Tenet, U.S. Department of Justice Reach Broad Settlement

Tenet Healthcare Corporation (NYSE: THC):
Accord Concludes Investigations of Medicare
Outliers, All Other DOJ Issues; Tenet to Pay $725 Million Over 4
Years, Waive $175 Million in Medicare Payments
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Company to Enter Into Corporate Integrity Agreement
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11 Hospitals Will Be Divested by Mid-2007;
Management Revises Outlook for 2006, Discusses
Intermediate-Term Earnings Potential
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Capital Investments in Hospitals to Be Accelerated;
2006 Spending and Commitments Expected to Reach $800 Million;
Focus Is on Technology, Patient Care Enhancements
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Company to Host Investor Web Cast at 11 a.m. (EDT) Today,
Schedules Investor Conference for July 13

Tenet Healthcare Corporation (NYSE: THC) announced today that ithas reached a broad settlement agreement with the U.S. Department ofJustice and other federal agencies that will conclude investigationsconducted by the department and a number of U.S. attorneys across thecountry into Tenet's receipt of certain Medicare outlier paymentsbefore 2003, physician financial arrangements and Medicare codingissues.

Under terms of the settlement, Tenet will pay $725 million over aperiod of four years plus interest as restitution for Medicare outlierpayments and to settle other Medicare billing matters. The companyalso agreed to waive its right to pursue receipt of $175 million incertain Medicare payments for past services.

The settlement will conclude all federal investigations conductedby the Department of Justice and the U.S. attorneys with no findingthat Tenet had engaged in illegal behavior.

"With this settlement, the company acknowledges that Tenet mademistakes in its conduct before 2003," said Trevor Fetter, Tenet'spresident and chief executive officer. "Health care is a heavilyregulated industry. Regulators depend on providers to be trustworthyand to set and abide by their own high ethical standards. Some of thiscompany's past actions did not measure up to the high standards thatwe have imposed on ourselves since these issues first arose. Thegovernment is both our largest customer and most important regulator,and it is vital for Tenet to be recognized for doing the right thing."

Fetter added, "We have made much progress with our reforms inclinical quality, corporate culture, management, transparency,governance, compliance and strategy. The organization was humbledbecause of what happened, but these challenges galvanized us to makenecessary changes. As a result, Tenet is a stronger and bettercompany."

Fetter concluded, "It is a tribute to the dedication of all ouremployees that we have not only survived but have built a solidfoundation for sustained success in the future. I also want to expressmy deep gratitude to our thousands of affiliated physicians for theirpatience and loyalty to our hospitals during the challenges of thepast several years."

The company said the settlement announced today will concludepreviously disclosed investigations into Medicare outlier payments bythe U.S. attorney in Los Angeles, as well as physician financialarrangements by U.S. attorneys in Los Angeles, El Paso, Memphis, St.Louis, San Francisco and New Orleans. It will also conclude civillitigation regarding Medicare coding that the Department of Justicefiled against the company in January 2003.

The cash settlement will be paid according to the followingschedule: $450 million, plus interest of approximately $20 million onthe full amount of $725 million from November 1, 2005 through June 30,2006, to be paid on June 30, 2006; and $275 million, plus interestaccruing on that amount at a simple rate of 4.125 percent, to be paidin 12 quarterly installments beginning November 1, 2007 and endingAugust 1, 2010.

In addition, the company agreed as part of the settlement to waiveits right to pursue receipt of $175 million in certain outlier anddisproportionate share payments that have never been recorded by thecompany pending a resolution of these issues and the uncertainty thatthey would ever be received.

The company said it would report a charge for the settlement inthe second quarter ending June 30.

Tenet said the agreement does not involve the Securities andExchange Commission. The company continues to work with the SEC towardresolving all issues related to the adequacy of its financialdisclosures regarding Medicare outlier payments and stop-loss paymentsunder managed care contracts.
CORPORATE INTEGRITY AGREEMENT

The company also has reached an agreement in principle with theOffice of Inspector General in the U.S. Department of Health and HumanServices to enter into a multi-year corporate integrity agreement.Under the agreement, OIG has committed that it will not exclude Tenethospitals or entities from any federal health care program providedTenet executes an acceptable corporate integrity agreement, which thecompany expects to do within 90 days.

