TENET HEALTHCARE CORP - FORM 8-K - EX-99.1

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8-K - FORM 8-K - TENET HEALTHCARE CORP	d234644d8k.htm

Exhibit 99.1

LOGO

Tenet Reports Results for the Second Quarter Ended June 30, 2016

•

Tenet reported a net loss from continuing operations of $44 million and earnings per share from continuing operations was a loss of $0.44.

•

Adjusted EBITDA was $617 million and Adjusted diluted earnings per share from continuing operations was $0.38.

•

Same-hospital patient revenue grew 4.4% in the second quarter, driven by 0.5% growth in adjusted admissions and 3.9% growth in revenue per adjusted admission. Hospital segment Adjusted EBITDA totaled $415 million.

•

Ambulatory Care segment revenue increased 11.7% on a pro forma same-facility system-wide basis in the second quarter, with cases increasing 5.2% and revenue per case increasing 6.1%. Adjusted EBITDA for the ambulatory segment was $139 million, a 20.9% increase on a pro forma basis.

•

Revenue from Conifer Health Solutions increased 13.5% in the second quarter with revenue from third parties increasing 28.0%. Conifer generated $63 million of Adjusted EBITDA in the second quarter, representing a margin of 16.3%.

•

Net cash provided by operating activities in the first half of 2016 was $582 million, a $229 million improvement when compared to $353 million of cash provided by operating activities in the first half of 2015. Adjusted Free Cash Flow was $268 million in the first half of 2016, a $180 million improvement when compared to $88 million in the first half of 2015.

•

Tenet believes that it has reached an agreement in principle with the government to resolve the Clinica de la Mama criminal investigation and civil litigation for $514 million.

•

Reiterated Adjusted EBITDA Outlook for 2016.

DALLAS – August 1, 2016 – Tenet Healthcare Corporation (NYSE:THC) reported a net loss from continuing operations of $44 million in the second quarter of 2016, a $16 million improvement when compared to a $60 million net loss from continuing operations in the second quarter of 2015. Adjusted EBITDA was $617 million in the second quarter of 2016, an increase of $49 million, or 8.6 percent, compared to $568 million in the second quarter of 2015.

“Our strategic investments in high-acuity service lines helped us to grow same-hospital patient revenue and revenue per adjusted admission,” said Trevor Fetter, chairman and chief executive officer. “Our Conifer Health and USPI subsidiaries performed well and both achieved double-digit revenue growth. We are pleased with the progress we are making on our core strategies across all three business segments and remain on track to meet our Adjusted EBITDA Outlook for the year.”

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Hospital Operations and Other Segment

Net operating revenue in the hospital operations and other segment increased to $4.202 billion, up 0.6 percent from $4.175 billion in the second quarter of 2015. On a same-hospital basis, patient revenue increased to $3.743 billion, up 4.4 percent from $3.586 billion in the second quarter of 2015. The increase was driven by a 0.5 percent increase in adjusted patient admissions and a 3.9 percent increase in net patient revenue per adjusted admission.

Adjusted EBITDA in Tenet’s hospital segment was $415 million, representing a decline of 9.6 percent as compared to $459 million in the second quarter of 2015. The decline was primarily driven by divestitures and a decline in electronic health record incentives, and was partially offset by acquisitions.

Total hospital segment selected operating expenses, defined as the sum of salaries, wages and benefits, supplies and other operating expenses, increased 3.4 percent per adjusted admission in the quarter. Approximately half of the 3.4 percent increase was attributable to a $47 million increase in expense at Tenet’s health plan business, which was substantially offset by higher plan premium revenues, and incremental expense related to our discounted malpractice liabilities as a result of the decline in Treasury rates.

Exchanges

Tenet’s same-hospital exchange admissions were 5,478 in the second quarter of 2016, up 14.9 percent from the second quarter of 2015. Same-hospital exchange outpatient visits were 52,020, up 30.5 percent from the second quarter of 2015.

Uncompensated Care

Tenet’s provision for doubtful accounts was $352 million in the second quarter of 2016, representing a ratio of 6.7 percent of revenues before bad debt, as compared to $352 million in the second quarter of 2015, or 7.3 percent of revenues before bad debt. Tenet’s uncompensated care cost, defined as the sum of the provision for doubtful accounts, charity care write-offs and uninsured discounts, was $1.210 billion and $1.226 billion in the second quarters of 2016 and 2015, respectively, including $858 million and $874 million, respectively, of charity care write-offs and uninsured discounts that were offered through Tenet’s Compact with Uninsured Patients. Uncompensated care represented 19.9 percent of revenue before bad debts, uninsured discounts and charity care write-offs in the second quarter of 2016, down from 21.4 percent in the second quarter of 2015. Nearly all of Tenet’s uncompensated care is associated with the Hospital Operations and other segment.

Uninsured plus charity admissions increased by 688 admissions, or 7.9 percent on a same-hospital basis in the second quarter of 2016 compared to the second quarter of 2015. Uninsured plus charity outpatient visits decreased by 692 visits, or 0.6 percent, on a same-hospital basis.

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Ambulatory Care Segment

The results of many of the facilities in which the Ambulatory Care segment has an investment are not consolidated by Tenet. To help analyze the segment’s results of operations, management uses system-wide measures which include revenues and cases of both consolidated and unconsolidated facilities. Tenet’s acquisition of a majority interest in USPI and all of Aspen on June 16, 2015 makes the year-over-year comparisons less meaningful since they were not owned for the entire year. In order to improve comparability, Tenet is presenting the results for the Ambulatory Care segment on a pro forma basis, including the results of USPI and Aspen in each comparable period.

During the second quarter of 2016, the Ambulatory segment produced net operating revenue of $442 million, representing an increase of 37.3 percent as compared to $322 million in the second quarter of 2015 on a pro forma basis. On a pro forma same-facility system-wide basis, revenue in the Ambulatory segment increased 11.7 percent, with cases increasing 5.2 percent and revenue per case increasing 6.1 percent.

Tenet’s Ambulatory segment generated Adjusted EBITDA of $139 million in the second quarter of 2016, up 20.9 percent from $115 million in the second quarter of 2015 on a pro forma basis.

Conifer Segment

During the second quarter of 2016, Conifer’s revenue increased 13.5 percent to $386 million, up from $340 million in the second quarter of 2015, and Conifer’s revenue from third party customers increased by 28.0 percent to $224 million. Conifer generated $63 million of Adjusted EBITDA in the second quarter of 2016, up 5.0 percent from $60 million in the second quarter of 2015.

Net Income and Earnings Per Share

Tenet reported a net loss from continuing operations of $44 million, or $0.44 per share, in the second quarter of 2016 compared to a net loss of $60 million, or $0.60 per share, in the second quarter of 2015.

After adjusting for certain items which are listed on Table #2, Tenet generated Adjusted net income from continuing operations of $38 million, or $0.38 per diluted share, during the second quarter of 2016. During the second quarter of 2015, the Company generated Adjusted net income from continuing operations of $76 million, or $0.75 per diluted share.

A reconciliation of GAAP net income available (loss attributable) to Tenet Healthcare Corporation common shareholders to Adjusted net income from continuing operations and Adjusted diluted earnings per share from continuing operations is contained in Table #2 at the end of this release.

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Cash Flow and Liquidity

Cash and cash equivalents were $656 million at June 30, 2016 compared to $728 million at March 31, 2016. The Company had no outstanding borrowings on its $1 billion credit line as of June 30, 2016. Accounts receivable days outstanding were 51.1 at June 30, 2016 compared to 50.6 at March 31, 2016 and 49.5 at December 31, 2015. The increase in accounts receivable days outstanding was primarily attributable to receivables that were retained from divested hospitals, including the sale of the Company’s hospitals in the Atlanta area and North Carolina.

Net cash provided by operating activities in the six months ended June 30, 2016 was $582 million, representing a $229 million improvement compared to $353 million in the comparable period in 2015. After subtracting $413 million and $359 million of capital expenditures in the six months ended June 30, 2016 and June 30, 2015, respectively, Free Cash Flow was $169 million in the six months ended June 30, 2016, representing a $175 million improvement compared to a $6 million outflow in the comparable period in 2015. Adjusted Free Cash Flow was $268 million in the six months ended June 30, 2016, representing a $180 million improvement from $88 million in the comparable period in 2015.

