate Corporate Compliance Compliance Directors Directors –– two two assigned assigned to to each each Division Division `` Facility Facility Compliance Compliance Officer Officer at at each each hospital hospital and and in in most most large large Clinic Clinic Corps Corps
84 84
Compliance Committees Management Compliance Committee
`` Responsible Responsible for for the the adoption, adoption, amendment amendment and and enforcement enforcement of of the the Compliance Compliance Program Program Corporate Compliance Work Group (“CWG”)
`` Initiated Initiated in in 1997, 1997, the the CWG CWG is is chaired chaired by by the the Corporate Corporate Compliance Compliance Officer Officer and and includes includes senior senior managers managers from from many many departments departments who who function function as as subject subject matter matter experts. experts. Responsibilities Responsibilities of of the the CWG CWG include: include: `` Identify Identify and and analyze analyze risk risk areas areas `` Develop Develop policies policies and and procedures procedures `` Create Create education education and and training training `` Coordinate Coordinate compliance compliance auditing auditing and and monitoring monitoring 85 85
Compliance Committees Facility Compliance Committee
`` Ensure Ensure implementation implementation of of the the Compliance Compliance Program Program and and Initiatives Initiatives –– Distribute Distribute and and communicate communicate compliance compliance policies policies to to relevant relevant staff staff –– Facilitate Facilitate auditing auditing and and monitoring monitoring activities activities –– Oversee Oversee all all compliance compliance training training and and education education efforts efforts –– Identify Identify known known or or potential potential compliance compliance risk risk areas areas –– Communicate Communicate compliance compliance issues issues at at the the facility facility level level –– Establish, Establish, document document and and follow follow through through with with action action plans plans for for detected detected risks, risks, including including correcting correcting and and refunding refunding payers, payers, when when necessary necessary –– Investigate Investigate Hotline Hotline or or other other reports reports of of potential potential concern concern –– Notify Notify Corporate Corporate Compliance Compliance of of perceived perceived problems, problems, violations violations or or inadequacies inadequacies
86 86
Confidential Disclosure Program The Confidential Disclosure Program (“CDP”) was established as part
of the original Compliance Program in 1997 `` `` `` `` `` `` `` ``
Outsourced Outsourced Hotline Hotline offered offered via via toll-free toll-free number number 24 24 // 77 // 365 365 Emphasis Emphasis on on non-retribution, non-retribution, no no retaliation retaliation policy policy Enables Enables anonymous, anonymous, confidential confidential communication communication Facilitates Facilitates follow-up follow-up by by caller caller so so status status of of concern concern may may be be communicated communicated when when caller caller is is anonymous anonymous Requirement Requirement by by Board Board of of Directors Directors to to investigate investigate any any allegation allegation of of improper improper conduct, conduct, practice, practice, or or behavior behavior Also Also encourages encourages direct direct contact contact via via phone phone or or letter letter to to the the Corporate Corporate Compliance Compliance Officer Officer Summary Summary of of CDP CDP contacts contacts reported reported quarterly quarterly to to the the Board Board of of Directors Directors by by the the Corporate Corporate Compliance Compliance Officer Officer Annual Annual audits audits of of the the CDP CDP by by external external audit audit firm firm 87 87
Policies and Procedures Code of Conduct
`` Includes Includes basic basic statements statements of of policy policy `` Acknowledged Acknowledged upon upon hire hire and and annually annually thereafter thereafter to to all all employees, employees, physicians physicians with with medical medical staff staff privileges, privileges, and and all all contractors contractors and and agents agents with with direct direct responsibility responsibility for for the the delivery, delivery, billing, billing, or or coding coding of of healthcare healthcare services services `` Reviewed Reviewed annually; annually; revisions revisions are are distributed distributed within within 30 30 days days `` Promotion Promotion of of and and adherence adherence to to the the Code Code is is an an element element in in performance performance evaluations evaluations `` Communicates Communicates commitment commitment to to compliance compliance including including commitment commitment to to prepare prepare and and submit submit accurate accurate claims claims consistent consistent with with federal federal healthcare healthcare program program regulations regulations and and regulatory regulatory instructions instructions `` Requirement Requirement to to report report suspected suspected violations violations of of statute, statute, regulation, regulation, law, law, or or guideline guideline applicable applicable to to federal federal healthcare healthcare programs programs or or CHS CHS policy policy Written and electronically available Compliance Manual Policies
88 88
Auditing and Monitoring Established annually after comparing various benchmarks, industry-
specific publications, advisory opinions, healthcare industry integrity agreements, and the OIG Work Plan against potential risk to CHS for each issue
The Auditing and Monitoring program includes but is not limited to
reviews of:
`` The The submission submission of of accurate accurate claims, claims, including including aa robust robust coding coding audit audit program; program; `` The The Stark Stark and and Anti-Kickback Anti-Kickback Laws; Laws; `` HIPAA HIPAA -- The The Health Health Insurance Insurance Portability Portability and and Accountability Accountability Act Act of of 1996 1996 –– privacy privacy and and security; security; `` EMTALA EMTALA –– The The Emergency Emergency Medical Medical Treatment Treatment and and Active Active Labor Labor Act; Act; `` Relationships Relationships with with Patients Patients
Coding Coding Audit Audit Program Program –– aa comprehensive comprehensive audit audit program program to to monitor monitor the the accuracy accuracy of of inpatient, inpatient, outpatient outpatient and and physician physician practice practice coding coding 89 89
Compliance Training and Education Compliance training began in June 1998 Audience for training includes all employees, physicians with medical
staff privileges, and contractors or agents of CHS affiliates who are engaged in coding, billing, the preparation or submission of claims, or the hands-on delivery of healthcare to patients
Compliance training is conducted upon hire and annually thereafter; the
training materials are updated each year to reflect changes in law or regulations
General Compliance Training Covers
`` `` `` `` ``
Code Code of of Conduct Conduct Confidential Confidential Disclosure Disclosure Program Program Relationships Relationships with with Potential Potential Referral Referral Sources Sources HIPAA HIPAA privacy privacy and and security security requirements requirements Identity Identity Theft Theft Prevention Prevention 90 90
Compliance Training and Education Specific Compliance Training is job-specific and includes but is not
limited to:
`` New New Leader Leader Orientation Orientation for for administrators administrators `` Coder Coder Training Training `` One-on-one One-on-one on on boarding boarding training training for for new new Facility Facility Compliance Compliance Officers Officers –– Monthly Monthly compliance compliance education education calls calls
`` Training Training for for jobs jobs such such as as billers, billers, case case managers, managers, and and others others
91 91
Other Compliance Program Elements Eligibility Screening for Excluded Individuals Written disciplinary actions for violating policies including possibility of
reporting to appropriate authorities or agencies
Reporting non-compliance
`` Self-reporting Self-reporting significant significant variances variances from from laws, laws, rules, rules, regulations regulations and and statutes statutes `` Generate Generate corrective corrective action action plans plans including including rebilling rebilling or or refunding refunding claims claims errors, errors, when when appropriate appropriate
92 92
CHS Compliance Response
CHS CHS received received aa letter letter from from CtW CtW Investment Investment Group,* Group,* dated dated September September 28, 28, 2010, 2010, asking asking the the CHS CHS Board Board of of Directors Directors to to investigate investigate ED ED one-day one-day stay stay rates rates and and other other matters. matters.
This This letter letter was was promptly promptly disclosed disclosed to to the the CHS CHS Board Board of of Directors. Directors. Responsibility Responsibility for for follow-up follow-up and and response response was was assigned assigned to to the the Audit Audit and and Compliance Compliance Committee, Committee, an an independent independent committee committee charged charged with with oversight oversight of of compliance, compliance, regulatory regulatory and and litigation litigation matters matters as as well well as as enterprise enterprise risk risk assessment. assessment. This This committee committee is is fully fully independent independent of of Company Company management management consistent consistent with with NYSE NYSE and and Sarbanes-Oxley Sarbanes-Oxley independence independence requirements. requirements. All All three three members members of of the the CHS CHS Audit Audit and and Compliance Compliance Committee Committee are are "audit "audit committee committee financial financial experts." experts."
The The Audit Audit and and Compliance Compliance Committee Committee concluded concluded that that itit did did not not need need to to appoint appoint aa further further special special committee committee and and itit directed directed that that aa review review be be undertaken. undertaken. That That review review is is ongoing ongoing and and has has been been combined combined with with the the response response to to the the subsequent subsequent government government investigation investigation by by the the Texas Texas Attorney Attorney General General and and OIG. OIG.
* According to its website, the CtW Investment Group makes investments on behalf of pension funds sponsored by unions affiliated with Change to Win, including the SEIU, IBT, UFW and UFCW. www.ctwinvestmentgroup.com www.changetowin.org
93 93
CHS Compliance Response
On On November November 15, 15, 2010, 2010, CHS CHS received received Civil Civil Investigation Investigation Demands Demands from from the the Texas Texas Attorney Attorney General General concerning concerning ED ED procedures procedures and and billing. billing.
CHS CHS disclosed disclosed receipt receipt of of the the Texas Texas Attorney Attorney General General CIDs CIDs in in its its 2010 2010 Form Form 10-K 10-K (its (its next next quarterly quarterly filing) filing) in in accordance accordance with with its its standard standard policy policy for for disclosing disclosing material material investigations investigations and and after after discussions discussions with with the the CHS CHS Board Board of of Directors' Directors' Audit Audit and and Compliance Compliance Committee. Committee. CHS CHS is is cooperating cooperating fully fully with with the the Texas Texas Attorney Attorney General. General.
