<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 11, 1997
REGISTRATION NO. 333-______
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
TENET HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 8062 95-2557091
(State or other (Primary standard (I.R.S. Employer
jurisdiction of industrial classification Identification No.)
incorporation code number)
or organization)
3820 STATE STREET
SANTA BARBARA, CALIFORNIA 93105
(805) 563-7000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
SCOTT M. BROWN, ESQ.
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
TENET HEALTHCARE CORPORATION
3820 STATE STREET
SANTA BARBARA, CALIFORNIA 93105
(805) 563-7000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies to:
ALISON S. RESSLER, ESQ.
SULLIVAN & CROMWELL
444 SOUTH FLOWER STREET, 12TH FLOOR
LOS ANGELES, CALIFORNIA 90071
(213) 955-8000
PAUL S. BIRD, ESQ.
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 909-6000
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
--------------
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
-----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE (1) REGISTRATION FEE (1)
<S> <C> <C> <C> <C>
Common Stock, par value $0.075 per share............... 9,580,644 $26.50 $253,887,066.00 $76,935.00
Preferred Stock Purchase Rights ....................... (2) N/A N/A N/A
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) of the Securities Act of 1933, as amended. Pursuant to
Rule 457, the maximum offering price of the shares of Tenet Common Stock
being registered is $26.50 per share, the average of the high and low
reported sales prices of a share of Tenet Common Stock reported on the New
York Stock Exchange Composite Tape on April 8, 1997, and the maximum
aggregate offering price is the product of $26.50 and 9,580,644, the
number of shares of Tenet Common Stock being registered.
(2) Represents the right to 0.0005 of a share of Series A Junior
Participating Preferred Stock of Tenet.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- -------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 11, 1997
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL __, 1997
[LOGO]
TENET HEALTHCARE CORPORATION
6,634,792 SHARES OF COMMON STOCK
(PAR VALUE $0.075)
--------------
This Prospectus Supplement relates to 6,634,792 shares (the "Shares") of
par value $0.075 Common Stock (the "Common Stock") of Tenet Healthcare
Corporation ("Tenet," the "Registrant" or the "Company") to be offered in an
underwritten public offering by the persons listed under the heading "Selling
Shareholders" (the "Selling Shareholders"). The Shares originally
were issued to Joseph Littlejohn & Levy Fund, L.P. ("JLL") in connection with
the acquisition of OrNda HealthCorp by Tenet in January 1997. Prior to the
consummation of the offering, JLL will distribute the Shares to the Selling
Shareholders who are limited partners of JLL. See "Underwriting" and "Selling
Shareholders." The Company will not receive any of the proceeds from the sale
of the Shares made hereunder. See "Use of Proceeds."
The Common Stock and the Shares offered hereby currently are listed on the
New York Stock Exchange and the Pacific Stock Exchange under the symbol "THC."
On April , 1997, the closing price of the Common Stock on the New York Stock
Exchange Composite Tape was $
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS TO
TO THE DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) SHAREHOLDERS(2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........................................
Total............................................
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters (as defined herein) against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities
Act"). See "Underwriting."
(2) Estimated expenses of $ will be paid by the Company.
-------------------
The Shares offered hereby are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by them and subject to various
prior conditions, including the right to reject any order in whole or in part.
It is expected that delivery of the Shares will be made in New York, New York on
or about April , 1997.
-------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
------------
April , 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
SHARES OFFERED HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE
PURCHASE OF COMMON STOCK TO COVER SYNDICATE SHORT POSITIONS AND THE
IMPOSITIONS OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
THE COMPANY
Tenet is the second largest investor-owned healthcare services company in
the United States. At February 28, 1997, Tenet's subsidiaries owned or leased
and operated 127 general hospitals (with 27,366 licensed beds) and related
healthcare facilities serving urban and rural communities in 22 states. Tenet's
subsidiaries and affiliates also owned or leased and operated various ancillary
healthcare businesses, including outpatient surgery centers, home healthcare
programs, ambulatory, occupational and rural healthcare clinics, a health
maintenance organization, a preferred provider organization and a managed care
insurance company as well as a small number of rehabilitation hospitals,
specialty hospitals, long-term care facilities and psychiatric facilities. In
addition, Tenet's subsidiaries hold the following investments in other
healthcare companies: (i) an approximately 12.1% interest in Vencor, Inc., which
operates nursing homes and other healthcare businesses, (ii) an approximately
11.3% interest in Total Renal Care Holdings, Inc., which operates kidney
dialysis units and certain related healthcare businesses and (iii) an
approximately 23% interest in Health Care Property Partners.
On January 30, 1997, Tenet completed its acquisition (the "Merger") of OrNda
HealthCorp ("OrNda"), which, with 49 general hospitals (9,599 licensed beds) at
November 30, 1996, was the third largest investor-owned healthcare services
company in the United States. Many of the hospitals acquired in the Merger are
located in geographic areas where Tenet was already operating hospitals,
including southern California and south Florida. The Merger also expanded
Tenet's operations into several new geographic areas, including Arizona, Iowa,
Massachusetts, Mississippi, Nevada, Oregon, Washington, West Virginia and
Wyoming. The Merger was accounted for on a pooling of interests basis. OrNda
(now known as Tenet HealthSystem HealthCorp) is now a wholly owned subsidiary of
Tenet.
The Company's principal executive offices are located at 3820 State Street,
Santa Barbara, California 93105, and its telephone number is (805) 563-7000.
USE OF PROCEEDS
All of the Shares offered hereby are being offered by the Selling
Shareholders. The Company will not receive any proceeds from the sale of the
Shares. See "Selling Shareholders."
S-2
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth information with respect to the number of
Shares owned by each of the Selling Shareholders and the number of Shares
that may be offered hereby by each Selling Shareholder. The Company has
agreed to pay the fees and expenses of registration, including the fees and
expenses (not to exceed $50,000) for one counsel on behalf of the Selling
Shareholders, in connection with the sale of the Shares offered hereby (other
than underwriting discounts and commissions, which will be paid by the
Selling Shareholders).
<TABLE>
<CAPTION>
NUMBER OF
SHARES OWNED NUMBER OF NUMBER OF
PRIOR TO SHARES SHARES OWNED
NAME OFFERING(1) BEING OFFERED(1) AFTER THE OFFFERING
- ------------------------------------------------------------------ --------------- ------------- --------------------
<S> <C> <C> <C>
California Public Employees' Retirement System.................... 1,830,775 1,830,775 0
New York State Common Retirement Fund............................. 812,745 812,745 0
Pension Reserves Investment Management Fund....................... 732,339 732,339 0
Rockefeller Foundation............................................ 366,243 366,243 0
State of Wisconsin Investment Board............................... 366,243 366,243 0
Virginia Retirement System........................................ 732,339 732,339 0
Yale University................................................... 366,243 366,243 0
Oregon Public Employees' Retirement System........................ 1,098,435 1,098,435 0
E.E.S. Distressed Securities Fund, L.P............................ 183,048 183,048 0
State of Montana Board of Investments............................. 18,261 18,261 0
State Universities Retirement System.............................. 54,929 54,929 0
Orange County Employees' Retirement System........................ 73,190 73,190 0
--------------- ------------- -----------------
Total......................................................... 6,634,792 6,634,792 0
</TABLE>
- -------------------
1. Estimated amounts assuming a distribution to such Selling Shareholders by
JLL calculated using a price per share of Tenet Common Stock of $26.00,
the closing price of Tenet Common Stock as reported on the New York Stock
Exchange Composite Tape on April 8, 1997. The actual amounts to be sold by
such Selling Shareholders will be determined on the basis of the price to
the public less the underwriting discount at the time of the sale of the
Shares by such Selling Shareholders in the offering made hereby.
S-3
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the purchase agreement
(the "Purchase Agreement") among the Company, the Selling Shareholders and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"), Goldman, Sachs & Co. and J.P. Morgan
Securities Inc. ("JPMSI") (collectively, the "Underwriters"), the Selling
Shareholders severally have agreed to sell to each of the Underwriters, and
each of the Underwriters has agreed to purchase from the Selling Shareholders
the Shares, at the public offering price set forth on the cover page of this
Prospectus Supplement, less the underwriting discounts and commissions. The
respective number of Shares that each Underwriter has agreed to purchase is
set forth opposite its name:
<TABLE>
<CAPTION>
UNDERWRITER SHARES PURCHASED
- ---------------------------------------------------------------------------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................................
Donaldson, Lufkin & Jenrette Securities Corporation.........................
Goldman, Sachs & Co.........................................................
J.P. Morgan Securities Inc..................................................
----------------
Total.............................................................
----------------
----------------
</TABLE>
In the Purchase Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth in the Purchase Agreement, to purchase all of the
Shares being sold pursuant to the Purchase Agreement if any of such Shares being
sold pursuant to the Purchase Agreement are purchased.
The Underwriters have advised the Selling Shareholders that they propose to
offer the Shares offered hereby to the public initially at the public offering
price set forth on the cover page of this Prospectus Supplement and to certain
dealers at such price less a concession not in excess of $. per Share. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $. per Share on sales to certain other dealers. After the offering, the
public offering price, concession and discount may be changed.
The Common Stock is traded on the New York Stock Exchange and the
Pacific Stock Exchange.
The Underwriters are permitted to engage in certain transactions that
stabilize the price of the Common Stock. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the offering, i.e., if, they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus Supplement, the
Underwriters may reduce that short position by purchasing Common Stock in the
open market.
