EX-99.1 2 d32290dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

Tenet Reports Results for the Fourth Quarter Ended December 31,

2015 and Issues Outlook for 2016

 

  •   Generated Adjusted EBITDA of $2.276 billion and Adjusted diluted EPS of $2.05 during calendar year 2015. During the fourth quarter, Tenet generated Adjusted EBITDA of $613 million and Adjusted diluted EPS of $0.35.

 

  •   Issued 2016 Outlook, which includes Adjusted EBITDA of $2.4 billion to $2.5 billion.

 

  •   After normalizing for timing differences related to the California Provider Fee, same-hospital patient revenue increased 3.6% in the fourth quarter, with adjusted admissions increasing 0.3% and revenue per adjusted admission increasing 3.2%.

 

  •   Ambulatory segment revenue increased 12.5% on a pro forma same-facility system-wide basis in the fourth quarter, with cases increasing 6.9% and revenue per case increasing 5.2%; on a pro forma basis, Adjusted EBITDA increased 17.9% to $158 million.

 

  •   Conifer’s total revenue increased 18.4% in 2015 with revenue from third parties increasing 24.1%. Conifer generated $265 million of Adjusted EBITDA in 2015, up 30.5% from 2014. In the fourth quarter, Conifer generated $61 million of Adjusted EBITDA.

 

  •   Adjusted Free Cash Flow increased to $405 million in 2015, up from a $55 million outflow in 2014. Tenet’s Outlook for Adjusted Free Cash Flow in 2016 is $400 million to $600 million and additional improvements are anticipated in 2017.

 

  •   Tenet reported a net loss attributable to common shareholders of $140 million or $1.41 per diluted share in 2015. During the fourth quarter, Tenet reported a net loss attributable to common shareholders of $97 million or $0.98 per diluted share. These losses include a $218 million increase in litigation reserves ($184 million after-tax or $1.86 per diluted share), which is described further below.

DALLAS – February 22, 2016 – Tenet Healthcare Corporation (NYSE:THC) reported Adjusted EBITDA of $613 million for the fourth quarter of 2015, a decrease of $33 million, or 5.1 percent, compared to $646 million in the fourth quarter of 2014. After normalizing for timing differences related to the California Provider Fee program, Adjusted EBITDA increased $91 million or 17.4 percent.

“We delivered Adjusted EBITDA at the midpoint of our Outlook for the fourth quarter and are on a path to deliver strong growth in Adjusted EBITDA and improved Adjusted Free Cash Flow in 2016,” said Trevor Fetter, chairman and chief executive officer. “Similar to our results in the third quarter, we experienced pressure on lower acuity inpatient hospital admissions and continued to drive increases in higher-acuity admissions. Our Conifer Health Solutions and United Surgical Partners subsidiaries performed well, with Conifer meeting our expectations and USPI delivering stronger-than-expected results in the fourth quarter.”

 

Page 1

Hospital Operations and Other Segment

Results for the fourth quarter of 2015 were impacted by the timing of revenue related to the California Provider Fee program as discussed further below.

During the fourth quarter of 2015, net operating revenue in the hospital operations and other segment increased 5.0 percent to $4.423 billion, up from $4.213 billion in the fourth quarter of 2014. On a same-hospital basis, net patient revenue increased 0.7 percent to $3.992 billion, up from $3.966 billion in the fourth quarter of 2014. The increase was driven by a 0.3 percent increase in adjusted patient admissions and a 0.3 percent increase in net patient revenue per adjusted admission.

The increases in both same-hospital revenue and same-hospital revenue per adjusted admission in the fourth quarter of 2015 were negatively impacted by timing differences related to the California Provider Fee program. On a same-hospital basis, during both calendar year 2014 and the fourth quarter of 2014, the hospital segment recorded $150 million of revenue related to the California Provider Fee program, of which approximately $112 million was related to the first nine months of 2014 since the program was not approved until the fourth quarter of 2014. During 2015, Tenet recorded $166 million of revenue related to the California Provider Fee program on a same-hospital basis, including $42 million in the fourth quarter of 2015. After adjusting for the approximately $112 million of out-of-period revenue related to the California Provider Fee program in the fourth quarter of 2014, same-hospital net patient revenue per adjusted admission increased 3.2 percent in the fourth quarter of 2015.

During 2015, net operating revenue in the hospital operations and other segment increased 8.0 percent to $16.928 billion, up from $15.681 billion in 2014. On a same-hospital basis, net patient revenue increased 5.5 percent to $15.709 billion, up from $14.886 billion in 2014. The increase was driven by a 2.4 percent increase in adjusted patient admissions and a 3.1 percent increase in net patient revenue per adjusted admission.

Fourth quarter Adjusted EBITDA in Tenet’s hospital segment was $394 million, representing a decline of 28.8 percent as compared to $553 million in the fourth quarter of 2014. During both calendar year 2014 and the fourth quarter of 2014, the hospital segment recorded $165 million of revenue related to the California Provider Fee program, of which, $124 million was related to the first nine months of 2014 since the program was not approved until the fourth quarter of 2014. During calendar year 2015 and the fourth quarter of 2015, the hospital segment recorded $188 million and $49 million, respectively, of revenue related to the California Provider Fee program. After adjusting for timing differences related to the California Provider Fee, Adjusted EBITDA in the hospital segment during the fourth quarter of 2015 decreased 8.2 percent to $394 million.

During 2015, Adjusted EBITDA in the hospital segment increased 0.1 percent to $1.653 billion, up from $1.651 billion in 2014.

 

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Total hospital selected operating expenses, defined as the sum of salaries, wages and benefits, supplies and other operating expenses, increased 1.4 percent per adjusted admission in the quarter. The company continued to deliver improvements in contract labor expense, with a 9.4 percent decline in same hospital contract labor per adjusted admission in the fourth quarter.

Medicaid and Exchanges

Uninsured plus charity admissions declined by 187 admissions, or 1.8 percent on a same hospital basis in the fourth quarter of 2015. Medicaid admissions decreased by 703 admissions, or 1.3 percent in the fourth quarter. Same-hospital uninsured plus charity outpatient visits declined by 5,135 visits, or 3.2 percent, and Medicaid outpatient visits increased by 4,105 visits, or 0.7 percent in the fourth quarter.

In Tenet’s six Medicaid expansion states, same-hospital uninsured plus charity admissions declined by 187 admissions, or 11.1 percent, and Medicaid admissions increased by 287 admissions, or 1.0 percent in the fourth quarter of 2015. Uninsured plus charity outpatient visits decreased by 1,615 visits, or 3.5 percent, and Medicaid outpatient visits grew by 2,946 visits, or 0.8 percent in the fourth quarter. The six states are comprised of five states that expanded Medicaid in 2014 (Arizona, California, Illinois, Massachusetts and Michigan) and one state that expanded Medicaid in 2015 (Pennsylvania).

Tenet’s same-hospital exchange admissions were 4,734 in the fourth quarter of 2015, up 27.0 percent from the fourth quarter of 2014. Same-hospital exchange outpatient visits were 44,616 in the fourth quarter of 2015, up 45.6 percent from the fourth quarter of 2014.

Uncompensated Care

Tenet’s bad debt expense ratio was 7.2 percent of revenues before bad debt in the fourth quarter of 2015, down from 7.4 percent in the fourth quarter of 2014. Including $1.029 billion and $920 million of charity care write-offs and uninsured discounts that were offered through Tenet’s Compact with Uninsured Patients in the fourth quarters of 2015 and 2014, respectively, Tenet’s uncompensated care was $1.420 billion and $1.275 billion, respectively, in these periods. As a percentage of adjusted revenue, uncompensated care represented 22.0 percent of adjusted revenue in the fourth quarter of 2015, down from 22.2 percent in the fourth quarter of 2014. Nearly all of Tenet’s uncompensated care is associated with the hospital segment.

Ambulatory Segment

The results of many of the facilities in which the Ambulatory segment has an investment are not consolidated by Tenet or USPI. To help analyze 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. In order to improve comparability, Tenet is presenting the results for the ambulatory segment on a pro forma basis, including the results of USPI and Aspen in each comparable period.