On On April April 8, 8, 2011, 2011, CHS CHS received received aa subpoena, subpoena, dated dated March March 31, 31, 2011, 2011, from from the the U.S. U.S. Department Department of of Health Health and and Human Human Services, Services, Office Office of of the the Inspector Inspector General. General. CHS CHS has has no no knowledge knowledge why why the the OIG OIG did did not not serve serve the the subpoena subpoena until until April April 8, 8, 2011. 2011.
While While CHS's CHS's standard standard policy policy is is to to disclose disclose such such matters matters in in its its next next quarterly quarterly filing, filing, CHS CHS voluntarily voluntarily disclosed disclosed receipt receipt of of the the OIG OIG subpoena subpoena on on aa Form Form 8-K 8-K on on April April 15, 15, 2011, 2011, in in response response to to analysts' analysts' reports reports and and speculation speculation concerning concerning the the subject subject of of government government investigations. investigations.
94 94
CHS Commitment to Compliance, Quality Care and Patient Safety CHS Commitment to Compliance, Quality Care and Patient Safety `
Process of Care: Core Measures Improvements – 16 consecutive quarters of trended improvement in Core Measures
`
Patients’ Perspective of Care: Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Improvements – 4 years of trended improvement in overall hospital rating of “very satisfied” for HCAHPS
`
Favorable Survey Results from The Joint Commission – All 50 hospitals surveyed by The Joint Commission fully accredited in 2010 – Both hospitals surveyed by the American Osteopathic Association fully accredited in 2010
`
Low Rate of DRG Coding Errors – Inpatient coding audit results over the past two years show CHS with a 1% average coding-related financial error rate, which we believe compares favorably to industry
`
ER Discharge Call-Back Administrator (DCA) Program – CHS hospital staff call to check on the health condition of patients discharged from the emergency room as well as to evaluate the customer service of the ER department – Nearly one-million DCA calls completed in 2010
`
Community Cares Initiative – “I want to thank CHS, winning the Malcolm Baldrige is very difficult. We turned in the results from CHS, which helped us win.” Quint Studer, CEO of The Studer Group. The Studer Group helped CHS implement its Community Cares Initiative. 95 95
Accredited Centers and Programs Chest Chest Pain Pain and and Primary Primary Stroke Stroke Centers Centers –– 30 30 accredited accredited chest chest pain pain centers centers
and and 88 primary primary stroke stroke centers centers Accrediting Accrediting Body: Body: Society Society of of Chest Chest Pain Pain Centers Centers and and The The Joint Joint Commission Commission
Bariatric Bariatric Center Center of of Excellence Excellence –– 10 10 bariatric bariatric centers centers of of excellence excellence
Accrediting Accrediting Body: Body: American American Society Society of of Metabolic Metabolic & & Bariatric Bariatric Surgery Surgery Joint Joint Replacement Replacement Certification Certification –– 44 certified certified joint joint replacement replacement programs programs
Accrediting Accrediting Body: Body: The The Joint Joint Commission Commission Cancer Cancer Center Center Accreditation Accreditation –– 22 22 accredited accredited cancer cancer centers centers
Accrediting Accrediting Body: Body: American American College College of of Surgeons-Commission Surgeons-Commission on on Cancer Cancer
96 96
Summary Tenet Analysis and Allegations
` ` `
We believe that Tenet’s contrived statistics lead to faulty and irresponsible conclusions We believe that Tenet makes unreliable and inaccurate statements We believe that Tenet’s lawsuit is a direct and unfair attack on the ethics and judgment of 16,000 physicians and 87,000 employees
Community Health Analysis
` `
Appropriate statistical review and tested by outside consultants Ultimate decision to admit patient – Physician judgment – Medical necessity
The Company remains stalwart in its defense against Tenet’s allegations We believe that the claim of lower “observation rate” and Tenet’s related
allegations do not materially affect the CHS financial statements The Company will cooperate fully with all government inquiries and cannot
predict the outcome 97 97
Summary
"Be assured, we will defend our reputation. We will dedicate whatever resources are required to reach an ultimate resolution of these matters. And we will work tirelessly to restore any erosion of confidence or trust that may have been caused by these accusations." Wayne Wayne T. T. Smith, Smith, Chairman, Chairman, President President and and Chief Chief Executive Executive Officer Officer --- April April 28, 28, 2011 2011
98 98
APPENDIX
99 99
Variance Among Data Sources
Inclusion or exclusion of certain hospitals in the portfolio of CHS and comparative hospital systems as well as the portfolio of legacy Triad hospitals, which generally relates to decisions involving acquisitions and divestitures
Data qualification for Discharge Status Codes included or excluded
`
02 – Transfers to another Short Term Hospital
`
07 – Left Against Medical Advice
`
20 – Deaths
Data qualification for Level of Care `
Acute
`
Distinct Part Unit (rehab, psych, SNF)
Method of Identifying Observation Claims `
Revenue Code vs. CPT Code Qualifiers
Source: American Hospital Directory, Cost Reports, and CHS Data Warehouse. Reviewed by an outside consultant.