Net cash provided by investing activities was $54 million in the six months ended June 30, 2016 compared to $985 million of net cash used in investing activities in the comparable period in 2015. Net cash used in financing activities was $336 million in the six months ended June 30, 2016 compared to $738 million of net cash provided by financing activities in the comparable period in 2015.

Reconciliations of net cash provided by (used in) operating activities to both Free Cash Flow and Adjusted Free Cash Flow are contained in Table #3 at the end of this release.

Clinica de la Mama Update

The Company believes that it has reached an agreement in principle with the government to resolve the Clinica de la Mama criminal investigation and civil litigation for $514 million. Based on the agreement in principle, we have increased our reserve from $407 million to $516 million to reflect the monetary components of the agreement in principle and certain other costs. This amount is reflected in Tenet’s consolidated balance sheet as of June 30, 2016 as accrued legal settlement costs. The increase in reserve lowered net income by approximately $67 million or $0.67 per share during the second quarter of 2016. Tenet expects the payment to be made as early as the third quarter of 2016, and to be funded through general corporate sources of liquidity, including cash on the balance sheet and borrowings under the Company’s revolving credit facility.

In addition to the monetary component, the agreement in principle includes the following non-monetary terms: (i) the execution of a Non-Prosecution Agreement, which includes the appointment of a corporate monitor for a period of three years; (ii) the agreement of the two indirect, wholly owned subsidiaries that previously operated Atlanta Medical Center and North

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Fulton Hospital, and which currently have no operating assets, to each plead guilty to a single-count indictment; and (iii) the execution of a corporate integrity agreement. The final resolution is subject to the negotiation and execution of definitive agreements. For additional information regarding these and other terms of the agreement in principle, see Note 10 to the Consolidated Financial Statements included in the Company’s Form 10-Q for the three months ended June 30, 2016.

Outlook

The Company’s Outlook for 2016 includes:

•

Revenue of $19.5 billion to $19.8 billion,

•

Net loss from continuing operations ranging from a loss of $65 million to a loss of $30 million,

•

Adjusted EBITDA of $2.4 billion to $2.5 billion,

•

Net cash provided by operating activities of $1.2 billion to $1.3 billion,

•

Adjusted Free Cash Flow of $400 million to $600 million,

•

Loss per share from continuing operations ranging from a loss of $0.66 to a loss of $0.30 per basic share, and

•

Adjusted diluted earnings per share from continuing operations of $1.32 to $1.67.

The Outlook for calendar year 2016 assumes equity in earnings of unconsolidated affiliates of $110 million to $130 million, electronic health record incentives of $25 million to $35 million, net income attributable to noncontrolling interests of $330 million to $350 million (excluding the additional $18 million of noncontrolling interests recorded by USPI in the first quarter of 2016, as discussed in our first quarter earnings release) and an average diluted share count of 102 million.

The Company’s Outlook for the third quarter of 2016 includes:

•

Revenue of $4.75 billion to $4.85 billion,

•

Net income from continuing operations of $10 million to $25 million,

•

Adjusted EBITDA of $550 million to $600 million,

•

Earnings per diluted share from continuing operations of $0.10 to $0.25, and

•

Adjusted diluted earnings per share from continuing operations of $0.10 to $0.25.

The Outlook for the third quarter assumes equity in earnings of unconsolidated affiliates of approximately $25 million, electronic health record incentives of less than $5 million, net income attributable to noncontrolling interests of $80 million to $90 million and an average diluted share count of 102 million.

Additional details on Tenet’s Outlook for both the third quarter and calendar year 2016 are available in Tables 4 and 5 at the end of this press release and in an accompanying slide presentation that is accessible through the Company’s website at www.tenethealth.com/investors.

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Management’s Webcast Discussion of Second Quarter Results

Tenet management will discuss the Company’s second quarter 2016 results on a webcast scheduled for 10:00 a.m. EDT (9:00 a.m. CDT) on August 2, 2016. Investors can access the webcast through Tenet’s website at www.tenethealth.com/investors. A set of slides, which will be referred to on the conference call, is available on the Quarterly Results section of the Company’s website.

Additional information regarding Tenet’s quarterly results of operations is contained in its Form 10-Q report for the three months ended June 30, 2016, which will be filed with the Securities and Exchange Commission and posted on the Tenet website before the webcast. This press release includes certain non-GAAP measures, such as Adjusted EBITDA, Adjusted net income from continuing operations, Adjusted diluted earnings per share from continuing operations, Free Cash Flow and Adjusted Free Cash Flow. Reconciliations of these measures to the most comparable GAAP measure are contained in the tables at the end of this release.

Tenet Healthcare Corporation is a diversified healthcare services company with 130,000 employees united around a common mission: to help people live happier, healthier lives. Through its subsidiaries, partnerships and joint ventures, including United Surgical Partners International, the Company operates 79 general acute care hospitals, 20 short-stay surgical hospitals and over 470 outpatient centers in the United States, as well as nine facilities in the United Kingdom. Tenet’s Conifer Health Solutions subsidiary provides technology-enabled performance improvement and health management solutions to hospitals, health systems, integrated delivery networks, physician groups, self-insured organizations and health plans. For more information, please visit www.tenethealth.com.

The terms “THC”, “Tenet Healthcare Corporation”, “the Company”, “we”, “us” or “our” refer to Tenet Healthcare Corporation or one or more of its subsidiaries or affiliates as applicable.

###

Corporate Communications

Charles Nicolas

469-893-2640

mediarelations@tenethealth.com

Investor Relations

Brendan Strong

469-893-6992

investorrelations@tenethealth.com

This release contains “forward-looking statements” – that is, statements that relate to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “assume,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include, but are not limited to, the factors disclosed

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under “Forward-Looking Statements” and “Risk Factors” in our Form 10-K for the year ended December 31, 2015 and other filings with the Securities and Exchange Commission. Among other things, these factors include adverse regulatory developments, government investigations or litigation, including the payment of civil and criminal monetary penalties and other conditions required in connection with the proposed settlement and resolution of the Clinica de la Mama civil litigation and criminal investigation described in Note 10 to the Consolidated Financial Statements included in our Form 10-Q for the three months ended June 30, 2016. The settlement and resolution of the Clinica de la Mama matters is subject to the execution of definitive documents and court acceptance. Although the Company believes it will reach a final resolution of the Clinica de la Mama matters, there can be no assurance that such a resolution will be reached or that judicial acceptance of the resolution terms will be received. If a resolution is not reached or accepted, or if the terms of the final resolution are materially different than the agreement in principle, the eventual loss related to these matters could materially exceed the amount reserved and could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Tenet uses its Company website to provide important information to investors about the

Company including the posting of important announcements regarding financial

performance and corporate developments.

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TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


(Dollars in millions except per share amounts)	Three Months Ended June 30,
	2016			%			2015			%			Change
Net operating revenues:
Net operating revenues before provision for doubtful accounts	$	5,220					$	4,844						7.8	%
Less: Provision for doubtful accounts		352						352						—	%

Net operating revenues		4,868			100.0	%		4,492			100.0	%		8.4	%
Equity in earnings of unconsolidated affiliates		30			0.6	%		16			0.4	%		87.5	%
Operating expenses:
Salaries, wages and benefits		2,316			47.6	%		2,185			48.6	%		6.0	%
Supplies		773			15.9	%		707			15.7	%		9.3	%
Other operating expenses, net		1,213			24.9	%		1,081			24.1	%		12.2	%
Electronic health record incentives		(21	)		(0.4	)%		(33	)		(0.7	)%		(36.4	)%
Depreciation and amortization		215			4.4	%		197			4.4	%
Impairment and restructuring charges, and acquisition-related costs		22			0.4	%		193			4.3	%
Litigation and investigation costs		114			2.3	%		14			0.3	%
Gains on sales, consolidation and deconsolidation of facilities		(1	)		—	%		—			—	%

Operating income		267			5.5	%		164			3.7	%
Interest expense		(244	)					(217	)
Investment earnings (losses)		2						(1	)