 

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During the fourth quarter of 2015, on a pro forma basis, the ambulatory segment delivered net operating revenue of $397 million, representing an increase of 28.9 percent as compared to $308 million in the fourth quarter of 2014. During 2015, on a pro forma basis, the ambulatory segment delivered net operating revenue of $1.343 billion, representing an increase of 17.8 percent as compared to $1.140 billion of revenue in 2014.

On a pro forma same-facility system-wide basis in the fourth quarter of 2015, revenue in the ambulatory segment increased 12.5 percent, with cases increasing 6.9 percent and revenue per case increasing 5.2 percent.

During the fourth quarter of 2015, on a pro forma basis, Tenet’s ambulatory segment delivered Adjusted EBITDA of $158 million, up 17.9 percent from $134 million in the fourth quarter of 2014. After subtracting $48 million and $33 million of net income attributable to noncontrolling interests in the fourth quarters of 2015 and 2014, respectively, and prior to subtracting additional noncontrolling interest related to Welsh Carson’s and other pre-existing USPI shareholders 49.9 percent ownership interest in the USPI joint venture, Adjusted EBITDA less NCI increased 8.9 percent to $110 million in the fourth quarter of 2015, up from $101 million in the fourth quarter of 2014. After subtracting $69 million and $49 million of Adjusted net income attributable to noncontrolling interests in the fourth quarters of 2015 and 2014, respectively, Adjusted EBITDA less NCI increased 4.7 percent to $89 million in the fourth quarter of 2015, up from $85 million in the fourth quarter of 2014. The Adjusted net income attributable to noncontrolling interests in the fourth quarter of 2015 excludes $16 million of net income attributable to noncontrolling interests recorded during the quarter related to $32 million of gains on the consolidation and deconsolidation of certain businesses.

During 2015, on a pro forma basis, the ambulatory segment delivered Adjusted EBITDA of $489 million, up 14.5 percent from $427 million in 2014. After subtracting $137 million and $112 million of net income attributable to noncontrolling interests in 2015 and 2014, respectively, and prior to subtracting additional noncontrolling interest related to Welsh Carson’s and other pre-existing USPI shareholders 49.9 percent ownership interest in the USPI joint venture, Adjusted EBITDA less NCI increased 11.7 percent to $352 million in 2015, up from $315 million in 2014. After subtracting $206 million and $150 million of net income attributable to noncontrolling interests in 2015 and 2014, respectively, Adjusted EBITDA less NCI increased 2.2 percent to $283 million in 2015, up from $277 million in 2014. After adjusting for the additional $16 million of net income attributable to noncontrolling interests that was recorded in the fourth quarter of 2015, Adjusted EBITDA Less NCI in the ambulatory segment increased 7.9 percent in 2015.

Conifer Segment

During the fourth quarter of 2015, Conifer’s revenue increased 17.4 percent to $384 million, up from $327 million. Conifer’s revenue increased 18.4 percent during 2015 to $1.413 billion, up from $1.193 billion in 2014. Excluding revenue from Tenet, Conifer’s revenue from other third party customers increased by 27.2 percent to $206 million in the fourth quarter of 2015 and by 24.1 percent to $747 million in 2015.

 

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In the fourth quarter of 2015, Conifer generated $61 million of Adjusted EBITDA, down 4.7 percent versus $64 million in the fourth quarter of 2014. During 2015, Conifer delivered Adjusted EBITDA of $265 million, up 30.5 percent from $203 million in 2014.

Net Income and Earnings Per Diluted Share

During the fourth quarter of 2015, Tenet generated Adjusted net income from continuing operations of $35 million, or $0.35 per diluted share. This excludes $135 million, or $1.36 per diluted share, in after-tax items such as impairment charges, restructuring charges, acquisition-related costs, litigation and investigation costs, the loss from the early extinguishment of debt, and gains on sales, consolidation and deconsolidation of facilities. During the fourth quarter of 2014, the company generated adjusted net income from continuing operations of $104 million, or $1.03 per diluted share, excluding the comparable items that totaled $43 million after-tax, or $0.42 per diluted share.

During 2015, Tenet generated Adjusted net income from continuing operations of $208 million, or $2.05 per diluted share. This excludes $350 million, or $3.48 per diluted share, in after-tax items such as impairment charges, restructuring charges, acquisition-related costs, litigation and investigation costs, the loss from the early extinguishment of debt, and gains on sales, consolidation and deconsolidation of facilities. During 2014, the company generated adjusted net income from continuing operations of $145 million, or $1.45 per diluted share, excluding the comparable items that totaled $111 million after-tax, or $1.11 per diluted share.

On a GAAP basis in the fourth quarter of 2015, including the results of both continuing and discontinued operations, Tenet reported a net loss attributable to common shareholders of $97 million, or $0.98 per diluted share, compared to net income of $61 million, or $0.61 per diluted share, in the fourth quarter of 2014. On a GAAP basis in 2015, including the results of both continuing and discontinued operations, Tenet reported a net loss attributable to common shareholders of $140 million, or $1.41 per diluted share, compared to net income of $12 million, or $0.12 per diluted share, in 2014.

Cash Flow and Liquidity

Cash and cash equivalents were $356 million at December 31, 2015 compared to $193 million at December 31, 2014. Tenet’s cash and debt balances as of December 31, 2015 reflect the cash proceeds that the company received from the sale of two hospitals in North Carolina, the sale of a majority position in four hospitals in Dallas, and the related changes that these transactions had on Tenet’s balance sheet. The company ended 2015 with no outstanding borrowings on its $1 billion credit line.

Accounts receivable days outstanding were 49.5 at December 31, 2015, representing no change from September 30, 2015 or December 31, 2014. Adjusted net cash provided by operating activities in 2015 was $1.247 billion, representing a 42.0 percent increase compared to $878 million in 2014. After subtracting $842 million and $933 million of capital expenditures

 

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in 2015 and 2014, respectively, Adjusted Free Cash Flow was $405 million in 2015, up from an outflow of $55 million in 2014.

Tenet repurchased $40 million of stock during the fourth quarter. As of December 31, 2015, the company had $460 million of remaining authorization under the previously announced $500 million share repurchase program. The repurchase program will expire on December 31, 2016 and may be suspended for periods or discontinued at any time.

Increase in Litigation Reserves

In the three months ended December 31, 2015, the Company increased its aggregate reserve for the Clinica de la Mama criminal investigation and civil litigation from $20 million to $238 million to reflect an offer it made in February 2016 to resolve the matter. This amount is reflected in the consolidated balance sheet as of December 31, 2015 as accrued legal settlement costs. The $218 million reserve increase lowered net income by approximately $184 million or $1.86 per diluted share during the fourth quarter of 2015. As previously disclosed, the Company commenced discussions in January 2016 with the U.S. Department of Justice and the State of Georgia regarding potential resolution of these matters. For additional information, see Note 15 to the Consolidated Financial Statements included in the Company’s Form 10-K for the year ended December 31, 2015.

Outlook

During 2016, Tenet expects to deliver revenue of $18.8 billion to $19.2 billion, Adjusted EBITDA of $2.4 billion to $2.5 billion, and Adjusted earnings per diluted share of $1.18 to $2.25. The Outlook for EPS in calendar year 2016 assumes net income attributable to noncontrolling interests of $310 million to $330 million and an average diluted share count of 102 million.

During 2016, Tenet expects to deliver Adjusted Free Cash Flow of $400 million to $600 million, compared to $405 million in 2015, and anticipates additional improvement in Adjusted Free Cash Flow in 2017. The Outlook for Adjusted Free Cash Flow in 2016 is based on an Outlook of $1.300 billion to $1.450 billion of Adjusted Net Cash Provided by Operating Activities less $850 million to $900 million of capital expenditures. In addition, the company anticipates making cash distributions to noncontrolling interests of $220 million to $240 million in 2016.