The Underwriters may also impose a penalty bid on certain selling group
members. This means that if the Underwriters purchase shares of Common Stock in
the open market to reduce the Underwriters short position or to stabilize the
price of the Common Stock, they may reclaim the amount of the selling concession
from the selling group members who sold those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor the Underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common
S-4
<PAGE>
Stock. In addition, neither the Company nor the Underwriters make any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
DLJ has provided and is currently retained to provide certain investment
banking services to the Company for which it has received and is entitled to
receive usual and customary fees.
JPMSI and certain of its affiliates have provided and are expected to
continue to provide certain investment banking and commercial banking
services to the Company for which they have received or will receive usual
and customary fees. Morgan Guaranty, an affilitae of JPMSI, was the
arranging agent for the Company's existing credit facility.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the Shares offered hereby will be
passed upon for the Company by Scott M. Brown, Senior Vice President, Secretary
and General Counsel of the Company. As of March 31, 1997, Mr. Brown owned 2,794
shares of Common Stock and had outstanding options to purchase 201,634 shares of
Common Stock pursuant to Company benefit plans. The validity of the Shares
offered hereby will be passed upon for the Underwriters by Sullivan &
Cromwell, Los Angeles, California.
S-5
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 11, 1997
PROSPECTUS
APRIL ___, 1997 [LOGO]
TENET HEALTHCARE CORPORATION
9,580,644 Shares of Common Stock
(Par Value $0.075)
____________________
This Prospectus relates to 9,580,644 shares (the "Shares") of par value
$0.075 Common Stock (the "Common Stock") of Tenet Healthcare Corporation
("Tenet," the "Registrant" or the "Company") to be offered for sale by the
persons listed under the heading "Selling Shareholders" (the "Selling
Shareholders"). The Shares originally were issued by Tenet to Joseph
Littlejohn & Levy Fund, L.P. ("JLL") in connection with the acquisition of
OrNda HealthCorp by Tenet in January 1997 and are being registered under the
Securities Act pursuant to a registration rights agreement entered into
between JLL and Tenet at that time. The Selling Shareholders may include JLL
and partners in JLL who receive distributions of Shares from JLL. See "Selling
Shareholders." The distribution of the Shares by the Selling Shareholders may
be effected from time to time in underwritten public offerings, in ordinary
brokerage transactions on the New York Stock Exchange or the Pacific Stock
Exchange (collectively, the "Exchanges") at market prices prevailing at the
time of sale or in one or more negotiated transactions at prices acceptable
to the Selling Shareholders. In addition, the Selling Shareholders may sell
the Shares through or to brokers in the over-the-counter market. The brokers
or dealers through or to whom the Shares may be sold may be deemed
underwriters of the Shares within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"), in which event all brokerage commissions
or discounts and other compensation received by such brokers or dealers may
be deemed to be underwriting compensation. To the extent required, the names
of any underwriter and applicable commissions or discounts and any other
required information with respect to any particular offer will be set forth
in an accompanying Prospectus Supplement. See "Plan of Distribution." The
Company will not receive any of the proceeds from sales of the Shares made
hereunder. See "Use of Proceeds."
The Common Stock and the Shares offered hereby currently are listed on the
Exchanges under the symbol "THC." On April ___, 1997, the closing price of the
Common Stock on the New York Stock Exchange Composite Tape was $_______.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS IN EVALUATING AN
INVESTMENT IN THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
____________________
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Reports,
proxy statements, registration statements and other information filed by the
Company with the Commission may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the
Commission: New York Regional Office, Seven World Trade Center, New York,
New York 10048; and Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and copies of such
material can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The
Commission also maintains a Web site at http://www.sec.gov that contains
reports, proxy statements and other information regarding registrants that
file electronically with the Commission. The reports, proxy statements and
other information filed by the Company also may be inspected at the offices
of the New York Stock Exchange, 20 Broad Street, New York, New York 10005,
and at the offices of the Pacific Stock Exchange Incorporated, 301 Pine
Street, San Francisco, California 94104. The Common Stock is listed on such
Exchanges.
This Prospectus constitutes part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the Securities Act.
This Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto, and reference is
hereby made to the Registration Statement for further information with respect
to the Company and the Shares offered hereby. Any statements contained herein
concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act (File No. I-7293) are incorporated in this Prospectus by
reference and are made a part hereof: (i) Annual Report on Form 10-K for the
fiscal year ended May 31, 1996, filed with the Commission on August 26, 1996
(the "Tenet 10-K"); (ii) Quarterly Report on Form 10-Q for the quarterly
period ended August 31, 1996, filed with the Commission on October 11, 1996;
(iii) Quarterly Report on Form 10-Q for the quarterly period ended November
30, 1996, filed with the Commission on January 13, 1997; (iv) Current Report
on Form 8-K, dated November 5, 1996, filed with the Commission on November 5,
1996; (v) Current Report on Form 8-K, dated February 12, 1997, filed with the
Commission on February 13, 1997; (vi) Current Report on Form 8-K, dated April
10, 1997, filed with the Commission on April 11, 1997; (vii) the description
of the Common Stock of the Company, which is contained in the Company's
Registration Statement on Form 8-A filed with the Commission on April 8,
1971, including any amendments or reports filed for the purpose of updating
such description; and (viii) the description of certain preferred stock
purchase rights that have attached to the Common Stock, which is contained in
the Company's
2
<PAGE>
Registration Statement on Form 8-A filed with the Commission on December 9,
1988, including any amendments or reports filed for the purpose of updating such
description.
All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering hereby of the
Common Stock, shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. Copies of all documents incorporated by reference
in this Prospectus (other than exhibits to such documents unless such exhibits
are specifically incorporated by reference into such documents) will be provided
without charge to each person to whom a copy of this Prospectus is delivered,
upon written or oral request of such person. Request for such copies should be
directed to Scott M. Brown, Secretary, Tenet Healthcare Corporation, P.O. Box
31907, Santa Barbara, California 93130, telephone number (805) 563-7000.
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY
THE FOLLOWING FACTORS BEFORE PURCHASING THE COMMON STOCK OFFERED HEREBY.
CERTAIN FINANCING CONSIDERATIONS; LEVERAGE
As of February 28, 1997, Tenet had $4.9 billion of outstanding
indebtedness, which amounted to approximately 58.5% of its total
capitalization including short-term borrowings and notes and the current
portion of long-term debt.
In connection with the Merger, on January 30, 1997, Tenet entered into a
new $2.3 billion credit agreement (the "New Credit Facility"). The New Credit
Facility includes covenants limiting, among other things, borrowings by, and
liens on the assets of, Tenet and its subsidiaries, investments, the sale of
all or substantially all assets and prepayment of subordinated debt, and
prohibiting the repurchase of Tenet stock or the payment of dividends, in
addition to a minimum consolidated net worth requirement and certain coverage
ratio tests. In addition, the indentures governing Tenet's outstanding public
debt include, among other things, covenants limiting the incurrence of
additional debt and liens and the payment of dividends. Tenet's failure to
comply with any of these covenants could result in an event of default under
the New Credit Facility or the public debt indentures, which in turn could
cause an event of default to occur under substantially all of Tenet's debt.
An event of default could have a material adverse effect on Tenet's business,
financial condition and results of operations.
The degree to which Tenet is leveraged and the covenants applicable to
its outstanding indebtedness may adversely affect Tenet's ability to finance
its future operations and could limit its ability to pursue business
opportunities that may be in the interests of Tenet and its securityholders.
In particular, changes in medical technology, existing, proposed and future
legislation, regulations and the interpretation thereof, and the increasing
importance of managed care contracts and integrated healthcare delivery
systems may require significant investment in facilities, equipment,
personnel or services. Although Tenet believes that cash generated from
operations, amounts available under its New Credit Facility and its
ability to access capital markets will be sufficient to allow it to make such
investments, there can be no assurance that Tenet will be able to obtain the
funds necessary to make such investments. Furthermore, tax-exempt or
government-owned competitors have certain financial advantages such as
endowments, charitable contributions, tax-exempt financing and exemption from
sales, property and income taxes not available to Tenet, providing them with
a potential competitive advantage in making such investments.
3
<PAGE>
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
Tenet's ability to continue to compete successfully for managed care
contracts or to expand and enhance its integrated healthcare delivery systems
may depend upon, among other things, Tenet's ability to increase the number
of its facilities and services offered. Part of Tenet's business strategy is
to expand its healthcare delivery systems and services through the
acquisition of and partnerships with hospitals, groups of hospitals, other
healthcare businesses, ancillary healthcare providers, physician practices
and physician practice assets. There can be no assurance that suitable
acquisitions and partnerships can be consummated on terms favorable to Tenet
or that financing, if necessary, can be obtained for such acquisitions.
Further, there is no assurance that, as Tenet continues to acquire or enter
into partnerships with additional facilities and related healthcare service
providers in the geographic areas in which it currently operates, it will not
face constraints on its ability to grow from Federal and state regulatory
agencies. In addition, there can be no assurance that Tenet will be able to
operate profitably any hospitals, facilities, businesses or other assets it
may acquire or enter into partnerships with, effectively integrate the
operations of such acquisitions or partnerships or otherwise achieve the
intended benefits of such acquisitions and partnerships. While management
believes that certain cost savings may be realized as a result of the
acquisition of OrNda HealthCorp in January 1997, there can be no assurance
that any such savings will actually be realized or as to the timing thereof.