Net income (loss) from continuing operations, before income taxes		25						(54	)
Income tax expense		16						27

Net income (loss) from continuing operations, before discontinued operations		41						(27	)
Discontinued operations:
Loss from operations		(2	)					(2	)
Income tax benefit		—						1

Net loss from discontinued operations		(2	)					(1	)

Net income (loss)		39						(28	)
Less: Net income attributable to noncontrolling interests		85						33

Net loss attributable to Tenet Healthcare Corporation common shareholders	$	(46	)				$	(61	)

Amounts attributable to Tenet Healthcare Corporation common shareholders
Net loss from continuing operations, net of tax	$	(44	)				$	(60	)
Net loss from discontinued operations, net of tax		(2	)					(1	)

Net loss attributable to Tenet Healthcare Corporation common shareholders	$	(46	)				$	(61	)

Loss per share attributable to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations	$	(0.44	)				$	(0.60	)
Discontinued operations		(0.02	)					(0.01	)

	$	(0.46	)				$	(0.61	)

Diluted
Continuing operations	$	(0.44	)				$	(0.60	)
Discontinued operations		(0.02	)					(0.01	)

	$	(0.46	)				$	(0.61	)

Weighted average shares and dilutive securities outstanding (in thousands):
Basic		99,341						99,244
Diluted*		99,341						99,244

Had we generated income from continuing operations in the three months ended June 30, 2016 and 2015 the effect of employee stock options, restricted stock units and deferred compensation units on the diluted shares calculation would have been an increase of 1,386 shares and 2,673 shares, respectively.

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TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


(Dollars in millions except per share amounts)	Six Months Ended June 30,
	2016			%			2015			%			Change
Net operating revenues:
Net operating revenues before provision for doubtful accounts	$	10,640					$	9,631						10.5	%
Less: Provision for doubtful accounts		728						715						1.8	%

Net operating revenues		9,912			100.0	%		8,916			100.0	%		11.2	%
Equity in earnings of unconsolidated affiliates		54			0.5	%		20			0.2	%		170.0	%
Operating expenses:
Salaries, wages and benefits		4,718			47.6	%		4,310			48.3	%		9.5	%
Supplies		1,584			16.0	%		1,394			15.6	%		13.6	%
Other operating expenses, net		2,455			24.8	%		2,174			24.4	%		12.9	%
Electronic health record incentives		(21	)		(0.2	)%		(39	)		(0.4	)%		(46.2	)%
Depreciation and amortization		427			4.3	%		404			4.5	%
Impairment and restructuring charges, and acquisition-related costs		50			0.4	%		222			2.5	%
Litigation and investigation costs		287			2.9	%		17			0.2	%
Gains on sales, consolidation and deconsolidation of facilities		(148	)		(1.5	)%		—			—	%

Operating income		614			6.2	%		454			5.1	%
Interest expense		(487	)					(416	)
Investment earnings (losses)		3						(1	)

Net income from continuing operations, before income taxes		130						37
Income tax benefit (expense)		(51	)					11

Net income from continuing operations, before discontinued operations		79						48
Discontinued operations:
Loss from operations		(7	)					—
Income tax benefit		1						—

Net loss from discontinued operations		(6	)					—

Net income		73						48
Less: Net income attributable to noncontrolling interests		178						62

Net loss attributable to Tenet Healthcare Corporation common shareholders	$	(105	)				$	(14	)

Amounts attributable to Tenet Healthcare Corporation common shareholders
Net loss from continuing operations, net of tax	$	(99	)				$	(14	)
Net loss from discontinued operations, net of tax		(6	)					—

Net loss attributable to Tenet Healthcare Corporation common shareholders	$	(105	)				$	(14	)

Net loss per share attributable to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations	$	(1.00	)				$	(0.14	)
Discontinued operations		(0.06	)					—

	$	(1.06	)				$	(0.14	)

Diluted
Continuing operations	$	(1.00	)				$	(0.14	)
Discontinued operations		(0.06	)					—

	$	(1.06	)				$	(0.14	)

Weighted average shares and dilutive securities outstanding (in thousands):
Basic		99,054						98,972
Diluted*		99,054						98,972

Had we generated income from continuing operations in the six months ended June 30, 2016 and 2015 the effect of employee stock options, restricted stock units and deferred compensation units on the diluted shares calculation would have been an increase of 1,477 shares and 2,423 shares, respectively.

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TENET HEALTHCARE CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30,			December 31,
(Dollars in millions)	2016			2015
ASSETS
Current assets:
Cash and cash equivalents	$	656		$	356
Accounts receivable, less allowance for doubtful accounts		2,734			2,704
Inventories of supplies, at cost		316			309
Income tax receivable		3			7
Assets held for sale		2			550
Other current assets		1,282			1,245

Total current assets		4,993			5,171
Investments and other assets		1,317			1,175
Deferred income taxes		797			776
Property and equipment, at cost, less accumulated depreciation and amortization		7,977			7,915
Goodwill		7,291			6,970
Other intangible assets, at cost, less accumulated amortization		1,865			1,675

Total assets	$	24,240		$	23,682

LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	181		$	127
Accounts payable		1,272			1,380
Accrued compensation and benefits		843			880
Professional and general liability reserves		179			177
Accrued interest payable		205			205
Liabilities held for sale		—			101
Accrued legal settlement costs		525			294
Other current liabilities		1,225			1,144

Total current liabilities		4,430			4,308
Long-term debt, net of current portion		14,320			14,383
Professional and general liability reserves		613			578
Defined benefit plan obligations		594			595
Deferred income taxes		274			37
Other long-term liabilities		582			557

Total liabilities		20,813			20,458
Commitments and contingencies
Redeemable noncontrolling interests in equity of consolidated subsidiaries		2,275			2,266
Equity:
Shareholders’ equity:
Common stock		7			7
Additional paid-in capital		4,791			4,815
Accumulated other comprehensive loss		(203	)		(164	)
Accumulated deficit		(1,655	)		(1,550	)
Common stock in treasury, at cost		(2,417	)		(2,417	)

Total shareholders’ equity		523			691
Noncontrolling interests		629			267

Total equity		1,152			958

Total liabilities and equity	$	24,240		$	23,682

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TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)


	Six Months Ended
(Dollars in millions)	June 30,
	2016			2015
Net Income	$	73		$	48
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		427			404
Provision for doubtful accounts		728			715
Deferred income tax expense		37			(27	)
Stock-based compensation expense		35			33
Impairment and restructuring charges, and acquisition-related costs		50			222
Litigation and investigation costs		287			17
Gains on sales, consolidation and deconsolidation of facilities		(148	)		—
Equity in earnings of unconsolidated affiliates, net of distributions received		10			(20	)
Amortization of debt discount and debt issuance costs		21			21
Pre-tax loss (income) from discontinued operations		7			—
Other items, net		(2	)		(5	)
Changes in cash from operating assets and liabilities:
Accounts receivable		(725	)		(779	)
Inventories and other current assets		(30	)		36
Income taxes		(17	)		9
Accounts payable, accrued expenses and other current liabilities		(106	)		(267	)
Other long-term liabilities		34			40
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements		(99	)		(86	)
Net cash used in operating activities from discontinued operations, excluding income taxes		—			(8	)

Net cash provided by operating activities		582			353
Cash flows from investing activities:
Purchases of property and equipment — continuing operations		(413	)		(359	)
Purchases of businesses or joint venture interests, net of cash acquired		(94	)		(636	)
Proceeds from sales of facilities and other assets		573			—
Proceeds from sales of marketable securities, long-term investments and other assets		24			11
Purchases of equity investments		(35	)		(2	)
Other long-term assets		(3	)		—
Other items, net		2			1

Net cash provided by (used in) investing activities		54			(985	)
Cash flows from financing activities:
Repayments of borrowings under credit facility		(1,195	)		(1,315	)
Proceeds from borrowings under credit facility		1,195			1,195
Repayments of other borrowings		(76	)		(1,992	)
Proceeds from other borrowings		—			3,187
Debt issuance costs		—			(72	)
Distributions paid to noncontrolling interests		(95	)		(23	)
Proceeds from sale of noncontrolling interests		15			3
Purchase of noncontrolling interests		(177	)		(254	)
Proceeds from exercise of stock options		3			9
Other items, net		(6	)		—

