Settlement Will Restore Funds to AHERF-Related Charities; Millions To Go for Research, Education and Community Health Initiatives.

Business Editors & Legal Writers

PITTSBURGH--(BUSINESS WIRE)--Jan. 16, 2002

Millions of dollars in endowment funds and other restricted assets allegedly used for operational purposes by the Allegheny Health, Education and Research Foundation (AHERF) will be restored to their intended charitable and educational purposes under terms of a settlement agreement filed today with the U.S. District Court here.

The settlement, if approved by U.S. District Judge Donald Ziegler and the Orphan's Court in Philadelphia, will conclude litigation filed in early 2000 by Tenet HealthSystem Philadelphia, a subsidiary of Tenet Healthcare Corporation (NYSE:THC), and joined by Pennsylvania Attorney General Mike Fisher together with two Philadelphia non-profit charitable organizations created after AHERF filed for bankruptcy protection and Tenet purchased its Philadelphia-area hospitals. Several other AHERF-related lawsuits brought by creditors and AHERF's bankruptcy trustee will also be concluded by this settlement.

The lawsuits were filed against a number of former AHERF directors and officers, as well as Mellon Bank and its parent, Mellon Financial Corporation. The settlement is expected to be funded mostly by insurance carriers.

At least $24.5 million will be recovered as part of the settlement, an amount that could ultimately increase to as much as $34.625 million. Most of the restored charitable assets will go to the Philadelphia Health and Education Corporation (PHEC), which operates and supports research and education at MCP Hahnemann University (including its School of Medicine), and Franklin Health Trust (formerly Philadelphia Health and Research Corporation), which supports local health initiatives in the Philadelphia area. A portion of the funds will also be restored to charitable interests affiliated with Allegheny General Hospital (AGH) in Pittsburgh, which also suffered a loss of assets.

Tenet and its Philadelphia-area hospitals will not receive any of the funds being recovered.

"The AHERF collapse was a deep wound on the health care system of Pennsylvania. From the beginning, Tenet's goal has been to restore confidence in the Philadelphia-area hospitals we purchased as well as the endowments that support medical education and community health initiatives," said Barry A. Wolfman, senior vice president of operations for Tenet's Pennsylvania region. "We are proud of the role Tenet has played in saving these vital health care facilities and restoring the charitable funds to their intended purposes."

Wolfman added: "This settlement also is a clear message that donors can once again feel confident that contributions they generously make for medical research, education and other worthwhile community initiatives will be protected and used only for purposes they intended."

Donna Gentile O'Donnell, president of Franklin Health Trust, said: "This settlement brings closure to a sad chapter in Philadelphia's health care history. Many people have worked long and hard to satisfy the outstanding interests of the citizens of Pennsylvania. We are especially grateful to Atty. Gen. Mike Fisher and to Tenet, and we look forward to our continuing role in ensuring that these restored assets are properly applied to the interests of Pennsylvanians."

The lawsuits alleged that funds from restricted AHERF accounts held in trust at Mellon Bank were used to cover AHERF's operating losses instead of their original charitable purposes. This loss of funds seriously reduced medical research, scholarships, supplies, equipment purchases and indigent care supported by PHEC and Franklin Health Trust.

The settlement includes the immediate payment of $20.5 million, and another $4 million over the next four years. The amount recovered may ultimately grow to as much as $34.625 million due to interests held by the endowment claimants in an ongoing lawsuit brought by AHERF's creditors against AHERF's former auditors as well as litigation against insurance companies not participating in this settlement. Subject to Orphan's Court approval, it is anticipated that about 55 percent of the total recovery will go to PHEC, 35 percent to Franklin Health Trust and 10 percent to charities associated with AGH.

Tenet Healthcare, through its subsidiaries, owns and operates 116 acute care hospitals with 28,786 beds and numerous related health care services. Its hospitals and subsidiaries employ approximately 113,500 people serving communities in 17 states. Tenet's name reflects its core business philosophy: the importance of shared values among partners -- including employees, physicians, insurers and communities -- in providing a full spectrum of health care. Tenet can be found on the World Wide Web at www.tenethealth.com.

In Philadelphia, Tenet owns and operates 618-bed Hahnemann University Hospital, 465-bed Medical College of Pennsylvania Hospital, 303-bed Graduate Hospital, 183-bed St. Christopher's Hospital for Children, 200-bed Parkview Hospital, 180-bed Warminster Hospital and 280-bed Elkins Park Hospital.

Certain statements in this release may constitute forward-looking statements. They are based on management's current expectations and could be affected by numerous factors and are subject to various risks and uncertainties. Certain of those risks and uncertainties are discussed in the Company's filings with the Securities and Exchange Commission, including the Company's annual report on Form 10-K and quarterly reports on Form 10-Q. Do not rely on any forward-looking statement, as we cannot predict or control many of the factors that ultimately may affect our ability to achieve the results estimated. 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.