COMPETITION
The healthcare industry has been characterized in recent years by increased
competition for patients and staff physicians, excess capacity at general
hospitals, a shift from inpatient to outpatient treatment settings and increased
consolidation. New competitive strategies of hospitals and other healthcare
providers place increasing emphasis on the use of alternative healthcare
delivery systems (such as home health services, outpatient surgery and emergency
and diagnostic centers) that eliminate or reduce lengths of hospital stays. The
principal factors contributing to these trends are advances in medical
technology and pharmaceuticals, cost-containment efforts by managed care payors,
employers and traditional health insurers, changes in regulations and
reimbursement policies, increases in the number and type of competing healthcare
providers and changes in physician practice patterns. The revenues and operating
results of most of Tenet's hospitals are significantly affected by the
hospitals' ability to negotiate favorable contracts with managed care payors.
Tenet's future success will depend, in part, on the ability of Tenet's hospitals
to continue to attract and retain staff physicians, to enter into managed care
contracts and to organize and structure integrated healthcare delivery systems
with other healthcare providers and physician practice groups. There can be no
assurance that Tenet's hospitals will continue to be able to, on terms favorable
to Tenet, attract and retain physicians to their staffs, enter into managed care
contracts or organize and structure integrated healthcare delivery systems, for
which other healthcare companies with greater financial resources or a wider
range of services may be competing.
LIMITS ON REIMBURSEMENT
Tenet derives a substantial portion of its net operating revenues from
third-party payors, including the Medicare and Medicaid programs. Changes in
government reimbursement programs have resulted in limitations on, increases in,
and in some cases reduced levels of, reimbursement for healthcare services, and
additional changes are anticipated. Such changes are likely to result in further
limitations on reimbursement levels especially because, in order to reach a
balanced budget, the U.S. Congress and the President are in favor of legislating
savings under both the Medicare and Medicaid programs. In addition, private
payors, including managed care payors, increasingly are demanding discounted fee
structures or the assumption by healthcare providers of all or a portion of the
financial risk through prepaid capitation arrangements. Inpatient utilization,
average lengths of stay and occupancy rates continue to be negatively affected
by payor-required pre-admission authorization and utilization review and by
payor pressure to maximize outpatient and alternative healthcare delivery
services for less acutely ill patients. In addition, efforts to impose reduced
allowances, greater discounts and more stringent cost controls by government and
other payors are expected to continue. Although Tenet is unable to predict the
effect these changes
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will have on its operations, as the number of patients covered by managed care
payors increases, significant limits on the scope of services reimbursed and on
reimbursement rates and fees could have a material adverse effect on its
business, financial condition and results of operations.
EXTENSIVE REGULATION
The healthcare industry is subject to extensive Federal, state and local
regulation relating to licensure, conduct of operations, ownership of
facilities, addition of facilities and services and prices for services. In
particular, Medicare and Medicaid antikickback, antifraud and abuse amendments
codified under Section 1128B(b) of the Social Security Act (the "Antikickback
Amendments") prohibit certain business practices and relationships that might
affect the provision and cost of healthcare services reimbursable under Medicare
and Medicaid, including the payment or receipt of remuneration for the referral
of patients whose care will be paid for by Medicare or other governmental
programs. Sanctions for violating the Antikickback Amendments include criminal
penalties and civil sanctions, including fines and possible exclusion from
government programs such as the Medicare and Medicaid programs. Pursuant to the
Medicare and Medicaid Patient and Program Protection Act of 1987, the Department
of Health and Human Services ("HHS") has issued regulations that describe some
of the conduct and business relationships permissible under the Antikickback
Amendments ("Safe Harbors"). The fact that a given business arrangement does not
fall within a Safe Harbor does not render the arrangement PER SE illegal.
Business arrangements of healthcare service providers that fail to satisfy the
applicable Safe Harbor criteria, however, risk increased scrutiny by enforcement
authorities. Because Tenet may be less willing than some of its competitors to
enter into business arrangements that do not clearly satisfy the Safe Harbors,
it could be at a competitive disadvantage in entering into certain transactions
and arrangements with physicians and other healthcare providers. See "--Certain
Legal Proceedings."
The "Health Insurance Portability and Accountability Act of 1996," which
became effective January 1, 1997, amends, among other things, Title XI (42
U.S.C. 1301 ET SEQ.) to broaden the scope of current fraud and abuse laws to
include all health plans, whether or not they are reimbursed as a Federal
program.
In addition, Section 1877 of the Social Security Act, which restricts
referrals by physicians of Medicare and other government-program patients to
providers of a broad range of designated health services with which they have
ownership or certain other financial arrangements, was amended effective January
1, 1995, to significantly broaden the scope of prohibited physician referrals
under the Medicare and Medicaid programs to providers with which they have
ownership or certain other financial arrangements (the "Self-Referral
Prohibitions"). Many states have adopted or are considering similar legislative
proposals, some of which extend beyond the Medicaid program to prohibit the
payment or receipt of remuneration for the referral of patients and physician
self-referrals regardless of the source of the payment for the care. Tenet's
participation in and development of joint ventures and other financial
relationships with physicians and others could be adversely affected by these
amendments and similar state enactments. The Company systematically reviews all
of its operations to ensure that it complies with the Social Security Act and
similar state statutes.
Both Federal and state government agencies have announced heightened and
coordinated civil and criminal enforcement efforts. One pilot project, Operation
Restore Trust, is focused on investigating healthcare providers in the home
health and nursing home industries as well as on medical suppliers to these
providers in California, Florida, Texas, Illinois and New York. Tenet provides
home health and nursing home care in California, Florida and Texas.
Some states require state approval for construction and expansion of
healthcare facilities, including findings of need for additional or expanded
healthcare facilities or services. Certificates of Need, which are issued by
governmental agencies with jurisdiction over healthcare facilities, are at times
required for capital expenditures exceeding a prescribed amount, changes in bed
capacity or services and certain other matters. Following a number of years of
decline, the number of states requiring Certificates of Need is once again on
the rise as state legislators once again are looking at the Certificate of Need
process as a way to contain rising healthcare costs. At February 28, 1997,
Tenet operated hospitals in 18 states
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that require state approval under Certificate of Need programs. Tenet is
unable to predict whether it will be able to obtain any Certificates of
Need in any jurisdiction where such Certificates of Need are required.
Tenet is unable to predict the future course of Federal, state and local
regulation or legislation, including Medicare and Medicaid statutes and
regulations. Further changes in the regulatory framework could have a material
adverse effect on Tenet's business, financial condition and results of
operations.
HEALTHCARE REFORM LEGISLATION
Healthcare is one of the largest industries in the United States and
continues to attract much legislative interest and public attention. Medicare,
Medicaid, mandatory and other public and private hospital cost-containment
programs, proposals to limit healthcare spending, proposals to limit prices and
industry competitive factors are highly significant to the healthcare industry.
In addition, the healthcare industry is governed by a framework of Federal and
state laws, rules and regulations that are extremely complex and for which the
industry has the benefit of little or no regulatory or judicial interpretation.
Although Tenet believes it is in compliance in all material respects with such
laws, rules and regulations, if a determination is made that the Company was in
material violation of such laws, rules or regulations, its business, financial
condition and results of operations could be materially adversely affected.
There continue to be Federal and state proposals that would, and actions
that do, impose more limitations on government and private payments to
providers such as Tenet and proposals to increase co-payments and deductibles
from program and private patients. At the Federal level, both Congress and
the President have in the past, and are expected to in the future, propose
healthcare budgets that substantially reduce payments under the Medicare and
Medicaid programs. For example, in May 1996, both houses of Congress passed
bills that would have significantly reduced Medicare and Medicaid funding by
limiting future increases to the funding for such programs. Although
President Clinton vetoed those bills, the President's own proposals also
propose to limit or reduce increases in future Medicare and Medicaid payments.
Many states have enacted or are considering enacting measures that are
designed to reduce their Medicaid expenditures and to make certain changes to
private healthcare insurance. Various states have applied, or are considering
applying, for a Federal waiver from current Medicaid regulations to allow them
to serve some of their Medicaid participants through managed care providers.
Tennessee has implemented such a revision and Texas has passed a law mandating
the state to apply for such a waiver. Louisiana also is considering wider use of
managed care for its Medicaid populations. California has created a voluntary
health insurance purchasing cooperative that seeks to make healthcare coverage
more affordable for businesses with five to 50 employees and, effective January
1, 1995, began changing the payment system for participants in its Medicaid
program in certain counties from fee-for-service arrangements to managed care
plans. Florida limits the amount by which a hospital's net revenues per
admission may be increased each year, has enacted a program creating a system of
local purchasing cooperatives and has proposed other changes that have not yet
been enacted. Florida has adopted, and other states are considering adopting,
legislation imposing a tax on revenues of hospitals to help finance or expand
those states' Medicaid systems. A number of other states are considering the
enactment of managed care initiatives designed to provide universal low-cost
coverage. These proposals also may attempt to include coverage for some people
who presently are uninsured.
While Tenet anticipates that payments to hospitals will be reduced as a
result of future federal and state legislation, it is uncertain at this time
what legislation regarding healthcare reform may ultimately be enacted or
whether other changes in the administration or interpretation of governmental
healthcare programs will occur. There can be no assurance that future
healthcare legislation or other changes in the administration or
interpretation of governmental healthcare programs will not have a material
adverse effect on Tenet's business, financial condition and results of
operations. A significant reduction in the amount of payments received by
hospitals under government programs such as Medicare
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and Medicaid could have a material adverse effect on Tenet's business, financial
condition and results of operations.