Net cash provided by (used in) financing activities		(336	)		738

Net increase in cash and cash equivalents		300			106
Cash and cash equivalents at beginning of period		356			193

Cash and cash equivalents at end of period	$	656		$	299

Supplemental disclosures:
Interest paid, net of capitalized interest	$	(467	)	$	(385	)
Income tax payments, net	$	(29	)	$	(8	)

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TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING TOTAL HOSPITALS⁽¹⁾

(Unaudited)


(Dollars in millions except per patient day, per admission, per adjusted admission and per visit amounts)	Three Months Ended June 30,									Six Months Ended June 30,
	2016			2015			Change			2016			2015			Change
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period)		75			80			(5	) *		75			80			(5	) *
Total admissions		193,898			201,908			(4.0	)%		405,697			410,241			(1.1	)%
Adjusted patient admissions		342,813			349,145			(1.8	)%		705,632			698,242			1.1	%
Paying admissions (excludes charity and uninsured)		183,539			191,373			(4.1	)%		384,975			388,756			(1.0	)%
Charity and uninsured admissions		10,359			10,535			(1.7	)%		20,722			21,485			(3.6	)%
Admissions through emergency department		122,283			128,570			(4.9	)%		258,339			262,114			(1.4	)%
Paying admissions as a percentage of total admissions		94.7	%		94.8	%		(0.1	)% *		94.9	%		94.8	%		0.1	% *
Charity and uninsured admissions as a percentage of total admissions		5.3	%		5.2	%		0.1	% *		5.1	%		5.2	%		(0.1	)% *
Emergency department admissions as a percentage of total admissions		63.1	%		63.7	%		(0.6	)% *		63.7	%		63.9	%		(0.2	)% *
Surgeries — inpatient		54,379			55,282			(1.6	)%		110,134			108,992			1.0	%
Surgeries — outpatient		75,821			72,241			5.0	%		152,650			139,934			9.1	%
Total surgeries		130,201			127,523			2.1	%		262,785			248,926			5.6	%
Patient days — total		897,313			929,840			(3.5	)%		1,907,827			1,905,752			0.1	%
Adjusted patient days		1,569,272			1,589,659			(1.3	)%		3,283,641			3,208,175			2.4	%
Average length of stay (days)		4.63			4.61			0.4	%		4.70			4.65			1.1	%
Licensed beds (at end of period)		20,380			20,826			(2.1	)%		20,380			20,826			(2.1	)%
Average licensed beds		20,380			20,826			(2.1	)%		20,953			20,823			0.6	%
Utilization of licensed beds		48.4	%		49.1	%		(0.7	)% *		50.0	%		50.6	%		(0.6	)% *
Outpatient Visits
Total visits		2,038,287			2,063,037			(1.2	)%		4,184,905			4,057,610			3.1	%
Paying visits (excludes charity and uninsured)		1,896,394			1,903,403			(0.4	)%		3,880,909			3,740,779			3.7	%
Charity and uninsured visits		141,893			159,634			(11.1	)%		303,996			316,831			(4.1	)%
Emergency department visits		715,692			742,951			(3.7	)%		1,505,608			1,484,484			1.4	%
Paying visits as a percentage of total visits		93.0	%		92.3	%		0.7	% *		92.7	%		92.2	%		0.5	% *
Charity and uninsured visits as a percentage of total visits		7.0	%		7.7	%		(0.7	)% *		7.3	%		7.8	%		(0.5	)% *
Revenues
Net inpatient revenues	$	2,588		$	2,623			(1.3	)%	$	5,369		$	5,314			1.0	%
Net outpatient revenues	$	1,460		$	1,484			(1.6	)%	$	2,974		$	2,896			2.7	%
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission	$	13,347		$	12,991			2.7	%	$	13,234		$	12,953			2.2	%
Net inpatient revenue per patient day	$	2,884		$	2,821			2.2	%	$	2,814		$	2,788			0.9	%
Net outpatient revenue per visit	$	716		$	719			(0.4	)%	$	711		$	714			(0.4	)%
Net patient revenue per adjusted patient admission	$	11,808		$	11,767			0.3	%	$	11,823		$	11,758			0.6	%
Net patient revenue per adjusted patient day	$	2,580		$	2,585			(0.2	)%	$	2,541		$	2,559			(0.7	)%
Total selected operating expenses (salaries, wages and benefits, supplies and other operating expenses) per adjusted patient admission	$	10,668		$	10,314			3.4	%	$	10,600		$	10,299			2.9	%
Net Patient Revenues from:
Medicare		21.7	%		20.7	%		1.0	% *		20.8	%		21.3	%		(0.5	)% *
Medicaid		7.4	%		8.5	%		(1.1	)% *		8.0	%		9.0	%		(1.0	)% *
Managed care		59.4	%		60.8	%		(1.4	)% *		60.4	%		59.9	%		0.5	% *
Indemnity, self-pay and other		11.5	%		10.0	%		1.5	% *		10.8	%		9.8	%		1.0	% *

(1)	Represents the consolidated results of Tenet’s Hospital Operations and other segment.

*	This change is the difference between the 2016 and 2015 amounts shown

Page 12

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS⁽¹⁾

(Unaudited)


(Dollars in millions except per patient day, per admission, per adjusted admission and per visit amounts)	Three Months Ended June 30,									Six Months Ended June 30,
	2016			2015			Change			2016			2015			Change
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period)		67			67			—	*		67			67			—	*
Total admissions		177,151			179,135			(1.1	)%		362,204			364,282			(0.6	)%
Adjusted patient admissions		309,372			307,958			0.5	%		625,159			616,687			1.4	%
Paying admissions (excludes charity and uninsured)		167,717			170,389			(1.6	)%		344,003			346,412			(0.7	)%
Charity and uninsured admissions		9,434			8,746			7.9	%		18,201			17,870			1.9	%
Admissions through emergency department		111,994			113,741			(1.5	)%		230,572			232,067			(0.6	)%
Paying admissions as a percentage of total admissions		94.7	%		95.1	%		(0.4	)% *		95.0	%		95.1	%		(0.1	)% *
Charity and uninsured admissions as a percentage of total admissions		5.3	%		4.9	%		0.4	% *		5.0	%		4.9	%		0.1	% *
Emergency department admissions as a percentage of total admissions		63.2	%		63.5	%		(0.3	)% *		63.7	%		63.7	%		—	% *
Surgeries — inpatient		49,222			49,291			(0.1	)%		97,769			97,586			0.2	%
Surgeries — outpatient		65,678			64,407			2.0	%		129,677			124,901			3.8	%
Total surgeries		114,900			113,698			1.1	%		227,446			222,487			2.2	%
Patient days — total		805,662			817,881			(1.5	)%		1,667,800			1,678,808			(0.7	)%
Adjusted patient days		1,394,486			1,391,305			0.2	%		2,851,066			2,812,810			1.4	%
Average length of stay (days)		4.55			4.57			(0.4	)%		4.60			4.61			(0.2	)%
Licensed beds (at end of period)		18,144			18,244			(0.5	)%		18,144			18,244			(0.5	)%
Average licensed beds		18,144			18,244			(0.5	)%		18,142			18,241			(0.5	)%
Utilization of licensed beds		48.8	%		49.3	%		(0.5	)% *		50.8	%		50.8	%		—	% *
Outpatient Visits
Total visits		1,830,522			1,815,393			0.8	%		3,685,257			3,578,261			3.0	%
Paying visits (excludes charity and uninsured)		1,707,375			1,691,554			0.9	%		3,436,059			3,330,685			3.2	%
Charity and uninsured visits		123,147			123,839			(0.6	)%		249,198			247,576			0.7	%
Emergency department visits		640,774			632,470			1.3	%		1,311,452			1,269,330			3.3	%
Paying visits as a percentage of total visits		93.3	%		93.2	%		0.1	% *		93.2	%		93.1	%		0.1	% *
Charity and uninsured visits as a percentage of total visits		6.7	%		6.8	%		(0.1	)% *		6.8	%		6.9	%		(0.1	)% *
Revenues
Net inpatient revenues	$	2,400		$	2,305			4.1	%	$	4,899		$	4,687			4.5	%
Net outpatient revenues	$	1,343		$	1,281			4.8	%	$	2,674		$	2,507			6.7	%
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission	$	13,548		$	12,867			5.3	%	$	13,526		$	12,866			5.1	%
Net inpatient revenue per patient day	$	2,979		$	2,818			5.7	%	$	2,937		$	2,792			5.2	%
Net outpatient revenue per visit	$	734		$	706			4.0	%	$	726		$	701			3.6	%
Net patient revenue per adjusted patient admission	$	12,099		$	11,644			3.9	%	$	12,114		$	11,666			3.8	%
Net patient revenue per adjusted patient day	$	2,684		$	2,577			4.2	%	$	2,656		$	2,558			3.8	%
Net Patient Revenues from:
Medicare		20.1	%		20.7	%		(0.6	)% *		20.4	%		21.3	%		(0.9	)% *
Medicaid		7.8	%		8.3	%		(0.5	)% *		8.1	%		8.9	%		(0.8	)% *
Managed care		62.1	%		61.6	%		0.5	% *		62.0	%		60.4	%		1.6	% *
Indemnity, self-pay and other		10.0	%		9.4	%		0.6	% *		9.5	%		9.4	%		0.1	% *