During the first quarter of 2016, Tenet expects to deliver revenue of $4.7 billion to $4.9 billion, Adjusted EBITDA of $550 million to $600 million and Adjusted earnings per diluted share of $0.05 to $0.54 assuming an average diluted share count of 101 million.

Additional details on Tenet’s Outlook for both the first quarter and calendar year 2016 are available in Tables 3, 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 Fourth Quarter Results

Tenet management will discuss the Company’s fourth quarter 2015 results on a webcast scheduled for 10:00 a.m. EST (9:00 a.m. CST) on February 23, 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-K report for the year ended December 31, 2015, 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. A reconciliation of Adjusted EBITDA to net income attributable to Tenet common shareholders is included in the financial tables at the end of this release.

Tenet Healthcare Corporation is a diversified healthcare services company with more than 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 84 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 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 any significant monetary resolution or other undesirable consequences of the Clinica de la Mama qui tam action and criminal investigation described in Note 15 to the

 

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Consolidated Financial Statements included in our Form 10-K for the year ended December 31, 2015. The terms of a final resolution, if any, of the Clinica de la Mama matter may require us to pay significant fines and penalties and give rise to other costs or adverse consequences that materially exceed the reserve we have established 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)

 

     Three Months Ended December 31,  
(Dollars in millions except per share amounts)    2015     %     2014     %     Change  

Net operating revenues:

           

Net operating revenues before provision for doubtful accounts

    $ 5,417        $ 4,821          12.4 % 

Less: Provision for doubtful accounts

      391          356          9.8 % 
  

 

 

      

 

 

      

Net operating revenues

      5,026        100.0 %      4,465        100.0 %      12.6 % 

Equity in earnings of unconsolidated affiliates

      51        1.0 %      3        0.1 %      1,600.0 % 

Operating expenses:

           

Salaries, wages and benefits

      2,443        48.6 %      2,118        47.5 %      15.3 % 

Supplies

      817        16.3 %      688        15.4 %      18.8 % 

Other operating expenses, net

      1,230        24.5 %      1,048        23.5 %      17.4 % 

Electronic health record incentives

      (26 )      (0.5 )%      (32 )      (0.7 )%      (18.8 )% 

Depreciation and amortization

      208        4.1 %      240        5.4 %   

Impairment and restructuring charges, and acquisition-related costs

      52        1.0 %      63        1.4 %   

Litigation and investigation costs

      224        4.5 %      6        0.1 %   

Gains on sales, consolidation and deconsolidation of facilities

      (186 )      (3.7 )%      —         
  

 

 

      

 

 

      

Operating income

      315        6.3 %      337        7.5 %   

Interest expense

      (248 )        (196 )     

Loss from early extinguishment of debt

      (1 )        —         

Investment earnings

      1          —         
  

 

 

      

 

 

      

Net income from continuing operations, before income taxes

      67          141       

Income tax expense

      (68 )        (60 )     
  

 

 

      

 

 

      

Net income (loss) from continuing operations, before discontinued operations

      (1 )        81       

Discontinued operations:

           

Loss from operations

      (1 )        —         

Litigation and investigation costs

      5          —         

Income tax expense

      (1 )        —         
  

 

 

      

 

 

      

Net income from discontinued operations

      3          —         
  

 

 

      

 

 

      

Net income

      2          81       

Less: Net income attributable to noncontrolling interests

      99          20       
  

 

 

      

 

 

      

Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders

    $ (97 )      $ 61       
  

 

 

      

 

 

      

Amounts available (attributable) to Tenet Healthcare Corporation common shareholders

           

Net income (loss) from continuing operations, net of tax

    $ (100 )      $ 61       

Net income from discontinued operations, net of tax

      3          —         
  

 

 

      

 

 

      

Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders

    $ (97 )      $ 61       
  

 

 

      

 

 

      

Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders:

           

Basic

    $ (1.01 )      $ 0.62       

Continuing operations

      0.03          —         
  

 

 

      

 

 

      
   $ (0.98 )      $ 0.62       
  

 

 

      

 

 

      

Diluted

           

Continuing operations

    $ (1.01 )      $ 0.61       

Discontinued operations

      0.03          —         
  

 

 

      

 

 

      
   $ (0.98 )      $ 0.61       
  

 

 

      

 

 

      

Weighted average shares and dilutive securities outstanding (in thousands):

           

Basic

      99,188          98,331       

Diluted*

      99,188          101,279       

 

* Had we generated income from continuing operations in the three months ended December 31, 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 2,173 shares.

 

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TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

     Years Ended December 31,  
(Dollars in millions except per share amounts)    2015     %     2014     %     Change  

Net operating revenues:

           

Net operating revenues before provision for doubtful accounts

    $ 20,111        $ 17,908          12.3 % 

Less: Provision for doubtful accounts

      1,477          1,305          13.2 % 
  

 

 

      

 

 

      

Net operating revenues

      18,634        100.0 %      16,603        100.0 %      12.2 % 

Equity in earnings of unconsolidated affiliates

      99        0.5 %      12        0.1 %      725.0 % 

Operating expenses:

           

Salaries, wages and benefits

      9,011        48.4 %      8,023        48.3 %      12.3 % 

Supplies

      2,963        15.9 %      2,630        15.8 %      12.7 % 

Other operating expenses, net

      4,555        24.4 %      4,114        24.8 %      10.7 % 

Electronic health record incentives

      (72 )      (0.4 )%      (104 )      (0.6 )%      (30.8 )% 

Depreciation and amortization

      797        4.3 %      849        5.1 %   

Impairment and restructuring charges, and acquisition-related costs

      318        1.7 %      153        0.9 %   

Litigation and investigation costs

      291        1.6 %      25        0.2 %   

Gains on sales, consolidation and deconsolidation of facilities

      (186 )      (1.0 )%      —          —   %   
  

 

 

      

 

 

      

Operating income

      1,056        5.7 %      925        5.6 %   

Interest expense

      (912 )        (754 )     

Loss from early extinguishment of debt

      (1 )        (24 )     

Investment earnings

      1          —         
  

 

 

      

 

 

      

Net income from continuing operations, before income taxes

      144          147       

Income tax expense

      (68 )        (49 )     
  

 

 

      

 

 

      

Net income from continuing operations, before discontinued operations

      76          98       

Discontinued operations:

           

Loss from operations

      (5 )        (17 )     

Litigation and investigation costs

      8          (18 )     

Income tax benefit (expense)

      (1 )        13       
  

 

 

      

 

 

      

Net income (loss) from discontinued operations

      2          (22 )     
  

 

 

      

 

 

      

Net income

      78          76       

Less: Net income attributable to noncontrolling interests

      218          64       
  

 

 

      

 

 

      

Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders

    $ (140 )      $ 12       
  

 

 

      

 

 

      

Amounts available (attributable) to Tenet Healthcare Corporation common shareholders

           

Net income (loss) from continuing operations, net of tax

    $ (142 )      $ 34       

Net income (loss) from discontinued operations, net of tax

      2          (22 )     
  

 

 

      

 

 

      

Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders

    $ (140 )      $ 12       
  

 

 

      

 

 

      

Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders:

           

Basic

           

Continuing operations

    $ (1.43 )      $ 0.35       

Discontinued operations

      0.02          (0.23 )     
  

 

 

      

 

 

      
   $ (1.41 )      $ 0.12       
  

 

 

      

 

 

      

Diluted

           

Continuing operations

    $ (1.43 )      $ 0.34       

Discontinued operations

      0.02          (0.22 )     
  

 

 

      

 

 

      
   $ (1.41 )      $ 0.12       
  

 

 

      

 

 

      

Weighted average shares and dilutive securities outstanding (in thousands):

           

Basic

      99,167          97,801       

Diluted*

      99,167          100,287       

 

* Had we generated income from continuing operations in the twelve months ended December 31, 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 2,380 shares.