100 100
Summary of Source Data for Inclusion and Exclusion Summary of Source Data for Inclusion and Exclusion UBS
Baird
Baird
J.P. Morgan
Morgan Stanley
Credit Suisse
Lazard Capital
Citigroup
CHS‐Data Warehouse
CHS‐AHD Data Source
Report Date April 18, 2011 Contact Justin Lake
April 18, 2011 Whit Mayo
April 13, 2011 Whit Mayo
April 18, 2011 John Rex
April 13, 2011 Doug Simpson
April 17, 2011 Ralph Giacobbe
April 15, 2011 Tom Gallucci
April 15, 2011 Gary Taylor
Source Data AHD, Company Rpts
AHD, Company Rpts
AHD, Company Rpts
AHD, Company Rpts
AHD, Company Rpts
AHD, Company Rpts
AHD, Company Rpts
CMS, Company Rpts
Medicare OPPS files based on Calendar YE, IP MedPar based on Federal FYE 9/30
Medicare OPPS files based on Calendar YE, IP MedPar based on Federal FYE 9/30
Medicare OPPS files based on Calendar YE, IP MedPar based on Federal FYE 9/30
Medicare OPPS files based on Calendar YE, IP MedPar based on Federal FYE 9/30
Medicare OPPS files based on Calendar YE, IP MedPar based on IP MedPar based on IP MedPar based on Medicare Federal FYE Medicare Federal FYE Federal FYE 9/30 9/30/09 9/30/09 Calendar Year End
Not Disclosed
Gadsden, AL NW‐Bentonville, AR NW‐Willow, AR Cedar Park, TX Crestwood, AL
Not Disclosed
Not Disclosed
Affinity‐Massillon, OH Cedar Park, TX Ortho Hosp‐Ft Wayne, IN NONE
Not Disclosed
Yes
Not Disclosed
Not Disclosed
No
Yes
Yes
Acquisitions subsequent to year reviewed excluded
Period Definition
Acute Hospitals Excluded for Triad Legacy Critical Access Hospitals Excluded
Medicare OPPS files based on Calendar YE, IP MedPar based on Federal FYE 9/30
Analysis included only Gateway ‐ Clarksville, 30 legacy Triad facilities. No detail TN (due to '08 provided in report. Not Disclosed replacement)
Yes
Not Disclosed
Not Disclosed
Yes
No
Not Disclosed
Not Disclosed
See (A) below
See (A) below
Analyzed only 2009 Data. See (A) below
Acquisitions or New Hospitals Excluded
S. Ark ‐ El Dorado, AR (acq rem 50% 4/09) Cedar Park, TX 12/07 Ortho Hosp, Ft Wayne, IN (2008) Not Disclosed
Not Disclosed
Cedar Park, TX 12/07 Ortho Hosp, Ft Wayne, IN (2008) Not Disclosed
Other Data Qualifiers
See (A) below
See (A) below
See (A) below
See (A) below
See (A) below
Per rpt, 1‐day & short Included Trinity‐ stays excluded 2,7,20 Augusta (legacy Triad) whereas total and post Triad Other Data medicare discharges acquisitions w/CYH Information included 2,7,20 legacy hospitals Est 1‐day adm for Gadsden&Crestwood‐ missing from AHD data Notes (A) We believe the standard AHD dataset was utilized in the external analyses referenced above. Per the AHD website, the pre‐packaged dataset excludes transfers to other short‐term acute facilities (2), patients who left against medical advice (7), and deaths (20). The AHD website did not disclose whether distinct part units were included.
Patient Billing Systems AHD Std Dataset Medicare OPPS files based on Calendar YE, IP MedPar based on Federal FYE 9/30
Excluded distinct part units
ER OP Visits do not appear correct on AHD Rev Code is not available in this data source for reporting
Sources of Data from Referenced Analyses: American Hospital Directory, Cost Reports, and CHS Data Warehouse. 101 101
Peer Group and Standard Deviation
We believe the analytical framework applicable for testing the type of systemic actions alleged in the Tenet Complaint involves the following definition for Peer Group. We and equity analysts have quantified the variability of peer group measures in terms of standard deviation. ` Peer Group – Defined as the individual hospitals, which comprise the relevant data set.