CERTAIN LEGAL PROCEEDINGS
Tenet continues to defend a greater than normal level of litigation relating
to its subsidiaries' former psychiatric operations. The majority of the lawsuits
filed contain allegations of medical malpractice as well as allegations of fraud
and conspiracy against Tenet and certain of its subsidiaries and former
employees. Also named as defendants are numerous doctors and other healthcare
professionals. Tenet believes that the increase in litigation arose primarily
from advertisements made by certain lawyers seeking former psychiatric patients
in order to file claims against Tenet and certain of its subsidiaries. The
advertisements focused, in many instances, on Tenet's settlement of past
disputes involving the operations of its discontinued psychiatric business,
including Tenet's 1994 resolution of the Federal government's investigation and
a corresponding criminal plea agreement involving such discontinued psychiatric
business of Tenet. Among the suits filed during fiscal 1995 were two lawsuits in
Texas state court with approximately 740 individual plaintiffs at present who
purport to have been patients in certain Texas psychiatric facilities. During
fiscal 1996, 64 plaintiffs voluntarily withdrew from one of the lawsuits and
Tenet's motion to recuse the original trial judge in that lawsuit has been
granted. The cases of three of the 740 individual plaintiffs within one of the
lawsuits currently are set for trial in April 1997.
During fiscal 1995 and 1996, lawsuits with approximately 210 plaintiffs at
present who purport to have been patients in certain Washington, D.C.
psychiatric facilities, containing allegations similar to those contained in the
Texas cases described above, were filed in the District of Columbia.
In addition to the above, a purported class action was filed in Texas state
court in May 1995, containing allegations of fraud and conspiracy similar to
those described in the preceding paragraphs. The plaintiff purports to represent
all persons who were voluntarily admitted to one of 11 psychiatric hospitals in
Texas between January 1, 1981 and December 31, 1991, and satisfied certain other
criteria. In February 1996, this case was removed to Federal court. A motion by
the plaintiff to remand the case to Texas state court has been denied. A class
has not been certified and Tenet believes that a class is not capable of being
certified.
Tenet expects that additional lawsuits with similar allegations will be
filed. Tenet believes it has a number of defenses to each of these actions and
will defend these and any additional lawsuits vigorously. Until the lawsuits are
resolved, however, Tenet will continue to incur substantial legal expenses.
Although, based upon information currently available to it, management believes
that the amount of damages, if any, in excess of the reserves Tenet has recorded
for unusual litigation costs that may be awarded in any of the foregoing
unresolved legal proceedings cannot reasonably be estimated, management does not
believe it is likely that any such damages will have a material adverse effect
on Tenet's business, financial condition and results of operations. There can be
no assurance, however, that the ultimate liability will not exceed such
reserves, which primarily represent the estimated costs of defending the
actions.
Two additional Federal class actions filed in August 1993 were consolidated
into one action pending in the U.S. District Court in the Central District of
California captioned In re: National Medical Enterprises Securities Litigation
II. These consolidated actions are on behalf of a purported class of
shareholders who purchased or sold stock of Tenet between January 14, 1993 and
August 26, 1993, and allege that each of the defendants violated Section 10(b)
of the Exchange Act. Based on these claims, plaintiffs seek compensatory
damages, injunctive relief, attorneys' fees, interest and costs. Tenet believes
it has meritorious defenses to this action and will defend this litigation
vigorously.
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THE COMPANY
Tenet is the second largest investor-owned healthcare services company in
the United States. At February 28, 1997, Tenet's subsidiaries owned or leased
and operated 127 general hospitals (with 27,366 licensed beds) and related
healthcare facilities serving urban and rural communities in 22 states. Tenet's
subsidiaries and affiliates also owned or leased and operated various ancillary
healthcare businesses, including outpatient surgery centers, home healthcare
programs, ambulatory, occupational and rural healthcare clinics, a health
maintenance organization, a preferred provider organization and a managed care
insurance company as well as a small number of rehabilitation hospitals,
specialty hospitals, long-term care facilities and psychiatric facilities. In
addition, Tenet's subsidiaries hold the following investments in other
healthcare companies: (i) an approximately 12.1% interest in Vencor, Inc.,
which operates nursing homes and other healthcare businesses, (ii) an
approximately 11.3% interest in Total Renal Care Holdings, Inc., which operates
kidney dialysis units and certain related healthcare businesses and (iii) an
approximately 23% interest in Health Care Property Partners.
On January 30, 1997, Tenet completed its acquisition (the "Merger") of
OrNda HealthCorp ("OrNda"), which, with 49 general hospitals (9,599 licensed
beds) at November 30, 1996, was the third largest investor-owned healthcare
services company in the United States. Many of the hospitals acquired in the
Merger are located in geographic areas where Tenet was already operating
hospitals, including southern California and south Florida. The Merger also
expanded Tenet's operations into several new geographic areas, including
Arizona, Iowa, Massachusetts, Mississippi, Nevada, Oregon, Washington, West
Virginia and Wyoming. The Merger was accounted for on a pooling of interests
basis. OrNda (now known as Tenet HealthSystem HealthCorp) is now a wholly
owned subsidiary of Tenet.
The Company's principal executive offices are located at 3820 State Street,
Santa Barbara, California 93105, and its telephone number is (805) 563-7000.
USE OF PROCEEDS
All of the Shares offered hereby are being offered by the Selling
Shareholders. The Company will not receive any proceeds from the sale of the
Shares. See "Selling Shareholders."
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BUSINESS STRATEGY
The Company's strategic objective is to provide quality healthcare services
responsive to the current managed care environment. Tenet believes that
competition among healthcare providers occurs primarily at the local level.
Accordingly, the Company tailors its local strategies to address the specific
competitive characteristics of the geographic areas in which it operates,
including the number of facilities operated by Tenet, the nature and structure
of physician practices and physician groups, the extent of managed care
penetration, the number and size of competitors and the demographic
characteristics of the area. Key elements of the Company's strategy are:
- to develop integrated healthcare delivery systems by coordinating the
operations and services of the Company's facilities with other hospitals
and ancillary care providers and through alliances with physicians and
physician groups;
- to reduce costs through enhanced operating efficiencies while improving
the quality of care provided;
- to develop and maintain its strong relationships with physicians and
generally to foster a physician-friendly culture;
- to enter into discounted fee for service arrangements, capitated contracts
and other managed care contracts with third party payors; and
- to acquire and enter into strategic partnerships with hospitals, groups of
hospitals, other healthcare businesses, ancillary healthcare providers,
physician practices and physician practice assets where appropriate to
expand and enhance quality integrated healthcare delivery systems
responsive to the current managed care environment.
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BUSINESS DESCRIPTION
The Company's subsidiaries own or lease and operate 127 general hospitals
( 27,366 licensed beds) serving communities in 22 states. In addition, the
Company's subsidiaries own or lease and operate numerous ancillary healthcare
facilities, including a small number of rehabilitation hospitals, long-term
care facilities and psychiatric facilities located on the same campus as, or
nearby, their general hospitals, and operated all or a substantial part of
145 medical office buildings as of February 28, 1997. With the exception of
one general hospital that was acquired in fiscal 1996 and is in the process
of becoming accredited for the first time, each of the Company's facilities
that is eligible for accreditation is fully accredited by the Joint
Commission on Accreditation of Healthcare Organizations ("JCAHO"), or another
appropriate accreditation agency. With such accreditation, the Company's
hospitals are eligible to participate in the Medicare and Medicaid programs.
Each of Tenet's general hospitals offers acute care services and most offer
operating and recovery rooms, radiology services, intensive care and coronary
care nursing units, pharmacies, clinical laboratories, respiratory therapy
services, physical therapy services and outpatient facilities. A number of the
hospitals also offer tertiary care services such as open heart surgery, neonatal
intensive care, neuroscience, orthopedics services and oncology services. Three
of the Company's hospitals, Memorial Medical Center (formerly known as
MercyBaptist Medical Center), USC University Hospital and Sierra Medical Center,
offer quartenary care in such areas as heart, lung, liver and kidney transplants
and USC University Hospital and Sierra Medical Center also offer gamma knife
brain surgery.
Technological developments permitting more procedures to be performed on an
outpatient basis, in conjunction with pressures to contain healthcare costs,
have led to a shift from inpatient care to ambulatory or outpatient care. Tenet
has responded to this trend by enhancing its hospitals' outpatient service
capabilities, including (i) establishing freestanding outpatient surgery centers
at or near certain of its hospital facilities, (ii) reconfiguring certain
hospitals to more effectively accommodate outpatient treatment by, among other
things, providing more convenient registration procedures and separate
entrances, and (iii) restructuring existing surgical capacity to allow a greater
number and range of procedures to be performed on an outpatient basis. Tenet's
facilities will continue to emphasize those outpatient services that can be
provided on a quality, cost-effective basis and that the Company believes will
experience increased demand. The patient volumes and net operating revenues at
both the Company's general hospitals and its outpatient surgery centers are
subject to seasonal variations caused by a number of factors, including but not
necessarily limited to, seasonal cycles of illness, climate and weather
conditions, vacation patterns of both patients and physicians and other factors
relating to the timing of elective procedures.
In addition, inpatient care is continuing to move from acute care to
sub-acute care, where a less-intensive level of care is provided. Tenet has been
proactive in the development of a variety of sub-acute inpatient services to
utilize a portion of its unused capacity, thereby retaining a larger share of
overall healthcare expenditures. By offering cost-effective ancillary services
in appropriate circumstances, Tenet is able to provide a continuum of care where
the demand for such services exists. For example, in certain hospitals the
Company has developed transitional care, rehabilitation and long-term care
sub-acute units. Such units utilize less intensive staffing levels to provide
the range of services sought by payers with a lower cost structure.