 

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TENET HEALTHCARE CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     December 31,     December 31,  
(Dollars in millions)    2015     2014  
ASSETS     

Current assets:

     

Cash and cash equivalents

    $ 356      $ 193   

Accounts receivable, less allowance for doubtful accounts

      2,704        2,404   

Inventories of supplies, at cost

      309        276   

Income tax receivable

      7        2   

Assets held for sale

      550        2   

Other current assets

      1,245        1,093   
  

 

 

    

 

 

  

Total current assets

      5,171        3,970   

Investments and other assets

      1,175        384   

Deferred income taxes

      776        863   

Property and equipment, at cost, less accumulated depreciation and amortization

      7,915        7,733   

Goodwill

      6,970        3,913   

Other intangible assets, at cost, less accumulated amortization

      1,675        1,088   
  

 

 

    

 

 

  

Total assets

    $ 23,682      $ 17,951   
  

 

 

    

 

 

  
LIABILITIES AND EQUITY     

Current liabilities:

     

Current portion of long-term debt

    $ 127      $ 112   

Accounts payable

      1,380        1,179   

Accrued compensation and benefits

      880        852   

Professional and general liability reserves

      177        189   

Accrued interest payable

      205        194   

Liabilities held for sale

      101        —     

Accrued legal settlement costs

      294        45   

Other current liabilities

      1,144        1,006   
  

 

 

    

 

 

  

Total current liabilities

      4,308        3,577   

Long-term debt, net of current portion

      14,383        11,505   

Professional and general liability reserves

      578        492   

Defined benefit plan obligations

      595        633   

Other long-term liabilities

      594        558   
  

 

 

    

 

 

  

Total liabilities

      20,458        16,765   

Commitments and contingencies

     

Redeemable noncontrolling interests in equity of consolidated subsidiaries

      2,266        401   

Equity:

     

Shareholders’ equity:

     

Common stock

      7        7   

Additional paid-in capital

      4,815        4,614   

Accumulated other comprehensive loss

      (164 )      (182 ) 

Accumulated deficit

      (1,550 )      (1,410 ) 

Common stock in treasury, at cost

      (2,417 )      (2,378 ) 
  

 

 

    

 

 

  

Total shareholders’ equity

      691        651   

Noncontrolling interests

      267        134   
  

 

 

    

 

 

  

Total equity

      958        785   
  

 

 

    

 

 

  

Total liabilities and equity

    $ 23,682      $ 17,951   
  

 

 

    

 

 

  

 

Page 11

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

 

     Years Ended  
     December 31,  
(Dollars in millions)    2015     2014  

Net Income

    $ 78      $ 76   

Adjustments to reconcile net income to net cash provided by operating activities:

     

Depreciation and amortization

      797        849   

Provision for doubtful accounts

      1,477        1,305   

Deferred income tax expense

      42        30   

Stock-based compensation expense

      69        51   

Impairment and restructuring charges, and acquisition-related costs

      318        153   

Litigation and investigation costs

      291        25   

Loss from early extinguishment of debt

      1        24   

Gains on sales, consolidation and deconsolidation of facilities

      (186 )      —     

Undistributed earnings from affiliates

      (99 )      (10 ) 

Amortization of debt discount and debt issuance costs

      41        28   

Pre-tax loss (income) from discontinued operations

      (3 )      35   

Other items, net

      59        (30 ) 

Changes in cash from operating assets and liabilities:

     

Accounts receivable

      (1,632 )      (1,896 ) 

Inventories and other current assets

      (130 )      (314 ) 

Income taxes

      18        3   

Accounts payable, accrued expenses and other current liabilities

      68        505   

Other long-term liabilities

      38        44   

Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements

      (200 )      (168 ) 

Net cash used in operating activities from discontinued operations, excluding income taxes

      (21 )      (23 ) 
  

 

 

    

 

 

  

        Net cash provided by operating activities

      1,026        687   

Cash flows from investing activities:

     

Purchases of property and equipment — continuing operations

      (842 )      (933 ) 

Purchases of businesses or joint venture interests, net of cash acquired

      (940 )      (428 ) 

Proceeds from sales of facilities and other assets

      549        6   

Proceeds from sales of marketable securities, long-term investments and other assets

      60        13   

Purchases of equity investments

      (134 )      (12 ) 

Other long-term assets

      (4 )      31   

Other items, net

      (6 )      1   
  

 

 

    

 

 

  

        Net cash used in investing activities

      (1,317 )      (1,322 ) 

Cash flows from financing activities:

     

Repayments of borrowings under credit facility

      (2,815 )      (2,430 ) 

Proceeds from borrowings under credit facility

      2,595        2,245   

Repayments of other borrowings

      (2,049 )      (683 ) 

Proceeds from other borrowings

      3,158        1,608   

Repurchases of common stock

      (40 )      —     

Debt issuance costs

      (80 )      (27 ) 

Distributions paid to noncontrolling interests

      (110 )      (45 ) 

Contributions from noncontrolling interests

      4        18   

Purchase of noncontrolling interests

      (254 )      —     

Proceeds from exercise of stock options

      15        26   

Other items, net

      30        3   
  

 

 

    

 

 

  

        Net cash provided by financing activities

      454        715   
  

 

 

    

 

 

  

Net increase in cash and cash equivalents

      163        80   

Cash and cash equivalents at beginning of period

      193        113   
  

 

 

    

 

 

  

Cash and cash equivalents at end of period

    $ 356      $ 193   
  

 

 

    

 

 

  

Supplemental disclosures:

     

Interest paid, net of capitalized interest

    $ (859 )    $ (726 ) 

Income tax payments, net

    $ (7 )    $ (8 ) 

 

Page 12

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING TOTAL HOSPITALS(1)

(Unaudited)

 

(Dollars in millions except per patient day,                                     
per admission, per adjusted admission    Three Months Ended December 31,     Years Ended December 31,  
and per visit amounts)    2015     2014(2)     Change     2015(2)     2014(2)     Change  

Net inpatient revenues

    $ 2,736      $ 2,719        0.6 %   $ 10,652      $ 10,015        6.4 %

Net outpatient revenues

    $ 1,616      $ 1,448        11.6 %   $ 6,027      $ 5,449        10.6 %

Number of acute care hospitals (at end of period)

      86        80        6 *      86        80        —   * 

Licensed beds (at end of period)

      22,525        20,814        8.2 %     22,525        20,814        8.2 %

Average licensed beds

      22,549        20,805        8.4 %     21,092        20,531        2.7 %

Utilization of licensed beds

      47.4 %      49.0 %      (1.6 )% *      49.6 %      49.3 %      0.3 % * 

Patient days - total

      983,856        937,803        4.9 %     3,817,572        3,695,288        3.3 %

Adjusted patient days

      1,710,620        1,578,854        8.3 %     6,520,289        6,203,383        5.1 %

Net inpatient revenue per patient day

    $ 2,781      $ 2,899        (4.1 )%   $ 2,790      $ 2,710        3.0 %

Total admissions

      211,991        202,337        4.8 %     824,102        791,165        4.2 %

Adjusted patient admissions

      371,994        344,857        7.9 %     1,422,588        1,343,511        5.9 %

Charity and uninsured admissions

      11,529        11,232        2.6 %     44,336        45,679        (2.9 )%

Net inpatient revenue per admission

    $ 12,906      $ 13,438        (4.0 )%   $ 12,926      $ 12,659        2.1 %

Average length of stay (days)

      4.64        4.63        0.2 %     4.63        4.67        (0.9 )%

Total surgeries

      138,264        128,050        8.0 %     517,127        495,980        4.3 %

Admissions through emergency department

      133,108        127,361        4.5 %     521,272        495,195        5.3 %

Emergency department visits

      778,148        737,680        5.5 %     3,010,625        2,824,526        6.6 %

Total emergency department admissions and visits

      911,256        865,041        5.3 %     3,531,897        3,319,721        6.4 %

Outpatient visits

      2,198,005        1,995,237        10.2 %     8,332,139        7,720,886        7.9 %

Charity and uninsured outpatient visits

      173,280        165,365        4.8 %     662,168        660,924        0.2 %

Net outpatient revenue per visit

    $ 735      $ 726        1.2 %   $ 723      $ 706        2.4 %

Net patient revenue per adjusted patient admission

    $ 11,699      $ 12,083        (3.2 )%   $ 11,724      $ 11,510        1.9 %

Net patient revenue per adjusted patient day

    $ 2,544      $ 2,639        (3.6 )%   $ 2,558      $ 2,493        2.6 %

Net Patient Revenues from:

             

Medicare

      19.3 %     21.1 %     (1.8 )% *      20.4 %     22.0 %     (1.6 )% * 

Medicaid

      8.2 %     11.3 %     (3.1 )% *      8.7 %     9.6 %     (0.9 )% * 

Managed care

      61.6 %     57.5 %     4.1 % *      60.6 %     58.4 %     2.2 % * 

Indemnity, self-pay and other

      10.9 %     10.1 %     0.8 % *      10.3 %     10.0 %     0.3 % * 

 

(1) Represents the results of Tenet’s Hospital Operations and other segment.
(2) The results for 2014 and the quarter ended March 31, 2015 have been restated to exclude the results of the surgery and imaging centers that Tenet contributed to the joint venture with United Surgical Partners International. The results for these surgery and imaging centers are now reported in Tenet’s Ambulatory Care segment.
* This change is the difference between the 2015 and 2014 amounts shown.