` Standard Deviation – Standard deviation is a widely used measurement of variability or diversity used in statistics and probability theory. It shows how much variation or "dispersion" there is from the average (mean, or expected value). • Technically, the standard deviation of a statistical population, data set, or probability distribution is the square root of its variance. • In addition to expressing the variability of a population, standard deviation is commonly used to measure confidence in statistical conclusions. • The reported margin of error is typically about twice the standard deviation -– the radius of a 95 percent confidence interval. 102 102
InterQual® First “severity of illness/intensity of service” published in 1978 for
evaluating appropriateness of admissions and level of service
60 professionals including physicians, nurses and allied health
professionals currently develop content
Reviewed and validated by nationwide network of more than 800
practicing clinicians from academic and community-based settings covering all major specialties
Utilized by hospitals, Quality Improvement Organizations (QIOs) in
over 40 states, over 300 health plans and managed care organizations
Utilized by Recovery Audit Contractors (RACs)
Source: InterQual® clinical guidelines version 2009, McKesson website (www.mckesson.com)
103 103
Comparison of Blue Book and InterQual® Clinical Guidelines
Organization
Categories
References to Observation
InterQual® (2007 through 2009)
By Organ System (Cardiac, Respiratory, Gastrointestinal, etc)
CHS Clinical Guidelines for Inpatient Care (2007 through 2010)
By Diagnosis (Chest Pain, Asthma/COPD/Respiratory Failure, GI Bleed, etc)
Severity of Illness
Admission Justification
Intensity of Service
Ongoing Plan of Care
Discharge Screens
Discharge Readiness
Notes
Documentation Guidelines
Listed in One Section
Referenced 14 times in most current version
Source: CHS Clinical Guidelines for Inpatient Care, 2010 Source: InterQual® Level of Care Criteria 2009, Acute Care, Adult, McKesson Health Solutions, LLC
104 104
Comparison of Blue Book and InterQual® Clinical Guidelines
Acknowledgements-Notes (InterQual®)/Introduction (Blue Book)
InterQual®, 2009 The clinical content is reviewed and validated by a national panel of clinicians and medical experts, including those in community and academic practice settings, as well as within the managed care industry throughout the United States.
CHS Clinical Guidelines for Inpatient Care, 2010 After intense research and review conducted jointly by the Department of Quality & Resource Management and the Physician Advisory Board, the attached tools were developed and published.
The clinical content is a synthesis of evidence-based standards of care, current practices, and consensus from licensed specialists and/or primary care physicians.
Information from a variety of authoritative sources including professional medical organizations and societies, Centers for Medicaid and Medicare, the Agency for Health Care Policy and Research, several state-based Quality Improvement Organizations and publications from Milliman & Robertson, InterQual, and other published criteria sets were obtained and analyzed.
The Criteria are intended solely for use as screening guidelines with respect to the medical appropriateness of healthcare services and not for final clinical or payment determinations concerning the type or level of medical care provided, or proposed to be provided, to a patient.
What remains constant through all the revisions to this document, is the intent for these guidelines. These guidelines continue to reflect only tools to be used by case managers in screening cases for appropriateness of their setting. These guidelines are not now nor have they ever been intended to reflect complete standards for provision of care.
Source: CHS Clinical Guidelines for Inpatient Care, 2010 Source: InterQual® Level of Care Criteria 2009, Acute Care, Adult, McKesson Health Solutions, LLC
105 105
Comparison of Blue Book and InterQual® Clinical Guidelines Cardiac/Atrial Fibrillation
InterQual®, 2009
CHS Clinical Guidelines for Inpatient Care, 2010
Afib/flutter > 120/min, ≥ one:
One or more of the following:
Requiring urgent cardioversion/continuous IV antiarrhymics
New onset atrial fibrillation/flutter with apical heart rate greater than 120
Systolic BP < 90/decrease from baseline
and systolic BP < 90 or decrease from baseline
Unresponsive to ER treatment
Pulmonary congestion, heart failure requiring IV meds