Tenet's subsidiaries, including OrNda, have acquired 17 general hospitals
(or interests in general hospitals) since June 1, 1995: (1) in July 1995, a
one-third interest (which subsequently was increased to a 50% interest) in the
82-bed St. Clair Hospital located outside of Birmingham, Alabama, which formerly
was a not-for-profit general hospital; (2 and 3) in August 1995, Memorial
Medical Center (formerly known as MercyBaptist Medical Center), formerly a
not-for-profit system, consisting of two general hospitals with an aggregate of
759 licensed beds located in New Orleans, Louisiana, and related physician
practices; (4) in September 1995, Providence Memorial Hospital located in El
Paso, Texas, which also was a not-for-
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profit general hospital. Providence is licensed for 471 general hospital beds
(34 of which may be used as skilled nursing beds) and is licensed for 30
additional rehabilitation and subacute care beds; (5) in October 1995, a
long-term lease of the 49-bed Medical Center of Manchester and its home health
business, in central Tennessee; (6) in November 1995, the 104-bed Methodist
Hospital of Jonesboro, a not-for-profit general hospital located in Jonesboro,
Arkansas. That hospital now is owned by a limited liability company of which
Tenet owns 95% and is the manager and Tenet's not-for-profit partner St. Vincent
TotalHealth Corporation, owns 5%; (7) in November 1995, the 202-bed University
Medical Center (subsequently re-named Florida Medical Center--South) located in
Plantation, Florida; (8) in January 1996, the 498-bed Houston Northwest Medical
Center located in Houston, Texas; (9) in June 1996, the 378-bed Hialeah Hospital
located in Hialeah, Florida; (10) in July 1996, the 136-bed Cypress Fairbanks
Medical Center located in Houston, Texas; (11) in August 1996, the 400-bed
Centinela Hospital Medical Center located in Inglewood, California; (12) in
September 1996, the 329-bed Saint Vincent Hospital located in Worcester,
Massachusetts; (13) in October 1996, the 319-bed Lloyd Noland Hospital located
in Birmingham, Alabama; (14 and 15) in December 1996, the 296-bed Western
Medical Center located in Santa Ana, California and the 193-bed Western Medical
Center-Anaheim located in Anaheim, California; (16 and 17) in January 1997, the
357-bed North Shore Medical Center located in Miami, Florida and a long-term
lease of the 326-bed Brookside Hospital located in San Pablo, California.
In addition, in August 1995, Tenet entered into an agreement with the
Cleveland Clinic Florida to develop a new 150-bed general hospital in western
Broward County, Florida. Completion of that project is subject to governmental
approvals. In the fourth quarter of fiscal 1996, Tenet converted the Jo Ellen
Smith general hospital in New Orleans, Louisiana, into a specialty hospital. In
April, 1997, Tenet signed a definitive agreement for a long-term lease of the
398-bed Desert Hospital located in Palm Springs, California. That transaction is
expected to close by the end of May.
KEY ELEMENTS OF TENET'S STRATEGY
DEVELOP INTEGRATED HEALTHCARE DELIVERY SYSTEMS. In most geographic areas it
serves, Tenet has established or is developing an integrated healthcare delivery
system to offer a full range of quality patient care responsive to the current
managed care environment by coordinating the services offered by its hospitals
and related facilities with the services offered by other providers. The Company
believes that general hospitals will serve as the hubs for the development of
integrated healthcare delivery systems due to their highly developed
infrastructure, extensive service base, sophisticated equipment and skilled
personnel.
The Company's strategy is implemented in a number of ways depending upon the
characteristics of the local area. In areas where there is significant managed
care penetration or in which the Company anticipates such penetration, the
Company encourages physicians practicing at its hospitals to form independent
physician associations ("IPAs"). As part of its strategy, the Company intends to
form physician hospital organizations ("PHOs") that bring together its hospitals
and IPAs, physicians or physician groups under a variety of arrangements to
negotiate for managed care contracts, including capitated contracts. Tenet has
formed a PHO for the New Orleans area and is in the process of forming PHOs in
several other geographic areas. The Company also has formed management service
organizations ("MSOs"), which provide management and administrative services to
physicians, physician group practices and IPAs, and which enter into managed
care contracts on behalf of these groups and, in certain circumstances in the
future, PHOs. Where appropriate, the Company also purchases physician and
physician group practices and employs such physicians or purchases the assets of
those practices and manages such practices through its MSOs or otherwise.
The Company uses various combinations of one or all of the foregoing methods
in each geographic area to create a community of interest between its hospitals
and the physicians who practice there, to which it adds additional resources,
where necessary, to create an integrated healthcare delivery system capable of
providing a full range of healthcare services to the community. In areas where
the Company has a
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significant presence, such as southern California, south Florida, and the
greater New Orleans area, it uses its own resources to establish and expand its
integrated healthcare delivery systems.
For example, in California, the Company is developing the Tenet California
HealthSystem, an integrated healthcare delivery system linking Tenet's 45
general hospitals (33 of which are in southern California) and other health care
facilities in California with physicians and other healthcare professionals as
well as other healthcare providers' facilities in geographic areas throughout
the state. In south Florida, the Company has created the Tenet South Florida
HealthSystem, an integrated healthcare delivery system consisting of 12 general
hospitals (six of which are tertiary care hospitals), and numerous related
healthcare operations. In the greater New Orleans area the Company has
established and is expanding the Tenet Louisiana HealthSystem, an integrated
healthcare delivery system with eight general hospitals, several specialty care
hospitals and numerous other healthcare operations.
Another example of how this integrated delivery strategy is being
implemented is the Company's Redding Medical Center, a tertiary care hospital
located in a primarily rural area in northern California, around which hospital
the Company is developing such a system, with the hospital itself acting as the
hub. Affiliations with physician practices, non-Tenet primary care hospitals, an
outpatient surgery center developed in partnership with local physicians and
affiliated ancillary care providers in the surrounding area enable this system
to provide a full range of healthcare services. In addition, the Company has
introduced its HMO product to this geographic area. The Company believes that
the development of such integrated healthcare delivery systems will enhance its
ability to contract with payors in those areas that have experienced or will
experience a high degree of managed care penetration.
REDUCE COSTS THROUGH ENHANCED OPERATING EFFICIENCY WHILE IMPROVING THE
QUALITY OF CARE. The Company continues to position itself as a provider of
quality healthcare services responsive to the current managed care environment
by enhancing operating efficiencies at the hospital, regional and corporate
levels. For example, the Company has implemented programs at the hospital level
to monitor and adjust staffing levels in response to patient acuity and hospital
census, and to improve service and the quality of outcomes while reducing
operating expenses through the reengineering of the delivery of patient care in
its hospitals. At several of the Company's hospitals, job functions have been
redefined and services have been moved directly to the patient floors. Tenet
believes that increasing the amount of patient care delivered at the bedside
will increase patient satisfaction while reducing costs. This initiative also
has enhanced the ability of professionals to focus their attention on higher
levels of patient care.
In order to reduce costs and achieve economies of scale at the regional
level, the Company has combined the hospital business offices of facilities
located in close geographic proximity. Consolidating business offices allows the
Company's hospitals to reduce staffing levels while enhancing the effectiveness
of their billing and collection efforts. The Company also has reduced costs and
achieved economies of scale at the hospital, regional and corporate levels by
consolidating the collection of accounts receivable through its Syndicated
Office Systems debt collection subsidiary and negotiating purchase contracts
that take greater advantage of its group purchasing program. In addition,
management believes that certain cost savings may be realized following the
Merger. No assurances can be made as to the amount of cost savings, if any, that
actually will be realized.
DEVELOP AND MAINTAIN STRONG RELATIONSHIPS WITH PHYSICIANS. Tenet believes
that its success will depend in large part on maintaining strong relationships
with physicians. To better serve the needs of its patients, Tenet has devoted
substantial management effort and resources to establishing and maintaining such
relationships and to fostering a physician-friendly culture at each of its
hospitals. The Company attracts physicians to its hospitals by equipping its
hospitals with technologically advanced equipment, sponsoring training programs
to educate physicians on advanced medical procedures, using governing boards for
each hospital, the primary voting members of which are physicians and community
members and otherwise creating an environment within which physicians prefer to
practice. The Company often is at the forefront in introducing new services,
medical equipment and medical technologies designed to improve patient care
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and assist physicians. These efforts serve the dual purposes of developing and
maintaining strong relationships with physicians and better serving the needs of
patients.
The Company looks to physicians to play an active role in the governance of
its hospitals. For example, each of the Company's hospitals has a governing
board, the members of which primarily are physicians who are members of the
medical staff and local community members. These boards develop short and
long-term plans for the hospitals and review and approve, as appropriate,
actions of the medical staff, including staff appointments, credentialing, peer
review and quality assurance. The Company also maintains a physician advisory
board that provides advice to the Company with respect to long-term strategy,
emerging technologies, training programs and significant hospital operational
issues. This advisory board serves as another vehicle through which physicians
on the staffs of the Company's hospitals can communicate their views to the
Company.
ENTER INTO MANAGED CARE CONTRACTS. The Company believes that its extensive
experience operating in California, which has a high degree of managed care
penetration, will enhance its ability to compete successfully in other
geographic areas that are experiencing an increase in managed care. Pressures to
control healthcare costs have resulted in a continuing increase in the
percentage of the United States population that is covered by managed healthcare
plans. To increase the cost-effectiveness of healthcare delivery, managed care
payors have introduced new utilization review systems, increased the use of
discounted and capitated fee arrangements and have attempted, where appropriate,
to direct patients to less intensive alternatives along the continuum of patient
care. Managed care payors typically require members or provide financial
incentives for members to utilize only those healthcare providers that have
contracted with such payors to provide care on a discounted or capitated basis.