(1)

Information for our Hospital Operations and other segment is presented on a same-hospital basis, which includes the results of our same 67 hospitals operated throughout the six months ended June 30, 2016 and 2015, associated outpatient facilities and six health plans and excludes the results of eight hospitals that Tenet acquired, as well as hospitals Tenet divested, since January 1, 2015.

*	This change is the difference between the 2016 and 2015 amounts shown

Page 13

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


(Dollars in millions except per share amounts)	Three Months Ended						Six Months Ended
	3/31/2016			6/30/2016			6/30/2016
Net operating revenues:
Net operating revenues before provision for doubtful accounts	$	5,420		$	5,220		$	10,640
Less: Provision for doubtful accounts		376			352			728

Net operating revenues		5,044			4,868			9,912
Equity in earnings of unconsolidated affiliates		24			30			54
Operating expenses:
Salaries, wages and benefits		2,402			2,316			4,718
Supplies		811			773			1,584
Other operating expenses, net		1,242			1,213			2,455
Electronic health record incentives		—			(21	)		(21	)
Depreciation and amortization		212			215			427
Impairment and restructuring charges, and acquisition-related costs		28			22			50
Litigation and investigation costs		173			114			287
Gains on sales, consolidation and deconsolidation of facilities		(147	)		(1	)		(148	)

Operating income		347			267			614
Interest expense		(243	)		(244	)		(487	)
Investment earnings (losses)		1			2			3

Net income from continuing operations, before income taxes		105			25			130
Income tax benefit (expense)		(67	)		16			(51	)

Net income from continuing operations, before discontinued operations		38			41			79
Discontinued operations:
Loss from operations		(5	)		(2	)		(7	)
Income tax benefit		1			—			1

Net loss from discontinued operations		(4	)		(2	)		(6	)

Net income		34			39			73
Less: Net income attributable to noncontrolling interests		93			85			178

Net loss attributable to Tenet Healthcare Corporation common shareholders	$	(59	)	$	(46	)	$	(105	)

Amounts attributable to Tenet Healthcare Corporation common shareholders
Net loss from continuing operations, net of tax	$	(55	)	$	(44	)	$	(99	)
Net loss from discontinued operations, net of tax		(4	)		(2	)		(6	)

Net loss attributable to Tenet Healthcare Corporation common shareholders	$	(59	)	$	(46	)	$	(105	)

Net loss per share attributable to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations	$	(0.56	)	$	(0.44	)	$	(1.00	)
Discontinued operations		(0.04	)		(0.02	)		(0.06	)

	$	(0.60	)	$	(0.46	)	$	(1.06	)

Diluted
Continuing operations	$	(0.56	)	$	(0.44	)	$	(1.00	)
Discontinued operations		(0.04	)		(0.02	)		(0.06	)

	$	(0.60	)	$	(0.46	)	$	(1.06	)

Weighted average shares and dilutive securities outstanding (in thousands):
Basic		98,768			99,341			99,054
Diluted		98,768			99,341			99,054

Page 14

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING TOTAL HOSPITALS⁽¹⁾

(Unaudited)


(Dollars in millions except per patient day, per admission, per adjusted admission and per visit amounts)	Three Months Ended						Six Months Ended
	3/31/2016			6/30/2016			6/30/2016
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period)		80			75			75
Total admissions		211,799			193,898			405,697
Adjusted patient admissions		362,819			342,813			705,632
Paying admissions (excludes charity and uninsured)		201,436			183,539			384,975
Charity and uninsured admissions		10,363			10,359			20,722
Admissions through emergency department		136,056			122,283			258,339
Paying admissions as a percentage of total admissions		95.1	%		94.7	%		94.9	%
Charity and uninsured admissions as a percentage of total admissions		4.9	%		5.3	%		5.1	%
Emergency department admissions as a percentage of total admissions		64.2	%		63.1	%		63.7	%
Surgeries — inpatient		55,755			54,379			110,134
Surgeries — outpatient		76,829			75,821			152,650
Total surgeries		132,584			130,201			262,785
Patient days — total		1,010,514			897,313			1,907,827
Adjusted patient days		1,714,369			1,569,272			3,283,641
Average length of stay (days)		4.77			4.63			4.70
Licensed beds (at end of period)		21,529			20,380			20,380
Average licensed beds		21,524			20,380			20,953
Utilization of licensed beds		51.6	%		48.4	%		50.0	%
Outpatient Visits
Total visits		2,146,618			2,038,287			4,184,905
Paying visits (excludes charity and uninsured)		1,984,515			1,896,394			3,880,909
Charity and uninsured visits		162,103			141,893			303,996
Emergency department visits		789,916			715,692			1,505,608
Paying visits as a percentage of total visits		92.4	%		93.0	%		92.7	%
Charity and uninsured visits as a percentage of total visits		7.6	%		7.0	%		7.3	%
Revenues
Net inpatient revenues	$	2,781		$	2,588		$	5,369
Net outpatient revenues	$	1,514		$	1,460		$	2,974
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission	$	13,130		$	13,347		$	13,234
Net inpatient revenue per patient day	$	2,752		$	2,884		$	2,814
Net outpatient revenue per visit	$	705		$	716		$	711
Net patient revenue per adjusted patient admission	$	11,838		$	11,808		$	11,823
Net patient revenue per adjusted patient day	$	2,505		$	2,580		$	2,541
Total selected operating expenses (salaries, wages and benefits, supplies and other operating expenses) per adjusted patient admission	$	10,537		$	10,668		$	10,600
Net Patient Revenues from:
Medicare		20.0	%		21.7	%		20.8	%
Medicaid		8.7	%		7.4	%		8.0	%
Managed care		61.1	%		59.4	%		60.4	%
Indemnity, self-pay and other		10.2	%		11.5	%		10.8	%

(1)	Represents the consolidated results of Tenet’s Hospital Operations and other segment.