 

Page 13

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS(1)

(Unaudited)

 

(Dollars in millions except per patient day,                                     
per admission, per adjusted admission    Three Months Ended December 31,     Years Ended December 31,  
and per visit amounts)    2015     2014(2)     Change     2015(2)     2014(2)     Change  

Net inpatient revenues

    $ 2,546      $ 2,591        (1.7 )%   $ 10,079      $ 9,615        4.8 %

Net outpatient revenues

    $ 1,446      $ 1,375        5.2 %   $ 5,630      $ 5,271        6.8 %

Number of acute care hospitals (at end of period)

      75        75        —   *      75        75        —   * 

Licensed beds (at end of period)

      19,882        19,984        (0.5 )%     19,882        19,984        (0.5 )%

Average licensed beds

      19,906        19,975        (0.3 )%     19,969        19,905        0.3 %

Utilization of licensed beds

      47.8 %      48.9 %      (1.1 )% *      49.0 %      49.1 %      (0.1 )% * 

Patient days—total

      875,226        898,353        (2.6 )%     3,573,155        3,566,694        0.2 %

Adjusted patient days

      1,508,868        1,512,531        (0.2 )%     6,083,749        5,993,861        1.5 %

Net inpatient revenue per patient day

    $ 2,909      $ 2,884        0.9 %   $ 2,821      $ 2,696        4.6 %

Total admissions

      190,642        194,169        (1.8 )%     774,480        765,951        1.1 %

Adjusted patient admissions

      332,037        330,884        0.3 %     1,333,227        1,301,936        2.4 %

Charity and uninsured admissions

      10,386        10,573        (1.8 )%     41,325        43,496        (5.0 )%

Net inpatient revenue per admission

    $ 13,355      $ 13,344        0.1 %   $ 13,014      $ 12,553        3.7 %

Average length of stay (days)

      4.59        4.63        (0.9 )%     4.61        4.66        (1.1 )%

Total surgeries

      123,761        123,854        (0.1 )%     487,953        482,633        1.1 %

Admissions through emergency department

      119,814        122,089        (1.9 )%     489,401        479,805        2.0 %

Emergency department visits

      700,837        703,265        (0.3 )%     2,816,943        2,738,233        2.9 %

Total emergency department admissions and visits

      820,651        825,354        (0.6 )%     3,306,344        3,218,038        2.7 %

Outpatient visits

      1,974,943        1,917,935        3.0 %     7,831,785        7,496,243        4.5 %

Charity and uninsured outpatient visits

      153,357        158,492        (3.2 )%     618,571        636,712        (2.8 )%

Net outpatient revenue per visit

    $ 732      $ 717        2.1 %   $ 719      $ 703        2.3 %

Net patient revenue per adjusted patient admission

    $ 12,023      $ 11,986        0.3 %   $ 11,783      $ 11,434        3.1 %

Net patient revenue per adjusted patient day

    $ 2,646      $ 2,622        0.9 %   $ 2,582      $ 2,484        3.9 %

Net Patient Revenues from:

             

Medicare

      19.6 %     20.7 %     (1.1 )% *      19.6 %     21.7 %     (2.1 )% * 

Medicaid

      8.3 %     11.1 %     (2.8 )% *      8.3 %     9.4 %     (1.1 )% * 

Managed care

      61.6 %     58.3 %     3.3 % *      61.6 %     59.0 %     2.6 % * 

Indemnity, self-pay and other

      10.5 %     9.9 %     0.6 % *      10.5 %     9.9 %     0.6 % * 

 

(1) Represents the results of Tenet’s Hospital Operations and other segment.
(2) The results for 2014 and the quarter ended March 31, 2015 have been restated to exclude the results of the surgery and imaging centers that Tenet contributed to the joint venture with United Surgical Partners International. The results for these surgery and imaging centers are now reported in Tenet’s Ambulatory Care segment.
* This change is the difference between the 2015 and 2014 amounts shown.

 

Page 14

TENET HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

     Three Months Ended     Year Ended  
(Dollars in millions except per share amounts)    03/31/15     6/30/2015     9/30/2015     12/31/2015     12/31/2015  

Net operating revenues:

           

Net operating revenues before provision for doubtful accounts

    $ 4,787      $ 4,844      $ 5,063      $ 5,417      $ 20,111   

Less: Provision for doubtful accounts

      363        352        371        391        1,477   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net operating revenues

      4,424        4,492        4,692        5,026        18,634   

Equity in earnings of unconsolidated affiliates

      4        16        28        51        99   

Operating expenses:

           

Salaries, wages and benefits

      2,125        2,185        2,258        2,443        9,011   

Supplies

      687        707        752        817        2,963   

Other operating expenses, net

      1,093        1,081        1,151        1,230        4,555   

Electronic health record incentives

      (6 )      (33 )      (7 )      (26 )      (72 ) 

Depreciation and amortization

      207        197        185        208        797   

Impairment and restructuring charges, and acquisition-related costs

      29        193        44        52        318   

Litigation and investigation costs

      3        14        50        224        291   

Gains on sales, consolidation and deconsolidation of facilities

      —          —          —          (186 )      (186 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

      290        164        287        315        1,056   

Interest expense

      (199 )      (217 )      (248 )      (248 )      (912 ) 

Loss from early extinguishment of debt

      —          —          —          (1 )      (1 ) 

Investment earnings (loss)

      —          (1 )      1        1        1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss) from continuing operations, before income taxes

      91        (54 )      40        67        144   

Income tax benefit (expense)

      (16 )      27        (11 )      (68 )      (68 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss) from continuing operations, before discontinued operations

      75        (27 )      29        (1 )      76   

Discontinued operations:

           

Loss from operations

      (1 )      (2 )      (1 )      (1 )      (5 ) 

Litigation and investigation costs

      3        —          —          5        8   

Income tax benefit (expense)

      (1 )      1        —          (1 )      (1 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss) from discontinued operations

      1        (1 )      (1 )      3        2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss)

      76        (28 )      28        2        78   

Less: Net income attributable to noncontrolling interests

      29        33        57        99        218   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders

    $ 47      $ (61 )    $ (29 )    $ (97 )    $ (140 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Amounts available (attributable) to Tenet Healthcare Corporation common shareholders

           

Net income (loss) from continuing operations, net of tax

    $ 46      $ (60 )    $ (28 )    $ (100 )    $ (142 ) 

Net income (loss) from discontinued operations, net of tax

      1        (1 )      (1 )      3        2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders

    $ 47      $ (61 )    $ (29 )    $ (97 )    $ (140 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders:

           

Basic

           

Continuing operations

    $ 0.47      $ (0.60 )    $ (0.28 )    $ (1.01 )    $ (1.43 ) 

Discontinued operations

      0.01        (0.01 )      (0.01 )      0.03        0.02   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
   $ 0.48      $ (0.61 )    $ (0.29 )    $ (0.98 )    $ (1.41 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Diluted

           