Accordingly, in order to maintain and increase their patient base as managed
care penetration increases, it is important for providers to enter into such
contracts. In determining with which providers to contract, payors consider,
among other factors, the quality of care provided, the range of services, the
geographic coverage and the cost-effectiveness of the care provided. Tenet
believes that the development and expansion of its integrated healthcare
delivery systems will enable it to better compete for managed care contracts,
which, in turn, should allow it to expand its patient volume and cash flow,
notwithstanding the reduced rates at which services may be provided under such
contracts.
PURSUE STRATEGIC ACQUISITIONS AND PARTNERSHIPS. The Company intends to
continue to pursue aggressively strategic acquisitions of and partnerships with
hospitals, other healthcare businesses, ancillary healthcare providers,
physician practices and physician practice assets, where appropriate, to expand
and enhance its integrated healthcare delivery systems. Examples of recent
strategic acquisitions are the Company's June 1996 acquisition of Hialeah
Hospital, a 378-bed general hospital located in Hialeah, Florida and the January
1997 acquisition of North Shore Medical Center, a 357-bed general hospital
located in Miami, Florida. Hialeah Hospital's location in Hialeah and North
Shore Medical Center's location in Miami, both in north Dade County, have
enhanced the geographic coverage of the Tenet South Florida HealthSystem and
increased the number of general hospitals in that system to 12. Tenet believes
that significant opportunities exist to enter into additional partnerships and
make strategic acquisitions, where appropriate, in the furtherance of its
strategy.
13
<PAGE>
DOMESTIC PROPERTIES
The following table sets forth certain information relating to each of the
127 hospitals (27,366 licensed beds) operated by the Company at February 28,
1997. Two of those hospitals currently are being independently managed pursuant
to an agreement entered into with the Federal Trade Commission in connection
with the Merger, one of which the Company expects to sell by August 1, 1997, and
the other of which will resume being managed by the Company upon the sale of the
first.
<TABLE>
<CAPTION>
LICENSED
GEOGRAPHIC AREA/STATE FACILITY LOCATION BEDS STATUS
- ------------------------------- --------------------------------------- ------------------- ------------- ---------
<S> <C> <C> <C> <C>
Southern California Alvarado Hospital Medical Center San Diego 231 Owned
Brotman Medical Center Culver City 438 Owned
Centinela Hospital Medical Center Inglewood 400 Owned
Century City Hospital (1) Los Angeles 190 Leased
Chapman Medical Center (1) Orange 135 Leased
Coastal Communities Hospital (2) Santa Ana 177 Owned
Community Hospital of Huntington Park
(1) Huntington Park 99 Leased
Encino Hospital (1)(3) Encino 151 Leased
Fountain Valley Regional Hospital and
Medical Center Fountain Valley 413 Owned
Garden Grove Hospital and Medical
Center Garden Grove 167 Owned
Garfield Medical Center Monterey Park 211 Owned
Greater El Monte Community Hospital South El Monte 113 Owned
Harbor View Medical Center San Diego 156 Owned
Irvine Medical Center (1) Irvine 176 Leased
John F. Kennedy Memorial Hospital Indio 130 Owned
Lakewood Regional Medical Center Lakewood 161 Owned
Los Alamitos Medical Center Los Alamitos 173 Owned
Medical Center of North Hollywood North Hollywood 160 Owned
Midway Hospital Medical Center Los Angeles 225 Owned
Mission Hospital of Huntington Park Huntington Park 127 Owned
Monterey Park Hospital Monterey Park 102 Owned
Placentia Linda Community Hospital Placentia 114 Owned
San Dimas Community Hospital San Dimas 93 Owned
Santa Ana Hospital Medical Center (1) Santa Ana 90 Leased
South Bay Medical Center (1) Redondo Beach 201 Leased
St. Luke Medical Center Pasadena 165 Owned
Suburban Medical Center (1) Paramount 184 Leased
Tarzana Regional Medical Center (1)(3) Tarzana 233 Leased
USC University Hospital (4) Los Angeles 286 Leased
Western Medical Center--Anaheim Anaheim 193 Owned
Western Medical Center Santa Ana 296 Owned
Whittier Hospital Medical Center Whittier 159 Owned
Woodruff Community Hospital Long Beach 96 Owned
Northern and Other California Brookside Hospital (1) San Pablo 312 Leased
Community Hospital & Rehabilitation
Center of Los Gatos (1) Los Gatos 164 Leased
Doctors Hospital of Manteca Manteca 73 Owned
Doctors Medical Center of Modesto Modesto 433 Owned
Doctors Hospital of Pinole (1) Pinole 137 Leased
French Hospital Medical Center (5) San Luis Obispo 147 Owned
Redding Medical Center Redding 185 Owned
San Ramon Regional Medical Center San Ramon 123 Owned
Sierra Vista Regional Medical Center San Luis Obispo 199 Owned
Twin Cities Community Hospital Templeton 84 Owned
Valley Community Hospital (1)(6) Santa Maria 70 Leased
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
LICENSED
GEOGRAPHIC AREA/STATE FACILITY LOCATION BEDS STATUS
- ------------------------------- --------------------------------------- ------------------- ------------- ---------
<S> <C> <C> <C> <C>
South Florida Coral Gables Hospital (7) Coral Gables 273 Owned
Delray Community Hospital Delray Beach 224 Owned
Florida Medical Center (8) Ft. Lauderdale 459 Owned
Florida Medical Center, South Plantation 202 Owned
Hialeah Hospital Hialeah 378 Owned
Hollywood Medical Center Hollywood 324 Owned
North Ridge Medical Center Ft. Lauderdale 391 Owned
North Shore Medical Center Miami 357 Owned
Palm Beach Gardens Medical Center (1) Palm Beach Gardens 204 Leased
Palmetto General Hospital Hialeah 360 Owned
Parkway Regional Medical Center (9) North Miami 689 Owned
West Boca Medical Center Boca Raton 185 Owned
Tampa/St. Petersburg, Florida Memorial Hospital of Tampa
Area Tampa 174 Owned
North Bay Medical Center New Port Richey 122 Owned
Palms of Pasadena Hospital St. Petersburg 310 Owned
Seven Rivers Community Hospital Crystal River 128 Owned
Town and Country Hospital Tampa 201 Owned
New Orleans, Louisiana Area Doctors Hospital of Jefferson (1) Metairie 138 Leased
Kenner Regional Medical Center Kenner 300 Owned
Meadowcrest Hospital Gretna 200 Owned
Memorial Medical Center Mid-City New Orleans 272 Owned
Memorial Medical Center Uptown New Orleans 526 Owned
Northshore Regional Medical Center (1) Slidell 174 Leased
St. Charles General Hospital New Orleans 173 Owned
Phoenix/Tucson, Arizona Community Hospital Medical Center Phoenix 43 Owned
Mesa General Hospital Medical Center
(1) Mesa 125 Leased
St. Luke's Medical Center (1) Phoenix 276 Leased
Tempe St. Luke's Hospital (1) Tempe 110 Leased
Tucson General Hospital Tucson 119 Owned
Dallas, Texas Area Doctors Hospital Dallas 268 Owned
Garland Community Hospital Garland 113 Owned
Lake Pointe Medical Center (10) Rowlett 92 Owned
RHD Memorial Medical Center (1) Dallas 190 Leased
Trinity Medical Center (1) Carrollton 149 Leased
Houston, Texas Area Cypress Fairbanks Medical Center Houston 149 Owned
Houston Northwest Medical Center (11) Houston 498 Owned
Park Plaza Hospital (12) Houston 468 Owned
Sharpstown General Hospital Houston 190 Owned
Twelve Oaks Hospital Houston 336 Owned
Other Texas Brownsville Medical Center Brownsville 177 Owned
Mid-Jefferson Hospital Nederland 138 Owned
Nacogdoches Medical Center Nacogdoches 150 Owned
Odessa Regional Hospital (13) Odessa 100 Owned
Park Place Medical Center Port Arthur 244 Owned
Providence Memorial Hospital El Paso 471 Owned
Sierra Medical Center El Paso 365 Owned
South Park Hospital and Medical Center Lubbock 101 Owned
Southwest General Hospital San Antonio 286 Owned
Trinity Valley Medical Center Palestine 150 Owned
Alabama Brookwood Medical Center Birmingham 586 Owned
Lloyd Noland Hospital Birmingham 319 Owned
St. Clair Hospital (1)(14) Birmingham 82 Leased
Arkansas Central Arkansas Hospital Searcy 193 Owned
Methodist Hospital of Jonesboro (15) Jonesboro 104 Owned
National Park Medical Center Hot Springs 165 Owned
St. Mary's Regional Hospital Russellville 170 Owned
Georgia North Fulton Regional Hospital (1) Roswell 167 Leased
Spalding Regional Hospital Griffin 160 Owned
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
LICENSED
GEOGRAPHIC AREA/STATE FACILITY LOCATION BEDS STATUS
- ------------------------------- --------------------------------------- ------------------- ------------- ---------
<S> <C> <C> <C> <C>
Indiana Culver Union Hospital Crawfordsville 120 Owned
Winona Memorial Hospital Indianapolis 148 Owned
Missouri Columbia Regional Hospital (16) Columbia 265 Owned
Lucy Lee Hospital (1) Poplar Bluff 201 Leased
Lutheran Medical Center St. Louis 408 Owned
Twin Rivers Regional Medical Center Kennett 118 Owned
North Carolina Central Carolina Hospital Sanford 137 Owned
Frye Regional Medical Center (1) Hickory 355 Leased
Oregon Eastmoreland Hospital Portland 100 Owned
Woodland Park Hospital (4) Portland 209 Leased
South Carolina East Cooper Community Hospital Mount Pleasant 100 Owned
Hilton Head Hospital (17) Hilton Head 64 Owned
Piedmont Medical Center Rock Hill 268 Owned
Tennessee John W. Harton Regional Medical Center Tullahoma 137 Owned
Medical Center of Manchester (1) Manchester 49 Leased
Saint Francis Hospital Memphis 693 Owned
University Medical Center Lebanon 261 Owned
Nine additional states Davenport Medical Center Davenport, IA 150 Owned
Gulf Coast Medical Center Biloxi, MI 189 Owned
Lake Meade Hospital Medical Center North Las Vegas, NV 198 Owned
Lander Valley Medical Center Lander, WY 102 Owned
Minden Medical Center Minden, LA 121 Owned
Plateau Medical Center Oak Hill, WV 91 Owned
Puget Sound Hospital Tacoma, WA 160 Owned
Saint Joseph Hospital Omaha, NE 374 Owned
Saint Vincent Hospital Worcester, MA 329 Owned
</TABLE>
- ------------------------------
(1) Leased from a third party.