Page 15

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS⁽¹⁾

(Unaudited)


(Dollars in millions except per patient day, per admission, per adjusted admission and per visit amounts)	Three Months Ended						Six Months Ended
	3/31/2016			6/30/2016			6/30/2016
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period)		67			67			67
Total admissions		185,053			177,151			362,204
Adjusted patient admissions		315,787			309,372			625,159
Paying admissions (excludes charity and uninsured)		176,286			167,717			344,003
Charity and uninsured admissions		8,767			9,434			18,201
Admissions through emergency department		118,578			111,994			230,572
Paying admissions as a percentage of total admissions		95.3	%		94.7	%		95.0	%
Charity and uninsured admissions as a percentage of total admissions		4.7	%		5.3	%		5.0	%
Emergency department admissions as a percentage of total admissions		64.1	%		63.2	%		63.7	%
Surgeries — inpatient		48,547			49,222			97,769
Surgeries — outpatient		63,999			65,678			129,677
Total surgeries		112,546			114,900			227,446
Patient days — total		862,138			805,662			1,667,800
Adjusted patient days		1,456,580			1,394,486			2,851,066
Average length of stay (days)		4.66			4.55			4.60
Licensed beds (at end of period)		18,144			18,144			18,144
Average licensed beds		18,139			18,144			18,142
Utilization of licensed beds		52.8	%		48.8	%		50.8	%
Outpatient Visits
Total visits		1,854,735			1,830,522			3,685,257
Paying visits (excludes charity and uninsured)		1,728,684			1,707,375			3,436,059
Charity and uninsured visits		126,051			123,147			249,198
Emergency department visits		670,678			640,774			1,311,452
Paying visits as a percentage of total visits		93.2	%		93.3	%		93.2	%
Charity and uninsured visits as a percentage of total visits		6.8	%		6.7	%		6.8	%
Revenues
Net inpatient revenues	$	2,499		$	2,400		$	4,899
Net outpatient revenues	$	1,331		$	1,343		$	2,674
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission	$	13,504		$	13,548		$	13,526
Net inpatient revenue per patient day	$	2,899		$	2,979		$	2,937
Net outpatient revenue per visit	$	718		$	734		$	726
Net patient revenue per adjusted patient admission	$	12,128		$	12,099		$	12,114
Net patient revenue per adjusted patient day	$	2,629		$	2,684		$	2,656
Net Patient Revenues from:
Medicare		20.6	%		20.1	%		20.4	%
Medicaid		8.5	%		7.8	%		8.1	%
Managed care		61.5	%		62.1	%		62.0	%
Indemnity, self-pay and other		9.4	%		10.0	%		9.5	%

(1)

Page 16

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS⁽¹⁾

(Unaudited)


(Dollars in millions except per patient day, per admission, per adjusted admission and per visit amounts)	Three Months Ended												Year Ended
	03/31/15			06/30/15			9/30/2015			12/31/2015			12/31/2015
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period)		67			67			67			67			67
Total admissions		185,147			179,135			176,885			176,051			717,218
Adjusted patient admissions		308,729			307,958			305,916			305,436			1,228,039
Paying admissions (excludes charity and uninsured)		176,023			170,389			167,463			166,962			680,837
Charity and uninsured admissions		9,124			8,746			9,422			9,089			36,381
Admissions through emergency department		118,326			113,741			110,235			110,291			452,593
Paying admissions as a percentage of total admissions		95.1	%		95.1	%		95.1	%		95.1	%		95.1	%
Charity and uninsured admissions as a percentage of total admissions		4.9	%		4.9	%		4.9	%		4.9	%		4.9	%
Emergency department admissions as a percentage of total admissions		63.9	%		63.5	%		62.3	%		62.6	%		63.1	%
Surgeries — inpatient		48,295			49,291			49,527			49,239			196,352
Surgeries — outpatient		60,494			64,407			64,985			65,046			254,932
Total surgeries		108,789			113,698			114,512			114,285			451,284
Patient days — total		860,927			817,881			804,181			803,037			3,286,026
Adjusted patient days		1,421,505			1,391,305			1,374,619			1,379,612			5,567,041
Average length of stay (days)		4.65			4.57			4.55			4.56			4.58
Licensed beds (at end of period)		18,244			18,244			18,201			18,130			18,130
Average licensed beds		18,241			18,244			18,233			18,154			18,217
Utilization of licensed beds		52.4	%		49.3	%		47.9	%		48.1	%		49.4	%
Outpatient Visits
Total visits		1,762,868			1,815,393			1,792,264			1,806,125			7,176,650
Paying visits (excludes charity and uninsured)		1,639,131			1,691,554			1,659,417			1,680,609			6,670,711
Charity and uninsured visits		123,737			123,839			132,847			125,516			505,939
Emergency department visits		636,860			632,470			624,871			626,280			2,520,481
Paying visits as a percentage of total visits		93.0	%		93.2	%		92.6	%		93.1	%		93.0	%
Charity and uninsured visits as a percentage of total visits		7.0	%		6.8	%		7.4	%		6.9	%		7.0	%
Revenues
Net inpatient revenues	$	2,382		$	2,305		$	2,289		$	2,358		$	9,334
Net outpatient revenues	$	1,226		$	1,281		$	1,288		$	1,308		$	5,103
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission	$	12,865		$	12,867		$	12,941		$	13,394		$	13,014
Net inpatient revenue per patient day	$	2,767		$	2,818		$	2,846		$	2,936		$	2,841
Net outpatient revenue per visit	$	695		$	706		$	719		$	724		$	711
Net patient revenue per adjusted patient admission	$	11,687		$	11,644		$	11,693		$	12,003		$	11,756
Net patient revenue per adjusted patient day	$	2,538		$	2,577		$	2,602		$	2,657		$	2,593
Net Patient Revenues from:
Medicare		21.9	%		20.7	%		20.2	%		19.9	%		20.7	%
Medicaid		9.4	%		8.3	%		8.8	%		8.3	%		8.7	%
Managed care		59.1	%		61.6	%		61.7	%		61.8	%		61.1	%
Indemnity, self-pay and other		9.6	%		9.4	%		9.3	%		10.0	%		9.5	%

(1)

Page 17

TENET HEALTHCARE CORPORATION

SEGMENT REPORTING

(Unaudited)


	June 30,		December 31,
	2016		2015
Assets
Hospital Operations and other	$	17,412	$	17,353
Ambulatory Care		5,673		5,159
Conifer		1,155		1,170

Total	$	24,240	$	23,682


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Capital expenditures:
Hospital Operations and other	$	184		$	166		$	375		$	341
Ambulatory Care		16			3			28			7
Conifer		5			6			10			11

Total	$	205		$	175		$	413		$	359

Net operating revenues:
Hospital Operations and other	$	4,202		$	4,175		$	8,599		$	8,326
Ambulatory Care		442			142			871			233
Conifer
Tenet		162			165			329			325
Other customers		224			175			442			357

Total Conifer revenues		386			340			771			682

Intercompany eliminations		(162	)		(165	)		(329	)		(325	)

Total	$	4,868		$	4,492		$	9,912		$	8,916

Equity in earnings of unconsolidated affiliates:
Hospital Operations and other	$	4		$	10		$	3		$	14
Ambulatory Care		26			6			51			6

Total	$	30		$	16		$	54		$	20

Adjusted EBITDA:
Hospital Operations and other	$	415		$	459		$	829		$	877
Ambulatory Care		139			49			275			78
Conifer		63			60			126			142

Total	$	617		$	568		$	1,230		$	1,097

Depreciation and amortization:
Hospital Operations and other	$	181		$	178		$	355		$	369
Ambulatory Care		22			7			47			11
Conifer		12			12			25			24

Total	$	215		$	197		$	427		$	404

Page 18

TENET HEALTHCARE CORPORATION

STATEMENT OF OPERATIONS – AMBULATORY CARE SEGMENT

INCLUDING PRO FORMA USPI AND ASPEN FOR ALL PERIODS

(Unaudited)


(Dollars in millions)	Three Months Ended June 30,
	2016						2015
	Ambulatory Care as Reported Under GAAP			Unconsolidated Affiliates			Ambulatory Care as Reported Under GAAP			Unconsolidated Affiliates
Net operating revenues:
Net operating revenues before provision for doubtful accounts	$	452		$	505		$	327		$	534
Less: Provision for doubtful accounts		(10	)		(14	)		(5	)		(14	)

Net operating revenues⁽¹⁾		442			491			322			520
Equity in earnings of unconsolidated affiliates⁽²⁾		26			—			28			—
Operating expenses:
Salaries, wages and benefits		147			116			104			127
Supplies		91			128			59			133
Other operating expenses, net		91			102			72			112
Depreciation and amortization		22			17			16			20
Impairment and restructuring charges, and acquisition-related costs		3			5			—			3
Gains on sales, consolidation and deconsolidation of facilities		(1	)		—			—			—

Operating income		115			123			99			125
Interest expense		(35	)		(6	)		(34	)		(7	)
Other		—			1			—			—

Net income from continuing operations, before income taxes		80			118			65			118
Income tax expense		(11	)		(1	)		(13	)		(1	)

Net income		69		$	117			52		$	117

Less: Net income attributable to noncontrolling interests		60						42

Net income attributable to Tenet Healthcare Corporation common shareholders	$	9					$	10

Equity in earnings of unconsolidated affiliates				$	26					$	28

(1)	On a same-facility system-wide basis, net revenue in Tenet’s Ambulatory Care segment increased 11.7% during the three months ended June 30, 2016, with cases increasing 5.2% and revenue per case increasing 6.1%.