Continuing operations

    $ 0.46      $ (0.60 )    $ (0.28 )    $ (1.01 )    $ (1.43 ) 

Discontinued operations

      0.01        (0.01 )      (0.01 )      0.03        0.02   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
   $ 0.47      $ (0.61 )    $ (0.29 )    $ (0.98 )    $ (1.41 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Weighted average shares and dilutive securities outstanding (in thousands):

           

Basic

      98,699        99,244        99,537        99,188        99,167   

Diluted

      100,872        99,244        99,537        99,188        99,167   

 

Page 15

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING TOTAL HOSPITALS(1)

(Unaudited)

 

(Dollars in millions except per patient day,                               
per admission, per adjusted admission    Three Months Ended     Year Ended  
and per visit amounts)    03/31/15(2)     06/30/15     9/30/2015     12/31/2015     12/31/2015  

Net inpatient revenues

    $ 2,691      $ 2,622      $ 2,603      $ 2,736      $ 10,652   

Net outpatient revenues

    $ 1,412      $ 1,484      $ 1,515      $ 1,616      $ 6,027   

Number of acute care hospitals (at end of period)

      80        80        83        86        86   

Licensed beds (at end of period)

      20,826        20,826        21,527        22,525        22,525   

Average licensed beds

      20,823        20,826        21,122        22,549        21,092   

Utilization of licensed beds

      52.1 %      49.1 %      47.8 %      47.4 %      49.6 % 

Patient days—total

      975,912        929,840        927,964        983,856        3,817,572   

Adjusted patient days

      1,618,516        1,589,659        1,601,494        1,710,620        6,520,289   

Net inpatient revenue per patient day

    $ 2,756      $ 2,821      $ 2,805      $ 2,781      $ 2,790   

Total admissions

      208,333        201,908        201,870        211,991        824,102   

Adjusted patient admissions

      349,097        349,145        352,352        371,994        1,422,588   

Charity and uninsured admissions

      10,950        10,535        11,322        11,529        44,336   

Net inpatient revenue per admission

    $ 12,912      $ 12,991      $ 12,894      $ 12,906      $ 12,926   

Average length of stay (days)

      4.68        4.61        4.60        4.64        4.63   

Total surgeries

      121,403        127,523        129,937        138,264        517,127   

Admissions through emergency department

      133,544        128,570        126,050        133,108        521,272   

Emergency department visits

      741,533        742,951        747,993        778,148        3,010,625   

Total emergency department admissions and visits

      875,077        871,521        874,043        911,256        3,531,897   

Outpatient visits

      1,994,573        2,063,037        2,076,524        2,198,005        8,332,139   

Charity and uninsured outpatient visits

      157,197        159,634        172,057        173,280        662,168   

Net outpatient revenue per visit

    $ 708      $ 719      $ 730      $ 735      $ 723   

Net patient revenue per adjusted patient admission

    $ 11,750      $ 11,764      $ 11,688      $ 11,699      $ 11,724   

Net patient revenue per adjusted patient day

    $ 2,534      $ 2,584      $ 2,571      $ 2,544      $ 2,558   

Net Patient Revenues from:

           

Medicare

      21.9 %     20.7 %     19.8 %     19.3 %     20.4 %

Medicaid

      9.4 %     8.5 %     8.8 %     8.2 %     8.7 %

Managed care

      58.6 %     60.8 %     61.1 %     61.6 %     60.6 %

Indemnity, self-pay and other

      10.2 %     10.0 %     10.3 %     10.9 %     10.3 %

 

(1) Represents the results of Tenet’s Hospital Operations and other segment.
(2) The results for the quarter ended March 31, 2015 have been restated to exclude the results of the surgery and imaging centers that Tenet contributed to the joint venture with United Surgical Partners International. The results for these surgery and imaging centers are now reported in Tenet’s Ambulatory Care segment.

 

Page 16

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS(1)

(Unaudited)

 

(Dollars in millions except per patient day,                               
per admission, per adjusted admission    Three Months Ended     Year Ended  
and per visit amounts)    03/31/15(2)     06/30/15     9/30/2015     12/31/2015     12/31/2015  

Net inpatient revenues

    $ 2,568      $ 2,493      $ 2,472      $ 2,546      $ 10,079   

Net outpatient revenues

    $ 1,350      $ 1,407      $ 1,427      $ 1,446      $ 5,630   

Number of acute care hospitals (at end of period)

      75        75        75        75        75   

Licensed beds (at end of period)

      19,996        19,996        19,953        19,882        19,882   

Average licensed beds

      19,993        19,996        19,985        19,906        19,969   

Utilization of licensed beds

      51.9 %      48.9 %      47.6 %      47.8 %      49.0 % 

Patient days—total

      934,521        888,952        874,456        875,226        3,573,155   

Adjusted patient days

      1,550,217        1,520,937        1,503,727        1,508,868        6,083,749   

Net inpatient revenue per patient day

    $ 2,748      $ 2,804      $ 2,827      $ 2,909      $ 2,821   

Total admissions

      199,460        193,324        191,054        190,642        774,480   

Adjusted patient admissions

      334,218        334,451        332,521        332,037        1,333,227   

Charity and uninsured admissions

      10,291        9,947        10,701        10,386        41,325   

Net inpatient revenue per admission

    $ 12,875      $ 12,895      $ 12,939      $ 13,355      $ 13,014   

Average length of stay (days)

      4.69        4.60        4.58        4.59        4.61   

Total surgeries

      117,412        123,015        123,765        123,761        487,953   

Admissions through emergency department

      127,497        122,826        119,264        119,814        489,401   

Emergency department visits

      706,433        707,425        702,248        700,837        2,816,943   

Total emergency department admissions and visits

      833,930        830,251        821,512        820,651        3,306,344   

Outpatient visits

      1,912,749        1,980,927        1,963,166        1,974,943        7,831,785   

Charity and uninsured outpatient visits

      150,324        152,449        162,441        153,357        618,571   

Net outpatient revenue per visit

    $ 706      $ 710      $ 727      $ 732      $ 719   

Net patient revenue per adjusted patient admission

    $ 11,723      $ 11,661      $ 11,726      $ 12,023      $ 11,783   

Net patient revenue per adjusted patient day

    $ 2,527      $ 2,564      $ 2,593      $ 2,646      $ 2,582   

Net Patient Revenues from:

           

Medicare

      21.6 %     20.4 %     20.0 %     19.6 %     19.6 %

Medicaid

      9.2 %     8.2 %     8.6 %     8.3 %     8.3 %

Managed care

      59.2 %     61.6 %     61.5 %     61.6 %     61.6 %

Indemnity, self-pay and other

      10.0 %     9.8 %     9.9 %     10.5 %     10.5 %

 

(1) Represents the results of Tenet’s Hospital Operations and other segment.
(2) The results for the quarter ended March 31, 2015 have been restated to exclude the results of the surgery and imaging centers that Tenet contributed to the joint venture with United Surgical Partners International. The results for these surgery and imaging centers are now reported in Tenet’s Ambulatory Care segment.