K < 3.0 and significant ventricular ectopy
Serum potassium < 3.0
K > 6.0 and widening QRS/peaked T waves
Serum potassium > 6.0
Toxic level of drugs/chemicals, ≥ one:
Toxic levels of digitalis or other drugs with potential for arrhythmias
Digitalis
Diagnostic imaging studies with findings of pulmonary edema or increased heart silhouette
QT/QRS prolongation on ECG Systolic BP < 90/decrease from baseline
Two or more of the following:
Cardioversion, urgent
Chemical or electrocardioversion planned urgently
IV Medication administration, both:
Cardiac monitoring (excluding holter monitoring)
Medications, ≥ one: ACE inhibitors, analgesics, antiarrhythmics, antihypertensives, based on fluid losses, Ca channel/beta blockers, diuretics, insulin, nitroglycerin, vasoactive/Ionotropic agents Titration, one: q1-2h and monitoring > q2hr and monitoring ≤ 24 hr
Source: CHS Clinical Guidelines for Inpatient Care, 2010 Source: InterQual® Level of Care Criteria 2009, Acute Care, Adult, McKesson Health Solutions, LLC
106 106
Comparison of Blue Book and InterQual® Clinical Guidelines Cardiac/Chest Pain
InterQual®, 2009
CHS Clinical Guidelines for Inpatient Care, 2010
Chest/Jaw/Arm/ Shoulder Pain/Silent ischemia, ≥ one:
Chest/Jaw/Arm/ Shoulder Pain with one or more of the following:
Acute MI confirmed by ECG
EKG changes suggestive of ischemia or AMI (ST segment changes, new Q wave, V Tach/ A Fib, new LBBB)
Aortic stenosis
Aortic stenosis
CHF on imaging
CHF on imaging
LBBB on ECG, new
Dyspnea with O2 sats < 89%
Q wave, new
Elevated or positive biomarkers
Requiring, ≥ one: IABP/VAD, IV medication titrated ≤ q2h, thrombolytics
Requiring IV meds titrated ≤ 2 hr, VAD/IABP, thrombolytics, mechanical ventilation
ST elevation/depression on ECG Systolic BP < 90/decrease from baseline
Hemodynamic instability (BP < 90 systolic or decrease from baseline)
Unstable angina V Tach/A Fib on ECG
Arrythmias on cardiac monitor (new or different)
Chest trauma ≥ 2: ECG abnormalities, positive troponins/CK-MB, systolic BP < 90/ decrease from baseline
Chest trauma with elevated biomarkers, post PCI complications, pacer lead malfunction
Source: CHS Clinical Guidelines for Inpatient Care, 2010 Source: InterQual® Level of Care Criteria 2009, Acute Care, Adult, McKesson Health Solutions, LLC
107 107
Index Introduction Introductionand andOverview………………………………………………………………………………… Overview………………………………………………………………………………… Tenet’s ofInappropriate InappropriateAdmissions……………………………………………………… Admissions……………………………………………………… Tenet’sAllegation Allegationof Tenet’s Leadto toan anImplausible ImplausibleResult…………………………………………………… Result…………………………………………………… Tenet’sAllegations AllegationsLead Inpatient Admissionsvs. vs.Observation ObservationStatus…………………………………………………………… Status…………………………………………………………… InpatientAdmissions Medicare MedicareDefinitions……………………………………………………………………………………… Definitions……………………………………………………………………………………… Use Useof ofClinical ClinicalReview ReviewCriteria…………………………………………………………………………… Criteria…………………………………………………………………………… Role ofClinical ClinicalReview ReviewCriteria……………………………………………………………… Criteria……………………………………………………………… Role//Purpose Purposeof CHS Care…………………………………………………………… CHSClinical ClinicalGuidelines Guidelinesfor forInpatient InpatientCare…………………………………………………………… CHS RoomService……………………………………………………… Service……………………………………………………… CHSProvides ProvidesBetter BetterEmergency EmergencyRoom Patient RoomFlow…………………………………………………………… Flow…………………………………………………………… PatientStatus Statusand andEmergency EmergencyRoom Pro-MED Pro-MEDClinical ClinicalSystem………………………………………………………………………………… System………………………………………………………………………………… CHS CHSUse Useof ofPro-MED Pro-MEDSystem…………………………………………………………………………… System…………………………………………………………………………… Physician Decisionto toAdmit……………………………………………………………………………… Admit……………………………………………………………………………… PhysicianDecision Criteria Care…………………………………………………………… Criteriafor forObservation Observationand andInpatient InpatientCare…………………………………………………………… “Observation “ObservationRate” Rate”isisaaContrived ContrivedStatistic……………………………………………………………… Statistic……………………………………………………………… Analysts SeekRelevant RelevantStatistics……………………………………………………………………… Statistics……………………………………………………………………… AnalystsSeek Industry Commentson on“Observation “ObservationRate”…………………………………………………………… Rate”…………………………………………………………… IndustryComments Tenet TenetDoes DoesNot NotDisclose Disclose“Observation “ObservationRate”………………………………………………………… Rate”………………………………………………………… Medicare