(2) Owned by a partnership in which a Tenet subsidiary owns 50% and is the
managing general partner.
(3) Leased by a partnership in which Tenet's subsidiaries own a 75% interest.
(4) On leased land.
(5) Independently managed and being held for sale.
(6) Independently managed until French Hospital Medical Center is sold, at
which time Valley Community Hospital will resume being managed by a Tenet
subsidiary.
(7) Owned by a partnership in which Tenet's subsidiaries own a 90% interest.
(8) Owned by a partnership in which Tenet's subsidiaries own an 85% interest.
(9) Effective September 1, 1996, the 352 bed license of Golden Glades Medical
Center was combined with the license of this nearby hospital resulting in
this hospital's licensed beds increasing to 689 licensed beds.
(10) Owned by a partnership in which Tenet's subsidiaries own an 80% interest.
(11) Owned by a partnership in which Tenet's subsidiaries own a 70% interest.
(12) Excludes the 38-bed Plaza Specialty Hospital in Houston, Texas, the
financial results of which are combined with Park Plaza Hospital.
(13) Owned by a partnership in which Tenet's subsidiaries own an 83% interest.
(14) A Tenet subsidiary owns a 50% interest in the limited liability company
that leases this hospital. This hospital's financial results are not
consolidated with Tenet's financial results and it is not included in the
count of the total number of hospitals owned or leased by Tenet because
Tenet does not manage or control the management of this hospital.
(15) Owned by a limited liability company of which a Tenet subsidiary owns 95%
and is the managing member.
(16) Excludes the 64-bed Keller Memorial Hospital in Columbia, Missouri, the
financial results of which were combined with the Columbia Regional
Hospital. The lease for Keller Memorial Hospital was terminated during the
first quarter of fiscal 1996.
(17) Owned by a partnership in which Tenet's subsidiaries own a 70% interest.
16
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth information with respect to the number of
Shares owned by each of the Selling Shareholders and the number of Shares
that may be offered hereby by each Selling Shareholder. The number of Shares
set forth for each Selling Shareholder other than JLL is based on the maximum
number of Shares that may be distributed to such Selling Shareholder by JLL
assuming a price per share of Tenet Common Stock of $26, the closing price of
Tenet Common Stock as reported on the New York Stock Exchange Composite Tape
on April 8, 1997. In connection with any offering and sale of the Shares,
the names of the Selling Shareholders participating in such offering and the
respective number of Shares being offered by each Selling Shareholder will be
set forth in an accompanying Prospectus Supplement and will be determined on
the basis of the price to the public and the underwriting discount, if any,
at the time of the sale of such Shares. The aggregate number of shares of
Common Stock held by the Selling Shareholders is 9,580,644. The Company has
agreed to pay the fees and expenses of registration, including the fees and
expenses (not to exceed $50,000) for one counsel on behalf of the Selling
Shareholders, in connection with the sale of the Shares offered hereby (other
than underwriting discounts and commissions, which will be paid by the
Selling Shareholders).
<TABLE>
<CAPTION>
Number of Number of Number of
Shares Owned Shares Shares Owned
Name Prior to Offering Being Offered After the Offering
- ---- --------------------- ------------- ------------------
<S> <C> <C> <C>
Joseph Littlejohn & Levy Fund, L.P.(1) ................. 9,580,644 9,580,644 0
JLL Partners
- --------
California Public Employees' Retirement System(2)...... 1,830,775 1,830,775 0
New York State Common Retirement Fund(2)............... 812,745 812,745 0
Pension Reserves Investment Management Fund(2)......... 732,339 732,339 0
Rockefeller Foundation(2).............................. 366,243 366,243 0
State of Wisconsin Investment Board(2)................. 366,243 366,243 0
Virginia Retirement System(2).......................... 732,339 732,339 0
Yale University(2)..................................... 366,243 366,243 0
Oregon Public Employees' Retirement System(2).......... 1,098,435 1,098,435 0
E.E.S. Distressed Securities Fund, L.P.(2)............. 183,048 183,048 0
State of Montana Board of Investments(2)............... 18,261 18,261 0
State Universities Retirement System(2)................ 54,929 54,929 0
Orange County Employees' Retirement System(2).......... 73,190 73,190 0
Public Employees' Retirement Association of Colorado(2) 1,098,435 1,098,435 0
JLL Associates, L.P.(1)(2)............................. 1,847,417 1,847,417 0
--------------------- ------------- ------------------
Total 9,580,644 9,580,644 0
</TABLE>
1. Peter A. Joseph and Paul S. Levy, the general partners of JLL Associates,
L.P., the general partners of JLL, were members of the Company's Board of
Directors from January 30, 1997 until April 9, 1997.
2. Estimated amounts assuming a distribution to such Selling Shareholders by
JLL calculated using a price per share of Tenet Common Stock of $26.00,
the closing price of Tenet Common Stock as reported on the New York Stock
Exchange Composite Tape on April 8, 1997. The actual amounts to be sold
by such each Selling Shareholders will be determined on the basis of the
price to the public less the underwriting discount at the time of the
sale of the Shares by such Selling Shareholders.
PLAN OF DISTRIBUTION
The shares may be sold from time to time by the Selling Shareholders in
underwritten public offerings, in any one or more transactions (which may
involve block transactions) on the Exchanges, in the over-the-counter market, on
NASDAQ, on any exchange on which the Common Stock may then be listed or
otherwise in negotiated transactions, or a combination of such methods of sale,
at market prices prevailing at the time of sale or at negotiated prices. The
Selling Shareholders may effect such transactions by selling shares to or
through broker-dealers, and such broker-dealers may sell the shares as agent or
may purchase such shares as principal and resell them for their own account
pursuant to this Prospectus. Such broker-dealers may receive compensation in
the form of underwriting discounts, concessions or commissions from the Selling
Shareholders and/or purchasers of shares for whom they may act as agent (which
compensation may be in excess of customary commissions). To the extent
required, the names of any underwriter and applicable commissions or discounts
and any other required information with respect to any particular offer will be
set forth in an accompanying Prospectus Supplement.
17
<PAGE>
In connection with such sales, the Selling Shareholders and any
participating brokers or dealers may be deemed to be "underwriters" as defined
in the Securities Act, in which event all brokerage commissions or discounts and
other compensation received by such brokers or dealers may be deemed
underwriting compensation under the Securities Act. In addition, any of the
securities that qualify for sale pursuant to Rule 144 may be sold under Rule 144
rather than pursuant to this Prospectus.
LEGAL MATTERS
Certain legal matters with respect to the Shares offered hereby will be
passed upon for the Company by Scott M. Brown, Senior Vice President, Secretary
and General Counsel of the Company. As of March 31, 1997, Mr. Brown owned 2,794
shares of Common Stock and had outstanding options to purchase 201,634 shares of
Common Stock pursuant to Company benefit plans.
EXPERTS
The consolidated financial statements and schedule of Tenet Healthcare
Corporation as of May 31, 1996 and 1995, and for each of the years in the
three-year period ended May 31, 1996, have been incorporated by reference herein
and in the Registration Statement in reliance upon the reports of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP covering the consolidated
financial statements refers to a change in the method of accounting for income
taxes in 1994.
The consolidated financial statements of OrNda HealthCorp at August 31,
1996 and 1995, and for each of the three years in the period ended August 31,
1996, incorporated by reference in the Tenet Healthcare Corporation Current
Report on Form 8-K dated February 12, 1997 have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon and incorporated
by reference therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
FORWARD LOOKING STATEMENTS
Prospective investors are cautioned that the statements in this Prospectus
and in documents incorporated by reference herein that are not descriptions of
historical facts constitute forward looking statements that are subject to risks
and uncertainties. The Company's actual results could differ materially from
those currently anticipated in these forward looking statements due to, among
other things, certain factors described in documents incorporated by reference
herein, including, without limitation, the Tenet 10-K.