(2)

At June 30, 2016, 120 of the 334 facilities in the Company’s newly formed Ambulatory segment were not consolidated based on the nature of the segment’s joint venture relationships with physicians and prominent healthcare systems. Although revenues of the segment’s unconsolidated facilities are not recorded as revenues by the Company, equity in earnings of unconsolidated affiliates is nonetheless a significant portion of the Company’s overall earnings. To help analyze results of operations, management also uses system-wide operating measures such as system-wide revenue growth, which includes revenues of both consolidated and unconsolidated facilities. We control our remaining 214 facilities and account for these investments as consolidated subsidiaries.

Page 19

TENET HEALTHCARE CORPORATION

STATEMENT OF OPERATIONS – AMBULATORY CARE SEGMENT

INCLUDING PRO FORMA USPI AND ASPEN FOR ALL PERIODS

(Unaudited)


	Six Months Ended June 30,
	2016						2015
	Ambulatory Care as Reported Under GAAP			Unconsolidated Affiliates			Ambulatory Care as Reported Under GAAP			Unconsolidated Affiliates
Net operating revenues:
Net operating revenues before provision for doubtful accounts	$	889		$	984		$	627		$	1,020
Less: Provision for doubtful accounts		(18	)		(28	)		(10	)		(26	)

Net operating revenues⁽¹⁾		871			956			617			994
Equity in earnings of unconsolidated affiliates⁽²⁾		51			—			49			—
Operating expenses:
Salaries, wages and benefits		293			234			202			247
Supplies		177			251			110			256
Other operating expenses, net		177			204			145			220
Electronic health record incentives		—			—			—			—
Depreciation and amortization		47			35			29			40
Impairment and restructuring charges, and acquisition-related costs		4			1			—			3
Gains on sales, consolidation and deconsolidation of facilities		(30	)		—			—			—

Operating income		254			231			180			228
Interest expense		(70	)		(12	)		(68	)		(14	)
Other		—			1			—			—

Net income from continuing operations, before income taxes		184			220			112			214
Income tax expense		(19	)		(3	)		(22	)		(3	)

Net Income		165		$	217			90		$	211

Less: Net income attributable to noncontrolling interests⁽³⁾		135						76

Net income attributable to Tenet Healthcare Corporation common shareholders	$	30					$	14

Equity in earnings of unconsolidated affiliates				$	51					$	49

(1)	On a same-facility system-wide basis, net revenue in Tenet’s Ambulatory Care segment increased 11.4% during the six months ended June 30, 2016, with cases increasing 6.9% and revenue per case increasing 4.2%.

(2)

(3)	During the six months ended June 30, 2016, the Company recorded $18 million of noncontrolling interests expense related to a $29 million gain on the consolidation of facilities (the gain is not included in Adjusted EBITDA) and an associated $7 million income tax benefit.

Page 20

Non-GAAP Financial Measures

Adjusted EBITDA, a non-GAAP measure, is defined by the Company as net income (loss) attributable to Tenet Healthcare Corporation common shareholders before (1) the cumulative effect of changes in accounting principle, (2) net loss (income) attributable to noncontrolling interests, (3) income (loss) from discontinued operations, (4) income tax benefit (expense), (5) investment earnings (losses), (6) gain (loss) from early extinguishment of debt, (7) interest expense, (8) litigation and investigation (costs) benefit, net of insurance recoveries, (9) net gains (losses) on sales, consolidation and deconsolidation of facilities, (10) impairment and restructuring charges and acquisition-related costs, and (11) depreciation and amortization. Litigation and investigation costs do not include ordinary course of business malpractice and other litigation and related expense.

Adjusted net income from continuing operations, a non-GAAP measure, is defined by the Company as net income (loss) attributable to Tenet Healthcare Corporation common shareholders before (1) impairment and restructuring charges, and acquisition-related costs, (2) litigation and investigation costs, (3) gains on sales, consolidation and deconsolidation of facilities, (4) the associated impact of these three items on taxes and noncontrolling interests, and (5) net income (loss) from discontinued operations. Adjusted diluted earnings per share from continuing operations, a non-GAAP term, is defined by the Company as Adjusted net income from continuing operations divided by the weighted average diluted shares outstanding in the reporting period.

Free Cash Flow, a non-GAAP measure, is defined by the Company as (1) net cash provided by (used in) operating activities, less (2) purchases of property and equipment from continuing operations.

Adjusted Free Cash Flow, a non-GAAP measure, is defined by the Company as (1) Adjusted net cash provided by (used in) operating activities from continuing operations, less (2) purchases of property and equipment from continuing operations. Adjusted net cash provided by (used in) operating activities, a non-GAAP measure, is defined by the Company as cash provided by (used in) operating activities prior to (1) payments for restructuring charges, acquisition-related costs and litigation costs and settlements, and, (2) net cash provided by (used in) operating activities from discontinued operations.

The Company believes the foregoing non-GAAP measures are useful to investors and analysts because they present additional information on the Company’s financial performance. Investors, analysts, Company management and the Company’s Board of Directors utilize these non-GAAP measures, in addition to GAAP measures, to track the company’s financial and operating performance and compare the Company’s performance to its peer companies, which utilize similar non-GAAP measures in their presentations. The Human Resources Committee of the Company’s Board of Directors also uses certain of these measures to evaluate management’s performance for the purpose of determining incentive compensation. Additional information regarding the purpose and utility of specific non-GAAP measures used in this release is set forth below.

The Company believes that Adjusted EBITDA is a useful measure, in part, because certain investors and analysts use both historical and projected Adjusted EBITDA, in addition to other GAAP and non-GAAP measures, as factors in determining the estimated fair value of shares of the Company’s common stock. Company management also regularly reviews the Adjusted EBITDA performance for each operating segment. The Company does not use Adjusted EBITDA to measure liquidity, but instead to measure operating performance.

We use, and we believe investors and analysts use, Free Cash Flow and Adjusted Free Cash Flow as supplemental measures to analyze cash flows generated from our operations because we believe it is useful to investors in evaluating our ability to fund distributions paid to noncontrolling interests, acquisitions, purchasing equity interests in joint ventures or repaying debt.

These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Because these measures exclude many items that are included in our financial statements, they do not provide a complete measure of our operating performance. For example, the Company’s definitions of Free Cash Flow and Adjusted Free Cash Flow do not account for other important uses of cash including (1) cash used to purchase businesses or joint venture interests, or (2) any items that are classified as Cash Flows From Financing Activities on the Company’s Consolidated Statement of Cash Flows, including items such as (i) cash used to repay borrowings, (ii) distributions paid to noncontrolling interests, or (iii) payments under the Put/Call Agreement for USPI redeemable noncontrolling interest, which are recorded on the Statement of Cash Flows as the purchase of noncontrolling interest. Accordingly, investors are encouraged to use GAAP measures when evaluating the Company’s financial performance.

A reconciliation of Adjusted EBITDA to net income (loss) attributable to Tenet Healthcare Corporation common shareholders, the most comparable GAAP measure, is set forth in Table #1 below for the three and six months ended June 30, 2016 and 2015. A reconciliation of Adjusted net income from continuing operations to net income (loss) attributable to Tenet Healthcare Corporation common shareholders, the most comparable GAAP measure, is set forth in Table #2 below for the three and six months ended June 30, 2016 and 2015. A reconciliation of Free Cash Flow and Adjusted Free Cash Flow to net cash provided by (used in) operating activities, the most comparable GAAP measure, is set forth in Table #3 below for the three and six months ended June 30, 2016 and 2015.