In connection with the corporate integrity agreement, Tenet willmaintain its existing compliance program, including the oversight roleof its board of directors with respect to compliance. Also, thecompany will retain an independent review organization to provide anexternal review of the company's ongoing compliance in the areas ofMedicare coding, physician financial relationships, setting ofhospital charges and quality of care. Other terms will be contained inthe comprehensive agreement, which is currently being finalized.

"Tenet has significantly enhanced its internal compliance functionsince 2003," Fetter said. "Therefore, we expect to fulfill the termsof the corporate integrity agreement without adding additionalresources, except for external reviews required to monitor ourcompliance with the agreement."

Tenet now has a compliance staff of approximately 100 people,including individual compliance officers in each of its four regionaloffices and most of its hospitals or hospital markets. Tenet's chiefcompliance officer reports directly to the Quality, Compliance andEthics committee of the company's board of directors.
PLANNED HOSPITAL DIVESTITURES

Tenet also announced today a strategic plan to divest a total of11 hospitals in order to enhance the company's future profitability,expand capital investments in its remaining hospitals and help fundthe settlement. This total includes the previously announceddivestiture of Alvarado Hospital Medical Center in San Diego.

In the first quarter of 2006, the 11 hospitals being divested -plus the already-divested Gulf Coast Medical Center in Biloxi, Miss. -had aggregate net operating revenues of $203 million and EBITDA ofnegative $3 million, before the allocation of corporate overhead.(EBITDA is a non-GAAP term that the company uses to measure itsoperating performance and is defined as earnings before interestexpense less investment earnings, tax, depreciation and amortizationand minority interest.) Once these divestitures are complete, Tenetwill operate 57 hospitals in 12 states. The company's fifty-eighthhospital, now under construction in El Paso, Texas, is scheduled toopen in early 2008, and the company recently won permission to buildits fifty-ninth hospital in Fort Mill, S.C.

"Because of uncertainties in the New Orleans market and the needfor health care consolidation in the aftermath of Hurricane Katrina,we have made the difficult decision to seek new ownership for four ofour five New Orleans-area hospitals," Fetter said. "We have alsodecided to divest three of our five hospitals in Philadelphia in orderto concentrate all our efforts on Hahnemann University Hospital andSt. Christopher's Hospital for Children, as well as our academicaffiliation with Drexel University School of Medicine."
The hospitals to be divested are:

1. Alvarado Hospital Medical Center, San Diego, Calif. 306 beds.
(On May 17, Tenet announced that it was required by the
government to sell or close this hospital.)
2. Cleveland Clinic Hospital, Weston, Fla. 150 beds. (Tenet's
partner in this hospital, The Cleveland Clinic Foundation,
earlier this year announced its intention to exercise its
contractual option this summer to purchase Tenet's 51 percent
interest.)
3. Graduate Hospital, Philadelphia, Pa. 190 beds.
4. Hollywood Medical Center, Hollywood, Fla. 324 beds.
5. Kenner Regional Medical Center, Kenner, La. 203 beds.
6. Lindy Boggs Medical Center, New Orleans, La. 187 beds.
7. Meadowcrest Hospital, Gretna, La. 207 beds.
8. Memorial Medical Center, New Orleans, La. 317 beds.
9. Parkway Regional Medical Center, North Miami, Fla. 382 beds.
10. Roxborough Memorial Hospital, Philadelphia, Pa. 137 beds.
11. Warminster Hospital, Warminster, Pa. 145 beds.

The company expects to record impairment and restructuring chargesin its financial results for the second quarter ending June 30, as aresult of these planned divestitures. The divestitures are expected tobe complete by mid-2007.

Tenet has established a 24-hour toll-free telephone line for thoseinterested in purchasing these hospitals. Qualified parties shouldcall (800) 307-5578.
ENHANCED CAPITAL SPENDING IN CORE HOSPITALS

Tenet announced that it intends to accelerate capital spendingcommitments in 2006 in order to make additional, immediateimprovements in its remaining 57 hospitals. The company said it hasrevised its outlook for capital spending this year and now expects tospend or commit approximately $800 million compared to the range of$550 million to $650 million it previously expected to spend or commitduring 2006. The company said the additional capital will be focusedon technology and patient care enhancements.

"Our top priority is improving the competitive positions of ourhospitals," Fetter said. "This additional commitment of capital willpermit our hospitals to move quickly to buy new equipment, expandservices and improve care."