18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFERING
COVERED BY THIS PROSPECTUS SUPPLEMENT. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE SELLING SHAREHOLDERS. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY THE COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM,
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT
BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
-----------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
THE COMPANY................................................................. S-2
USE OF PROCEEDS............................................................. S-2
SELLING STOCKHOLDERS........................................................ S-3
UNDERWRITING................................................................ S-4
LEGAL MATTERS............................................................... S-5
PROSPECTUS
AVAILABLE INFORMATION....................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................. 2
RISK FACTORS................................................................ 3
THE COMPANY................................................................. 9
USE OF PROCEEDS............................................................. 9
BUSINESS STRATEGY........................................................... 10
SELLING SHAREHOLDERS........................................................ 18
PLAN OF DISTRIBUTION........................................................ 18
LEGAL MATTERS............................................................... 19
EXPERTS..................................................................... 19
FORWARD LOOKING STATEMENTS.................................................. 19
-----------------------------
---------------------
TENET HEALTHCARE
CORPORATION
6,634,792 SHARES OF COMMON STOCK
(PAR VALUE $0.075)
---------------------
PROSPECTUS SUPPLEMENT
---------------------
APRIL ___, 1997
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Securities and Exchange Commission fee . . . . . . . . . . . . .$76,935
Printing and Engraving fees. . . . . . . . . . . . . . . . . . .$ *
Accounting fees and expenses . . . . . . . . . . . . . . . . . .$ *
Legal fees and expenses. . . . . . . . . . . . . . . . . . . . .$ *
Blue sky fees and expenses . . . . . . . . . . . . . . . . . . .$ *
Miscellaneous fees and expenses. . . . . . . . . . . . . . . . .$ *
Total fees and expenses . . . . . . . . . . . . . . . . .$ *
- -----------------
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.751 of the Nevada General Corporation Law ("Nevada Law")
provides generally and in pertinent part that a Nevada corporation may indemnify
its directors and officers against expenses, judgments, fines, and settlements
actually and reasonably incurred by them in connection with any civil suit or
action, except actions by or in the right of the corporation, or any
administrative or investigative proceeding if, in connection with the matters in
issue, they acted in good faith and in a manner they reasonably believed to be
in, or not opposed to, the best interests of the corporation, and in connection
with any criminal suit or proceeding, if in connection with the matters in
issue, they had no reasonable cause to believe their conduct was unlawful.
Section 78.751 further provides that, in connection with the defense or
settlement of any action by or in the right of the corporation, a Nevada
corporation may indemnify its directors and officers against expenses actually
and reasonably incurred by them if, in connection with the matters in issue,
they acted in good faith, in a manner they reasonably believed to be in, or not
opposed to, the best interest of the corporation. Section 78.751 further permits
a Nevada corporation to grant its directors and officers additional rights of
indemnification through by-law provisions and otherwise.
Article X of the Restated Articles of Incorporation, as amended, of the
Registrant (the Restated Articles") and Article IX of the Restated By-Laws, as
amended, of the Registrant (the "Restated Bylaws") provide that the Registrant
shall indemnify its directors and officers to the fullest extent permitted by
Nevada Law. The Registrant has entered into indemnification agreements with each
of its directors and executive officers. Such indemnification agreements are
intended to provide a contractual right to indemnification, to the maximum
extent permitted by law, for expenses (including attorneys' fees), judgments,
penalties, fines, and amounts paid in settlement actually and reasonably
incurred by the person to be indemnified in connection with any proceeding
(including, to the extent permitted by applicable law, any derivative action) to
which they are, or are threatened to be made, a party by reason of their status
in such positions. Such indemnification agreements do not change the basic legal
standards for indemnification set forth under Nevada Law, the Restated Articles
or the Restated Bylaws. Such agreements are intended to be in furtherance, and
not in limitation of, the general right to indemnification provided in the
Restated Articles and Restated Bylaws.
II - 1
<PAGE>
Section 78.037 of the Nevada Law provides that the articles of
incorporation may contain, and Tenet's Restated Articles do contain, a provision
eliminating or limiting the personal liability of a director or officer to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director provided that such provision shall not eliminate or limit the
liability of a director or officer (i) for acts or omissions which involve
intentional misconduct or a knowing violation of law, or (ii) under Section
78.300 of the Nevada Law (relating to liability for unauthorized acquisitions or
redemptions of, or dividends on, capital stock). The Company's Restated
Articles and Restated Bylaws permit indemnification of directors and officers in
terms sufficiently broad to indemnify officers and directors under certain
circumstances for liabilities (including expense reimbursement) arising under
the Securities Act. The Company also maintains an indemnification agreement
with each of its Directors and any officer designated by the Company's Board of
Directors insuring them against certain liabilities incurred by them in the
performance of their duties, including liabilities under the Securities Act. In
addition, the Company has directors and officers liability insurance policies.
ITEM 16. EXHIBITS.
*1.1 Form of Purchase Agreement among Tenet Healthcare Corporation, the
Selling Shareholders and the Underwriters
5.1 Opinion of Scott M. Brown
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Ernst & Young LLP
23.3 Consent of Scott M. Brown (included in his opinion filed as
Exhibit 5.1)
24.1 Power of Attorney (included on page II-4 of this Registration
Statement)
________
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) (1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
II - 2
<PAGE>
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at the time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, the Nevada Law,
the Restated Articles of Incorporation, and the Restated Bylaws, as amended, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(d) (i) For purposes of determining liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained
in a prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II - 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Santa Barbara, State of California on April 11,
1997.
TENET HEALTHCARE CORPORATION
By: /s/ Scott M. Brown
--------------------------------
Scott M. Brown
Senior Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jeffrey C. Barbakow, Trevor Fetter, Raymond L.
Mathiasen and Scott M. Brown and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and any related registration statements pursuant
to Rule 462 of the Securities Act of 1933, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitutes or substitute, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below on April 11, 1997, by the
following persons in the capacities indicated:
TENET HEALTHCARE CORPORATION
/s/ Trevor Fetter /s/ Scott M. Brown
- ------------------------------------- -----------------------------------
Trevor Fetter Scott M. Brown
Executive Vice President Senior Vice President
Chief Financial Officer
(Principal Financial Officer)
/s/ Raymond L. Mathiasen
- -------------------------------------
Raymond L. Mathiasen
Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
II - 4
<PAGE>
SIGNATURE TITLE
/s/ Jeffrey C. Barbakow Chairman, Chief Executive
- ----------------------------------- Officer and Director (Principal
Jeffrey C. Barbakow Executive Officer)
/s/ Michael H. Focht, Sr. President, Chief Operating
- ----------------------------------- Officer and Director
Michael H. Focht, Sr.
/s/ Bernice Bratter Director
- -----------------------------------
Bernice Bratter
/s/ Maurice J. DeWald Director
- -----------------------------------
Maurice J. DeWald
/s/ Peter de Wetter Director
- -----------------------------------
Peter de Wetter
/s/ Edward Egbert, M.D. Director
- -----------------------------------
Edward Egbert, M.D.
/s/ Raymond A. Hay Director
- -----------------------------------
Raymond A. Hay
/s/ James P. Livingston Director
- -----------------------------------
James P. Livingston
/s/ Richard S. Schweiker Director
- -----------------------------------
Richard S. Schweiker
II - 5
<PAGE>
EXHIBIT INDEX
*1.1 Form of Purchase Agreement among Tenet Healthcare Corporation, the
Selling Shareholders and the Underwriters
5.1 Opinion of Scott M. Brown
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Ernst & Young LLP
23.3 Consent of Scott M. Brown (included in his opinion filed as
Exhibit 5.1)
24.1 Power of Attorney (included on page II-4 of this Registration
Statement)
___________
* To be filed by amendment.
<PAGE>
EXHIBIT 5.1
April 10, 1997
Tenet Healthcare Corporation
3820 State Street
Santa Barbara, CA 93105
Gentlemen:
I am the General Counsel of Tenet Healthcare Corporation, a Nevada
corporation (the "Company"), and in such capacity I have examined the
Company's Registration Statement on Form S-3 (the "Registration Statement")
under the Securities Act of 1933, as amended (the "1933 Act"), for the
registration of 9,580,644 shares of the Company's common stock, $0.075 par
value per share (the "Shares"), that may be offered for sale by the persons
listed under the heading "Selling Shareholders" (the "Selling Shareholders")
in the Registration Statement.
I have examined and am familiar with originals or copies, certified or
otherwise identified to my satisfaction, of such documents, corporate records,
certificates of public officials and officers of the Company and such other
instruments as I have deemed necessary or appropriate as a basis for the
opinions expressed below.
Based on the foregoing, I am of the opinion that the Shares are duly
authorized, legally issued, fully paid and nonassessable.
I hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement. In giving such consent, I do not thereby admit that I
come within the category of persons whose consent is required under Section 7 of
the 1933 Act, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
/s/ Scott M. Brown
Scott M. Brown
<PAGE>
EXHIBIT 23.1
AUDITORS' CONSENT
The Board of Directors
Tenet Healthcare Corporation:
We consent to the use of our reports dated July 25, 1996 incorporated herein
by reference in the Registration Statement on Form S-3 of Tenet Healthcare
Corporation, relating to the consolidated balance sheets of Tenet Healthcare
Corporation and subsidiaries as of May 31, 1996 and 1995, and the related
consolidated statements of operations, shareholders' equity and cash flows
for each of the years in the three-year period ended May 31, 1996, and the
related schedule, and to the reference to our firm under the heading
"Experts" in the prospectus. Our report on the consolidated financial
statements refers to a change in the method of accounting for income taxes in
1994.
KPMG PEAT MARWICK LLP
Los Angeles, California
April 9, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3) and related Prospectus of Tenet
Healthcare Corporation for the registration of 9,580,644 shares of the common
stock of Tenet Healthcare Corporation and to the incorporation by reference
of our report dated October 25, 1996 with respect to the consolidated
financial statement of OrNda HealthCorp at August 31, 1996 and 1995, and for
each of the three years in the period ended August 31, 1996, incorporated by
reference in the Tenet Healthcare Corporation Current Report on Form 8-K
dated February 12, 1997.
ERNST & YOUNG LLP
Nashville, Tennessee
April 9, 1997