Page 21

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #1 – Reconciliation of Adjusted EBITDA to Net Income Available

(Loss Attributable) to Tenet Healthcare Corporation Common Shareholders

(Unaudited)


(Dollars in millions)	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Net loss attributable to Tenet Healthcare Corporation common shareholders	$	(46	)	$	(61	)	$	(105	)	$	(14	)
Less: Net income attributable to noncontrolling interests		(85	)		(33	)		(178	)		(62	)
Net loss from discontinued operations, net of tax		(2	)		(1	)		(6	)		—

Net income (loss) from continuing operations		41			(27	)		79			48
Income tax benefit (expense)		16			27			(51	)		11
Investment earnings (losses)		2			(1	)		3			(1	)
Interest expense		(244	)		(217	)		(487	)		(416	)

Operating income		267			164			614			454
Litigation and investigation costs		(114	)		(14	)		(287	)		(17	)
Gains on sales, consolidation and deconsolidation of facilities		1			—			148			—
Impairment and restructuring charges, and acquisition-related costs		(22	)		(193	)		(50	)		(222	)
Depreciation and amortization		(215	)		(197	)		(427	)		(404	)

Adjusted EBITDA	$	617		$	568		$	1,230		$	1,097

Net operating revenues	$	4,868		$	4,492		$	9,912		$	8,916

Net income (loss) from continuing operations as a % of operating revenues		(0.9	)%		(1.4	)%		(1.1	)%		(0.2	)%
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin)		12.7	%		12.6	%		12.4	%		12.3	%

Page 22

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #2 – Pre-Tax, After-Tax and Earnings Per Share Impact of Certain Items

on Continuing Operations

(Unaudited)


	Three Months Ended						Six Months Ended
(Dollars in millions except per share amounts)	June 30,						June 30,
	2016			2015			2016			2015
Adjustments to calculate Adjusted Diluted EPS		(Expense) Income
Impairment and restructuring charges, and acquisition-related costs	$	(22	)	$	(193	)	$	(50	)	$	(222	)
Litigation and investigation costs		(114	)		(14	)		(287	)		(17	)
Gain on sales, consolidation and deconsolidation of facilities		1			—			148			—

Pre-tax impact	$	(135	)	$	(207	)	$	(189	)	$	(239	)

Tax impact of above items	$	53		$	71		$	25		$	82

Total after-tax impact	$	(82	)	$	(136	)	$	(164	)	$	(157	)
Noncontrolling interests impact		—			—			(18	)		—

Total income (loss) from items above	$	(82	)	$	(136	)	$	(182	)	$	(157	)

Net income available (loss attributable) to common shareholders	$	(46	)	$	(61	)	$	(105	)	$	(14	)
Less net income (loss) discontinued operations, net of tax		(2	)		(1	)		(6	)		—

Net income (loss) from continuing operations, net of tax	$	(44	)	$	(60	)	$	(99	)	$	(14	)
Net loss (income) from adjustments above		82			136			182			157

Adjusted net income (loss)	$	38		$	76		$	83		$	143

Weighted average dilutive shares outstanding (in thousands)		100,727			101,917			100,531			101,395
Diluted earnings per share from continuing operations	$	(0.44	)	$	(0.60	)	$	(1.00	)	$	(0.14	)
Adjusted diluted EPS from continuing operations	$	0.38		$	0.75		$	0.83		$	1.41

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #3 – Reconciliations of Free Cash Flow and Adjusted Free Cash Flow

(Unaudited)


	Three Months Ended						Six Months Ended
(Dollars in millions)	June 30,						June 30,
	2016			2015			2016			2015
Net cash provided by (used in) operating activities	$	435		$	410		$	582		$	353
Purchases of property and equipment		(205	)		(175	)		(413	)		(359	)

Free cash flow	$	230		$	235		$	169		$	(6	)

Net cash provided by (used in) investing activities	$	(266	)	$	(798	)	$	54		$	(985	)
Net cash provided by (used in) financing activities	$	(241	)	$	502		$	(336	)	$	738
Net cash provided by (used in) operating activities	$	435		$	410		$	582		$	353
Less:
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements		(30	)		(53	)		(99	)		(86	)
Net cash used in operating activities from discontinued operations		3			(4	)		—			(8	)

Adjusted net cash provided by operating activities – continuing operations		462			467			681			447
Purchases of property and equipment – continuing operations		(205	)		(175	)		(413	)		(359	)

Adjusted free cash flow – continuing operations	$	257		$	292		$	268		$	88

Page 23

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #4 – Reconciliation of Outlook Adjusted EBITDA to

Outlook Net Income Attributable to Tenet Healthcare Corporation Common Shareholders

(Unaudited)


(Dollars in millions)	Q3 2016						2016
	Low			High			Low			High
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders	$	5		$	25		$	(80	)	$	(40	)
Less: Net (income) loss attributable to noncontrolling interests		(80	)		(90	)		(350	)		(370	)
Net loss from discontinued operations, net of tax		(5	)		—			(15	)		(10	)

Income from continuing operations		90			115			285			340
Income tax expense		(15	)		(25	)		(115	)		(140	)

Income from continuing operations, before income taxes		105			140			400			480
Interest expense		(240	)		(245	)		(970	)		(980	)

Operating income		345			385			1,370			1,460
Gains on sales, consolidation and deconsolidation of facilities^(a)		—			—			147			147
Impairment and restructuring charges, acquisition-related costs and litigation costs and settlements^(a)		—			—			(337	)		(337	)
Depreciation and amortization		(205	)		(215	)		(840	)		(850	)

Adjusted EBITDA	$	550		$	600		$	2,400		$	2,500

Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin)		11.6	%		12.4	%		12.3	%		12.6	%
Net income (loss) from continuing operations	$	10		$	25		$	(65	)	$	(30	)
Net income (loss) from continuing operations as a % of operating revenues		0.2	%		0.5	%		(0.3	)%		(0.2	)%

Net operating revenues	$	4,750		$	4,850		$	19,500		$	19,800

Adjusted EBITDA	$	550		$	600		$	2,400		$	2,500
Depreciation and amortization		(205	)		(215	)		(840	)		(850	)
Interest expense		(240	)		(245	)		(970	)		(980	)

Adjusted income from continuing operations before income taxes		105			140			590			670
Income tax expense		(15	)		(25	)		(125	)		(150	)

Adjusted income from continuing operations		90			115			465			520
Net income attributable to noncontrolling interests		(80	)		(90	)		(330	)		(350	)

Adjusted net income attributable to common shareholders	$	10		$	25		$	135		$	170

Basic weighted average shares outstanding		100			100			99			99
Fully diluted weighted average shares outstanding (in millions)		102			102			102			102
Diluted earnings per share from continuing operations	$	0.10		$	0.25		$	(0.66	)	$	(0.30	)
Adjusted diluted earnings per share from continuing operations	$	0.10		$	0.25		$	1.32		$	1.67

^(a)

Company does not forecast impairment and restructuring charges, acquisition-related costs and litigation costs and settlements and gains on sales, consolidation and deconsolidation of facilities because the Company does not believe that it can forecast these items with sufficient accuracy since some of these items are indeterminable at the time the Company provides its financial Outlook.

Page 24

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #5 – Reconciliation of Outlook Adjusted Free Cash Flow

for the Year Ending December 31, 2016


(Dollars in millions)	2016
	Low			High
Net cash provided by operating activities	$	1,177		$	1,337
Less:
Payments for restructuring charges, acquisition-related costs and litigation costs and settlements^(a)		(98	)		(98	)
Net cash used in operating activities from discontinued operations		(25	)		(15	)

Adjusted net cash provided by operating activities – continuing operations	$	1,300		$	1,450
Purchases of property and equipment – continuing operations		(900	)		(850	)

Adjusted free cash flow – continuing operations	$	400		$	600

^(a)

Company does not forecast impairment and restructuring charges, acquisition-related costs and litigation costs and settlements because the Company does not believe that it can forecast these items with sufficient accuracy since some of these items may be indeterminable at the time the Company provides its financial Outlook.

Page 25

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