Medicare“Observation “ObservationRate” Rate” with withTotal TotalRelevant RelevantPeer PeerGroup……………………………………… Group……………………………………… Medicare “Observation Rate”…………………………………………………………………………… Medicare “Observation Rate”…………………………………………………………………………… Medicare Medicare“Observation “ObservationRate” Rate”Variance………………………………………………………………… Variance………………………………………………………………… CHS Admissions………………………………… CHS"Observation "ObservationRate" Rate"Not NotCorrelated Correlatedwith withInpatient InpatientAdmissions………………………………… Other OtherMetrics MetricsAre AreMore MoreRelevant Relevantthan than"Observation "ObservationRate"………………………………………… Rate"………………………………………… Medicare RoomAdmission AdmissionRate………………………………………………………… Rate………………………………………………………… MedicareEmergency EmergencyRoom Medicare ERDischarge DischargeRate…………………………………………………………………… Rate…………………………………………………………………… MedicarePrompt PromptER Medicare AverageLength Lengthof ofStay Stay CHS CHSIn InLine LineWith WithPeers……………………………… Peers……………………………… MedicareInpatient InpatientAverage Medicare Stayswithin withinIndustry IndustryNational NationalWeighted-Average Weighted-Averageand andStandard StandardDeviation… Deviation… MedicareOne-Day One-DayStays Medicare Staysto toNational NationalAverage………………………………………………………… Average………………………………………………………… MedicareOne-Day One-DayStays Medicare Stays2006-2009…………………………………………………………………… 2006-2009…………………………………………………………………… MedicareOne-Day One-DayStays Medicare Stays2005-2009…………………………………………………………………… 2005-2009…………………………………………………………………… MedicareOne-Day One-DayStays Ratio Staysto toTotal TotalMedicare MedicareER ERVisits……………………………………… Visits……………………………………… Ratioof ofMedicare MedicareOne-Day One-DayStays Medicare Admissions………………………… MedicareCase CaseMix MixIndex Indexfor forAll AllAdmissions Admissionsand andShort-Stay Short-StayAdmissions………………………… Net Admission………………………………………………………………… NetRevenue RevenuePer PerAdjusted AdjustedAdmission………………………………………………………………… Medicare Staysto toER ERAdmissions…………………………………………………………… Admissions…………………………………………………………… MedicareOne-Day One-DayStays Specified MedicareOne-Day One-DayStay StayAdmissions………………………………………………………… Admissions………………………………………………………… SpecifiedMedicare Equity AnalystComments CommentsAfter AfterReviewing ReviewingProper ProperMetrics…………………………………………… Metrics…………………………………………… EquityAnalyst CHS CHSData Dataand andAnalysis…………………………………………………………………………………… Analysis…………………………………………………………………………………… CHS CHSSame SameStore StoreNet NetRevenue RevenueGrowth Growth………………………………………………………………… ………………………………………………………………… CHS CHSSame SameStore StoreAdmissions AdmissionsGrowth…………………………………………………………………… Growth…………………………………………………………………… CHS CHSConsolidated ConsolidatedEBITDA EBITDAMargins…………………………………………………………………… Margins…………………………………………………………………… CHS RoomAdmission AdmissionRates…………………………………………………… Rates…………………………………………………… CHSMedicare MedicareEmergency EmergencyRoom Medicare CaseMix MixIndex…………………………………………………………………… Index…………………………………………………………………… MedicareShort-Stay Short-StayCase Case Mix Index…………………………………………………………………… Medicare Short-Stay Medicare Short-Stay Case Mix Index……………………………………………………………………
4-6 4-6 77 88 99 10-11 10-11 12 12 13 13 14-17 14-17 18 18 19 19 20 20 21-22 21-22 23 23 24 24 25-26 25-26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 41 41 42 42 43 43 44 44 45 45 46 46 47 47 48 48 49 49 50 50 51 51 52 52 53 53 54 54
The 55 TheFallacy FallacyOf OfTenet's Tenet'sThesis: Thesis:Lower LowerObservations Observationsto toInappropriate InappropriateAdmissions………………… Admissions………………… 55 Medicare 56 MedicareOne-Day One-DayStays Staysto toTotal TotalAdmissions………………………………………………………… Admissions………………………………………………………… 56 Tenet 57 TenetAllegations Allegationsare areInaccurate Inaccurateas asIllustrated Illustratedby byMedicare MedicareOne-Day One-DayStays……………………… Stays……………………… 57 Tenet 58 TenetAllegations Allegations Lead Leadto toan anImplausible ImplausibleResult……………………………………………………… Result……………………………………………………… 58 “Observation 59 “ObservationRate” Rate”Not NotCorrelated Correlatedwith withOne-Day One-DayStay StayInpatient InpatientAdmissions……………………… Admissions……………………… 59 CHS Improved Operations at Triad……………………………………………………………………… 60 CHS Improved Operations at Triad……………………………………………………………………… 60 Tenet 61 TenetErrs Errsin inMaking MakingTriad TriadHospital HospitalIntegration IntegrationAllegations………………………………………… Allegations………………………………………… 61 CHS CHSTransition TransitionActivities Activitieswith