 

Page 17

TENET HEALTHCARE CORPORATION

SELECTED STATISTICS – CONTINUING SAME HOSPITALS(1)

(Unaudited)

 

(Dollars in millions except per patient day,                               
per admission, per adjusted admission    Three Months Ended     Year Ended  
and per visit amounts)    03/31/14     06/30/14     9/30/2014     12/31/2014     12/31/2014  

Net inpatient revenues

    $ 2,364      $ 2,324      $ 2,336      $ 2,591      $ 9,615   

Net outpatient revenues

    $ 1,250      $ 1,323      $ 1,323      $ 1,375      $ 5,271   

Number of acute care hospitals (at end of period)

      75        75        75        75        75   

Licensed beds (at end of period)

      19,832        19,932        19,932        19,984        19,984   

Average licensed beds

      19,832        19,881        19,932        19,975        19,905   

Utilization of licensed beds

      50.7 %      48.7 %      48.2 %      48.9 %      49.1 % 

Patient days—total

      904,400        880,198        883,743        898,353        3,566,694   

Adjusted patient days

      1,485,264        1,496,763        1,499,303        1,512,531        5,993,861   

Net inpatient revenue per patient day

    $ 2,614      $ 2,640      $ 2,643      $ 2,884      $ 2,696   

Total admissions

      190,021        189,642        192,119        194,169        765,951   

Adjusted patient admissions

      315,397        325,810        329,845        330,884        1,301,936   

Charity and uninsured admissions

      12,094        10,510        10,319        10,573        43,496   

Net inpatient revenue per admission

    $ 12,441      $ 12,255      $ 12,159      $ 13,344      $ 12,553   

Average length of stay (days)

      4.76        4.64        4.60        4.63        4.66   

Total surgeries

      115,391        120,778        122,610        123,854        482,633   

Admissions through emergency department

      120,160        119,269        118,287        122,089        479,805   

Emergency department visits

      655,714        689,083        690,171        703,265        2,738,233   

Total emergency department admissions and visits

      775,874        808,352        808,458        825,354        3,218,038   

Outpatient visits

      1,787,262        1,887,541        1,903,505        1,917,935        7,496,243   

Charity and uninsured outpatient visits

      158,356        161,773        158,091        158,492        636,712   

Net outpatient revenue per visit

    $ 699      $ 701      $ 695      $ 717      $ 703   

Net patient revenue per adjusted patient admission

    $ 11,459      $ 11,194      $ 11,093      $ 11,986      $ 11,434   

Net patient revenue per adjusted patient day

    $ 2,433      $ 2,437      $ 2,440      $ 2,622      $ 2,484   

Net Patient Revenues from:

           

Medicare

      22.4 %     22.4 %     21.2 %     20.7 %     21.7 %

Medicaid

      7.7 %     9.9 %     8.7 %     11.1 %     9.4 %

Managed care

      58.2 %     58.4 %     61.1 %     58.3 %     59.0 %

Indemnity, self-pay and other

      11.7 %     9.3 %     9.1 %     9.9 %     9.9 %

 

(1) Represents the results of Tenet’s Hospital Operations and other segment. The results for 2014 have been restated to exclude the results of the surgery and imaging centers that Tenet contributed to the joint venture with United Surgical Partners International. The results for these surgery and imaging centers are now reported in Tenet’s Ambulatory Care segment.

 

Page 18

TENET HEALTHCARE CORPORATION

SEGMENT REPORTING

(Unaudited)

 

                 December 31,     December 31,  
                 2015     2014  

Assets

         

Hospital Operations and other

        $ 17,353      $ 16,810   

Ambulatory Care

          5,159        212   

Conifer

          1,170        929   
      

 

 

    

 

 

  

Total

        $ 23,682      $ 17,951   
      

 

 

    

 

 

  
     Three Months Ended
December 31,		     Years Ended
December 31,		  
     2015     2014     2015     2014  

Capital expenditures:

         

Hospital Operations and other

    $ 250      $ 188      $ 786      $ 899   

Ambulatory Care

      14        3        28        9   

Conifer

      12        8        28        25   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ 276      $ 199      $ 842      $ 933   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net operating revenues:

         

Hospital Operations and other

    $ 4,423      $ 4,213      $ 16,928      $ 15,681   

Ambulatory Care

      397        90        959        320   

Conifer

         

        Tenet

      178        165        666        591   

        Other customers

      206        162        747        602   
  

 

 

    

 

 

    

 

 

    

 

 

  

        Total Conifer revenues

      384        327        1,413        1,193   
  

 

 

    

 

 

    

 

 

    

 

 

  

Intercompany eliminations

      (178 )      (165 )      (666 )      (591 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ 5,026      $ 4,465      $ 18,634      $ 16,603   
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA:

         

Hospital Operations and other

    $ 394      $ 553      $ 1,653      $ 1,651   

Ambulatory Care

      158        29        358        98   

Conifer

      61        64        265        203   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ 613      $ 646      $ 2,276      $ 1,952   
  

 

 

    

 

 

    

 

 

    

 

 

  

Depreciation and amortization:

         

Hospital Operations and other

    $ 177      $ 227      $ 702      $ 810   

Ambulatory Care

      18        3        46        14   

Conifer

      13        10        49        25   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ 208      $ 240      $ 797      $ 849   
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA

    $ 613      $ 646      $ 2,276      $ 1,952   

Depreciation and amortization

      (208 )      (240 )      (797 )      (849 ) 

Impairments and restructuring charges, and acquisition-related costs

      (52 )      (63 )      (318 )      (153 ) 

Litigation and investigation costs

      (224 )      (6 )      (291 )      (25 ) 

Interest expense

      (248 )      (196 )      (912 )      (754 ) 

Loss from early extinguishment of debt

      (1 )      —          (1 )      (24 ) 

Gains on sales, consolidation and deconsolidation of facilities

      186        —          186        —     

Investment Earnings

      1        —          1        —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Income from continuing operations before income taxes

    $ 67      $ 141      $ 144      $ 147   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

Page 19

TENET HEALTHCARE CORPORATION

STATEMENT OF OPERATIONS – AMBULATORY CARE SEGMENT

INCLUDING PRO FORMA USPI AND ASPEN FOR ALL PERIODS

(Unaudited)

 

     Three Months Ended December 31,  
     2015     2014  
     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

    $ 404      $ 637      $ 313      $ 587   

Less: Provision for doubtful accounts

      (7 )      (13 )      (5 )      (14 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net operating revenues(1)

      397        624        308        573   

Equity in earnings of unconsolidated affiliates(2)

      47        —          43        —     

Operating expenses:

         

Salaries, wages and benefits

      130        135        97        130   

Supplies

      79        148        57        142   

Other operating expenses, net

      78        111        65        106   

Electronic health record incentives

      (1 )      —          (2 )      —     

Depreciation and amortization

      18        20        14        20   

Impairment and restructuring charges, and acquisition-related costs

      3        (2 )      7        —     

Gains on sales, consolidation and deconsolidation of facilities

      (32 )      —          —          —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

      169        212        113        175   

Interest expense

      (35 )      (7 )      (31 )      (7 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income from continuing operations, before income taxes

      134        205        82        168   

Income tax expense

      (16 )      (3 )      (19 )      (2 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income

      118      $ 202        63      $ 166   
    

 

 

      

 

 

  

Less: Net income attributable to noncontrolling interests

      85          49     
  

 

 

      

 

 

    

Net income attributable to Tenet Healthcare Corporation common shareholders

    $ 33        $ 14     
  

 

 

      

 

 

    

Equity in earnings of unconsolidated affiliates

      $ 47        $ 43   

 

(1) On a same-facility system-wide basis, net revenue in Tenet’s Ambulatory Care segment increased 12.5% during the three months ended December 31, 2015, with cases increasing 6.9% and revenue per case increasing 5.2%.
(2) At December 31, 2015, 139 of the 333 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 194 facilities and account for these investments as consolidated subsidiaries.

 

Page 20

TENET HEALTHCARE CORPORATION

STATEMENT OF OPERATIONS – AMBULATORY CARE SEGMENT

INCLUDING PRO FORMA USPI AND ASPEN FOR ALL PERIODS

(Unaudited)

 

     Years Ended December 31,  
     2015     2014  
     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

    $ 1,366      $ 2,213      $ 1,156      $ 1,967   

Less: Provision for doubtful accounts

      (23 )      (53 )      (16 )      (48 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net operating revenues(1)

      1,343        2,160        1,140        1,919   

Equity in earnings of unconsolidated affiliates(2)

      126        —          116        —     

Operating expenses:

         

Salaries, wages and benefits

      438        514        368        463   

Supplies

      253        542        203        478   

Other operating expenses, net

      290        448        260        397   

Electronic health record incentives

      (1 )      —          (2 )      —     

Depreciation and amortization

      64        80        56        76   

Impairment and restructuring charges, and acquisition-related costs

      5        1        9        (6 ) 

Gains on sales, consolidation and deconsolidation of facilities

      (32 )      —          —          —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

      452        575        362        511   

Interest expense

      (137 )      (28 )      (123 )      (28 ) 

Other

      —          (2 )      —          1   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income from continuing operations, before income taxes

      315        545        239        484   

Income tax expense

      (52 )      (8 )      (49 )      (8 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net Income

      263      $ 537        190      $ 476   
    

 

 

      

 

 

  

Less: Net income attributable to noncontrolling interests

      206          150     
  

 

 

      

 

 

    

Net income attributable to Tenet Healthcare Corporation common shareholders

    $ 57        $ 40     
  

 

 

      

 

 

    

Equity in earnings of unconsolidated affiliates

      $ 126        $ 116   

 

(1) On a pro forma same-facility system-wide basis, net revenue in Tenet’s Ambulatory Care segment increased 11.7% during the twelve months ended December 31, 2015, with cases increasing 7.9% and revenue per case increasing 3.6%.
(2) At December 31, 2015, 139 of the 333 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 194 facilities and account for these investments as consolidated subsidiaries.