Among other things, the additional capital will go to purchase orconstruct:

-- 22 advanced multi-slice CT scanners

-- 13 new or expanded heart catheterization labs

-- Two expanded or renovated emergency rooms

-- 12 new or upgraded magnetic resonance imaging machines

-- 14 upgraded hospital labs

-- 13 nuclear medicine cameras
REVISED OUTLOOK FOR 2006

On March 2, 2006, in its release of earnings for the fourthquarter of 2005, Tenet provided investors with its outlook for 2006for the 69 hospitals in continuing operations at that time, whichincluded an outlook in a range between breakeven and a pre-tax loss of$100 million, excluding any impact of potential charges to resolvelitigation or investigations, impairment, restructuring or specialcharges, or the results of discontinued operations, or recoveries fromoutstanding claims from insurance carriers. Any of these factors couldsignificantly impact the results of 2006 and beyond.

The 11 hospitals Tenet intends to divest, along with thealready-divested Gulf Coast Medical Center, will be reclassified asdiscontinued operations in the second quarter of 2006. As a result ofthese anticipated divestitures and lower anticipated patient volumesfor 2006, the company's revised outlook for 2006 with the reducednumber of hospitals in continuing operations is for a range from apre-tax loss of $75 million to pre-tax income of $25 million andEBITDA of $675 million to $775 million, excluding any impact ofvarious charges or other items listed above.

Tenet said it has revised its 2006 outlook to include thefollowing: net revenues from continuing operations of approximately$8.7 billion; depreciation and amortization expense of approximately$360 million; interest expense net of investment earnings and minorityinterest of approximately $385 million; income tax expense or benefitfrom continuing operations is assumed to be immaterial as a result ofpotential changes in the company's deferred tax valuation allowancepreviously recorded; an expected bad debt expense ratio (adjusted forTenet's Compact With Uninsured Patients) of 13.5 percent of netoperating revenues; cash flow from operations in a positive range of$325 million to $425 million; capital expenditures of approximately$700 million (excluding approximately $100 million of expected 2006commitments for which the cash expenditure is expected to occur in2007).

These revisions result in an outlook for free cash flow (definedas cash flow from operations less capital expenditures) in an expectedrange of a negative $275 million to a negative $375 million. Thisrevised 2006 outlook excludes all announced payments to be made thisyear to settle litigation and investigations, which total $643 million(including the $470 million, principle and interest, to be paid in2006 on the Department of Justice settlement announced today), as wellas any potential future settlements.
INTERMEDIATE-TERM EARNINGS POTENTIAL

Tenet expects the additional divestitures and the continuingimplementation of its strategies for earnings growth to have amaterial positive impact on its earnings performance over anintermediate time frame of two to three years. Its actual financialperformance will be heavily influenced by a variety of factors,including its ability to restore growth in patient volumes, maintainexisting favorable trends in pricing, and achieve incremental costefficiencies.

To estimate the effect of these strategies on its earningspotential over this two-to-three year period, Tenet made the followingassumptions for continuing operations beginning in 2007:

-- Annual inpatient admission growth of approximately 1.5 percent;

-- Annual growth in outpatient visits of approximately 2 percent;

-- Bad debt expense adjusted for Tenet's Compact With Uninsured Patients declining gradually from 13.5 percent to approximately 12.5 percent;

-- A continuation of recent trends in managed care pricing with annual percentage increases in the mid-single digits;

-- Annual growth in controllable operating expenses limited to 4.5 percent;

-- Omission of results from two Dallas hospitals whose master lease expires in mid-2007 and may not be renewed.

Based on these assumptions, Tenet believes its EBITDA margin canbe improved to the range of 11 to 13 percent over the next two tothree years, excluding special charges or recoveries from insurancecarriers. (EBITDA margin is a non-GAAP term that is reconciled to GAAPterms later in this section.) Based on these assumptions, cash flowfrom operations (which does not include capital expenditures) has thepotential to be in the range of $750 million to $950 million.

Tenet's performance will be highly sensitive to the aboveassumptions. It is unlikely that an improvement in earnings of thisdegree can be achieved if these assumptions are not met.