withTriad……………………………………………………………………… Triad……………………………………………………………………… 62-64 62-64 Reasons 65 Reasonsfor forDecrease Decreasein inMedicare MedicareObservation ObservationVisits Visits Year-Over-Year Year-Over-Year2007 2007to to2008 2008………… ………… 65 Appropriate 66 AppropriateUse Useof ofMedicare MedicareObservation……………………………………………………………… Observation……………………………………………………………… 66 Triad TriadObservation ObservationData Data…………………………………………………………………………………… …………………………………………………………………………………… 67 67 Duration 68 Durationof ofTime Timefor forObservation ObservationCare Care………………………………………………………………… ………………………………………………………………… 68 One-Day 69 One-DayStays StaysSame SameStore StoreTriad TriadHospitals…………………………………………………………… Hospitals…………………………………………………………… 69 Triad 70 TriadOne-Day One-DayStay StayDRGs……………………………………………………………………………… DRGs……………………………………………………………………………… 70 No 71 NoConsistent ConsistentMovement MovementininTriad TriadOne-Day One-DayStay StayDRGs……………………………………………… DRGs……………………………………………… 71 Growth 72 Growthin inTriad TriadHospital HospitalOne-Day One-DayStays……………………………………………………………… Stays……………………………………………………………… 72 CHS 73 CHSCurrent CurrentTrends Trendsin inBoth BothOne-Day One-DayStays Staysand andObservations Observationsare areReversing…………………… Reversing…………………… 73 74 CHS Staysand andObservation ObservationCases………………………………………………………… Cases………………………………………………………… 74 CHSOne-Day One-DayStays CHS CHSOne-Day One-DayStays Staysto toTotal TotalAdmissions……………………………………………………………… Admissions……………………………………………………………… 75-76 75-76 77 Other Data Points Refute Tenet's Allegations………………………………………………………… 77 Other Data Points Refute Tenet's Allegations………………………………………………………… Recovery 78 RecoveryAudit AuditContractors Contractors(RAC) (RAC)Demonstration DemonstrationProject ProjectMarch March20052005-March March2008…………… 2008…………… 78 CHS 79 CHSMaintains MaintainsStrong StrongControls ControlsRegarding RegardingPhysician PhysicianContracts…………………………………… Contracts…………………………………… 79 80 CHS TriadSynergies…………………………………………………………………………………… Synergies…………………………………………………………………………………… 80 CHS//Triad ER 81 ERManagement…………………………………………………………………………………………… Management…………………………………………………………………………………………… 81 CHS 82 CHSER ERMalpractice MalpracticeClaims Claimsto toBenchmarks…………………………………………………………… Benchmarks…………………………………………………………… 82 CHS 83 CHSCompliance ComplianceProgram……………………………………………………………………………… Program……………………………………………………………………………… 83 CHS 84 CHSCompliance ComplianceProgram……………………………………………………………………………… Program……………………………………………………………………………… 84 Compliance ComplianceCommittees………………………………………………………………………………… Committees………………………………………………………………………………… 85-86 85-86 Confidential 87 ConfidentialDisclosure DisclosureProgram………………………………………………………………………… Program………………………………………………………………………… 87 Policies 88 Policiesand andProcedures………………………………………………………………………………… Procedures………………………………………………………………………………… 88 Auditing 89 Auditingand andMonitoring…………………………………………………………………………………… Monitoring…………………………………………………………………………………… 89 Compliance ComplianceTraining Trainingand andEducation…………………………………………………………………… Education…………………………………………………………………… 90-91 90-91 Other 92 OtherCompliance ComplianceProgram ProgramElements………………………………………………………………… Elements………………………………………………………………… 92 CHS CHSCompliance ComplianceResponse……………………………………………………………………………… Response……………………………………………………………………………… 93-94 93-94 CHS 95 CHSCommitment Commitmentto toCompliance, Compliance,Quality QualityCare Careand andPatient PatientSafety………………………………… Safety………………………………… 95 Accredited 96 AccreditedCenters Centersand andPrograms……………………………………………………………………… Programs……………………………………………………………………… 96 Summary…………………………………………………………………………………………………… Summary…………………………………………………………………………………………………… 97-98 97-98 APPENDIX………………………………………………………………………………………………… 99 APPENDIX………………………………………………………………………………………………… 99 Variance 100 VarianceAmong AmongData DataSources………………………………………………………………………… Sources………………………………………………………………………… 100 Summary 101 Summaryof ofSource SourceData Data for forInclusion Inclusionand andExclusion……………………………………………… Exclusion……………………………………………… 101 Peer 102 PeerGroup Groupand andStandard StandardDeviation…………………………………………………………………… Deviation…………………………………………………………………… 102 InterQual®………………………………………………………………………………………………… 103 InterQual®………………………………………………………………………………………………… 103 Comparison Comparisonof ofBlue BlueBook Bookand andInterQual®……………………………………………………………… InterQual®……………………………………………………………… 104-107 104-107
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