 

Page 21

(1) Reconciliation of Adjusted EBITDA

Adjusted EBITDA, a non-GAAP term, 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, net of tax; (2) net loss (income) attributable to noncontrolling interests; (3) preferred stock dividends; (4) income (loss) from discontinued operations, net of tax; (5) income tax benefit (expense); (6) investment earnings (loss); (7) gain (loss) from early extinguishment of debt; (8) net gain (loss) on sales of investments; (9) interest expense; (10) litigation and investigation benefit (costs), net of insurance recoveries; (11) hurricane insurance recoveries, net of costs; (12) net gains (losses) on sales, consolidation and deconsolidation of facilities: (13) impairment and restructuring charges and acquisition-related costs; and (14) depreciation and amortization. The Company’s Adjusted EBITDA may not be comparable to EBITDA reported by other companies.

The Company provides this information as a supplement to GAAP information to assist itself and investors in understanding the impact of various items on its financial statements, some of which are recurring or involve cash payments. The Company uses this information in its analysis of the performance of its business excluding items that it does not consider as relevant in the performance of its hospitals in continuing operations. In addition, from time to time we use this measure to define certain performance targets under our compensation programs. Adjusted EBITDA is not a measure of liquidity, but is a measure of operating performance that management uses in its business as an alternative to net income (loss) attributable to Tenet Healthcare Corporation common shareholders. Because Adjusted EBITDA excludes many items that are included in our financial statements, it does not provide a complete measure of our operating performance. Accordingly, investors are encouraged to use GAAP measures when evaluating the Company’s financial performance.

The reconciliation of net income (loss) attributable to Tenet Healthcare Corporation common shareholders, the most comparable GAAP term, to Adjusted EBITDA, is set forth in the first table below for the three and twelve months ended December 31, 2015 and 2014.

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #1 – Reconciliation of Adjusted EBITDA to Net Loss Attributable to

Tenet Healthcare Corporation Common Shares

(Unaudited)

 

     Three Months Ended     Years Ended  
     December 31,     December 31,  
     2015     2014     2015     2014  

Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders

    $ (97 )    $ 61      $ (140 )    $ 12   

Less: Net income attributable to noncontrolling interests

      (99 )      (20 )      (218 )      (64 ) 

Net income (loss) from discontinued operations, net of tax

      3        —          2        (22 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income from continuing operations

      (1 )      81        76        98   

Income tax expense

      (68 )      (60 )      (68 )      (49 ) 

Investment earnings

      1        —          1        —     

Loss from early extinguishment of debt

      (1 )      —          (1 )      (24 ) 

Interest expense

      (248 )      (196 )      (912 )      (754 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

      315        337        1,056        925   

Litigation and investigation costs

      (224 )      (6 )      (291 )      (25 ) 

Gains on sales, consolidation and deconsolidation of facilities

      186        —          186        —     

Impairment and restructuring charges, acquisition-related costs and litigation costs and settlements

      (52 )      (63 )      (318 )      (153 ) 

Depreciation and amortization

      (208 )      (240 )      (797 )      (849 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA

    $ 613      $ 646      $ 2,276      $ 1,952   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net operating revenues

    $ 5,026      $ 4,465      $ 18,634      $ 16,603   
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin)

      12.2 %      14.5 %      12.2 %      11.8 % 

 

Page 22

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #2 – Reconciliation of Adjusted Free Cash Flow

(Unaudited)

 

     Three Months Ended      Years Ended  
     December 31,      December 31,  
(Dollars in millions)    2015      2014      2015      2014  

Net cash provided by operating activities

    $ 191       $ 219       $ 1,026       $ 687   

Less:

            

Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements

      (43 )       (53 )       (200 )       (168 ) 

Net cash used in operating activities from discontinued operations

      (3 )       (7 )       (21 )       (23 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Adjusted net cash provided by operating activities – continuing operations

      237         279         1,247         878   

Purchases of property and equipment – continuing operations

      (276 )       (199 )       (842 )       (933 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Adjusted free cash flow – continuing operations

    $ (39 )     $ 80       $ 405       $ (55 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #3 – Reconciliation of Outlook Adjusted EBITDA to

Outlook Net Income Attributable to Tenet Healthcare Corporation Common Shareholders

for the Year Ending December 31, 2016

(Unaudited)

 

     Q1 2016     2016  
(Dollars in millions)    Low     High     Low     High  

Net income attributable to Tenet Healthcare Corporation common shareholders

    $ 3      $ 55      $ 115      $ 230   

Less: Net income attributable to noncontrolling interests

      (70 )      (60 )      (330 )      (310 ) 

Net Loss from discontinued operations, net of tax

      (2 )      —          (5 )      —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Income from continuing operations

      75        115        450        540   

Income tax expense

      (10 )      (50 )      (130 )      (200 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income from continuing operations, before income taxes

      85        165        580        740   

Interest expense, net

      (245 )      (235 )      (970 )      (950 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income

      330        400        1,550        1,690   

Gains on sales, consolidation and deconsolidation of facilities

      —          —          —          —     

Impairment and restructuring charges, acquisition-related costs and litigation costs and settlements(a)

      —          —          —          —     

Depreciation and amortization

      (220 )      (200 )      (850 )      (810 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA

    $ 550      $ 600      $ 2,400      $ 2,500   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net operating revenues

    $ 4,700      $ 4,900      $ 18,800      $ 19,200   
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin)

      11.7 %      12.2 %      12.8 %      13.0 % 

 

(a)  Company does not forecast impairment and restructuring charges, acquisition-related costs, litigation costs and settlements, and gains on sales, consolidation and deconsolidation of facilities.

 

Page 23

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #4 – Reconciliation of Outlook Adjusted EBITDA to

Outlook Normalized Income from Continuing Operations

for the Year Ending December 31, 2016

(Unaudited)

 

     Q1 2016      2016  
(Dollars in millions)    Low      High      Low      High  

Adjusted EBITDA

    $ 550       $ 600       $  2,400       $  2,500   

Depreciation and amortization

      (220 )       (200 )       (850 )       (810 ) 

Interest expense

      (245 )       (235 )       (970 )       (950 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Normalized income from continuing operations before income taxes

      85         165         580         740   

Income tax expense

      (10 )       (50 )       (130 )       (200 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Normalized income from continuing operations

      75         115         450         540   

Net income attributable to noncontrolling interests

      (70 )       (60 )       (330 )       (310 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Normalized net income attributable to common shares

    $ 5       $ 55       $ 120       $ 230   
  

 

 

     

 

 

     

 

 

     

 

 

  

Fully diluted weighted average share outstanding (in millions)

      101         101         102         102   

Normalized fully diluted earnings per share – continuing operations

    $ 0.05       $ 0.54       $ 1.18       $ 2.25   

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures

Table #5 – Reconciliation of Outlook Adjusted Free Cash Flow

for the Year Ending December 31, 2016

 

     2016  
(Dollars in millions)    Low      High  

Net cash provided by operating activities

    $ 1,275       $ 1,435   

Less:

      

Payments for restructuring charges, acquisition-related costs and litigation costs and settlements(a)

      —           —     

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.

 

Page 24