This intermediate-term earnings potential is below some of Tenet'spublic-company peers. There are two principal reasons for this. First,this assessment of intermediate earnings potential covers only thenext two to three years. Tenet expects to continue to identify andimplement strategies with the potential for further incrementalearnings enhancement. Second, Tenet has a relatively larger portion ofits hospitals in states where hospitals generally earn lower margins(California and Florida), and a relatively smaller portion of itshospitals in states where hospitals earn higher margins (states in theSoutheast).

The required reconciliation to GAAP terms of Tenet's expressedpotential of an 11 to 13 percent EBITDA margin over the next two tothree years is as follows: an assumed range of pre-tax income of $265million to $465 million, assumed depreciation and amortization in therange of $400 million to $420 million, assumed interest expense (netof investment earnings and minority income) in the range of $420million to $430 million, yields EBITDA of $1.1 billion to $1.3billion. Assuming net operating revenues of $9.6 billion to $10.2billion, this would result in an EBITDA margin of 11 to 13 percent.Income tax expense or benefit from continuing operations is assumed tobe immaterial as a result of potential changes in the company'sdeferred tax valuation allowance previously recorded. The change tothe valuation allowance depends on a future assessment of Tenet'sdeferred tax assets and may be material but cannot be determined atthis time. The company provides non-GAAP information as a supplementto its GAAP information, and investors should not view it as asubstitute for GAAP information.
INVESTOR WEB CAST AND CONFERENCE ARE SCHEDULED

Tenet said its management will discuss this announcement withinvestors during a web cast today beginning at 11 a.m. Eastern time.The company also said its management will hold an in-depth investorconference on July 13 to discuss Tenet's business strategy andoperations. Both events will be available live and archived throughthe Tenet website at www.tenethealth.com.
BACKGROUND

Outlier payments

Tenet acknowledged in December 2002 that between 2000 and 2002 itreceived a large amount of Medicare "outlier" revenues. Outlierrevenues are additional payments made to hospitals for treating thecostliest Medicare cases.

Because Medicare policies at that time set the amount of outlierpayments as a percentage of a hospital's gross charges, as chargesincreased at approximately 50 Tenet hospitals between 2000 and 2002,significant outlier payments were made to these hospitals by theMedicare program.

In late 2002, Tenet's new management team froze charges at all itshospitals and adopted a new method of calculating requested Medicareoutlier payments that cut the payments by 90 percent, effectiveJanuary 1, 2003. These same standards for billing of Medicare outlierpayments were later adopted by the Medicare program for the entirehospital industry.
Physician Financial Arrangements

Tenet has disclosed that, since at least late 2002, it has beenunder heightened scrutiny by federal prosecutors with respect to itshospitals' relationships with physicians, particularly with respect torelocation agreements that are used throughout the hospital industryto attract new physicians who are needed by a community. Thesettlement will resolve separate investigations by U.S. attorneys inLos Angeles, El Paso, Memphis, St. Louis, San Francisco and NewOrleans. It will also conclude civil litigation regarding Medicarecoding that the Department of Justice had filed against the company inJanuary 2003.

On May 17, 2006, the company announced a separate settlement of acase involving Alvarado Hospital Medical Center, which was a defendantin a criminal prosecution related to physician relocation agreementsat Alvarado. Two trials in that case ended with deadlocked juries. Aspart of the settlement, the company agreed to pay the government $21million and was required to sell or close the hospital. On May 30,2006, federal prosecutors dismissed all criminal charges against aTenet ownership entity, the hospital and Alvarado's former chiefexecutive officer.

The company significantly revamped its physician relationshippolicies in the summer of 2004 to assure that it remains in strictcompliance with federal regulations.

Tenet Healthcare Corporation, through its subsidiaries, owns andoperates acute care hospitals and related health care services.Tenet's hospitals aim to provide the best possible care to everypatient who comes through their doors, with a clear focus on qualityand service. Tenet can be found on the World Wide Web atwww.tenethealth.com.

Some of the statements in this release may constituteforward-looking statements. Such statements are based on our currentexpectations and could be affected by numerous factors and are subjectto various risks and uncertainties discussed in our filings with theSecurities and Exchange Commission, including our annual report onForm 10-K for the year ended Dec. 31, 2005, our quarterly reports onForm 10-Q and periodic reports on Form 8-K. Do not rely on anyforward-looking statement, as we cannot predict or control many of thefactors that ultimately may affect our ability to achieve the resultsestimated. We make no promise to update any forward-looking statement,whether as a result of changes in underlying factors, new information,future events or otherwise.