Tenet Healthcare Corporation (together with our subsidiaries, referred to herein as “Tenet,” “we” or “us”) is a diversified healthcare services company headquartered in Dallas, Texas. Through an expansive care network that includes USPI Holding Company, Inc. (“USPI”), at March 31, 2020, we operated 65 hospitals and approximately 510 other healthcare facilities, including surgical hospitals, ambulatory surgery centers, urgent care and imaging centers, and other care sites and clinics. We also operate Conifer Health Solutions, LLC through our Conifer Holdings, Inc. (“Conifer”) subsidiary, which provides revenue cycle management and value-based care services to hospitals, healthcare systems, physician practices, employers and other customers.

This quarterly report supplements our Annual Report on Form 10-K for the year ended December 31, 2019 (“Annual Report”). As permitted by the Securities and Exchange Commission for interim reporting, we have omitted certain notes and disclosures that substantially duplicate those in our Annual Report. For further information, refer to the audited Consolidated Financial Statements and notes included in our Annual Report. Unless otherwise indicated, all financial and statistical data included in these notes to our Condensed Consolidated Financial Statements relate to our continuing operations, with dollar amounts expressed in millions (except per-share amounts).

Effective January 1, 2020, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments—Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”) using the modified retrospective transition approach as of the period of adoption. Upon adoption of ASU 2016-13 on January 1, 2020, we recorded a cumulative effect adjustment to increase accumulated deficit by $14 million.

Certain prior-year amounts have been reclassified to conform to the current year presentation. In the accompanying Condensed Consolidated Statements of Operations, electronic health record incentives have been reclassified to other operating expenses, net, as they are no longer significant enough to present separately. In the accompanying Condensed Consolidated Statements of Cash Flows, purchases of marketable securities have been reclassified from other items, net within cash flows from investing activities to purchases of marketable securities and equity investments. Additionally, our financial statements and corresponding footnotes for prior periods have been recast to reflect retrospective application of the change in accounting principle discussed in the Professional and General Liability Reserves section of this note.

Although the Condensed Consolidated Financial Statements and related notes within this document are unaudited, we believe all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. In preparing our financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”), we are required to make estimates and assumptions that affect the amounts reported in our Condensed Consolidated Financial Statements and these accompanying notes. We regularly evaluate the accounting policies and estimates we use. In general, we base the estimates on historical experience and on assumptions that we believe to be reasonable given the particular circumstances in which we operate. Actual results may vary from those estimates. Financial and statistical information we report to other regulatory agencies may be prepared on a basis other than GAAP or using different assumptions or reporting periods and, therefore, may vary from amounts presented herein. Although we make every effort to ensure that the information we report to those agencies is accurate, complete and consistent with applicable reporting guidelines, we cannot be responsible for the accuracy of the information they make available to the public.

Operating results for the three month period ended March 31, 2020 are not necessarily indicative of the results that may be expected for the full year. Reasons for this include, but are not limited to: the impact of the novel coronavirus pandemic on our operations, business, financial condition and cash flows; overall revenue and cost trends, particularly the timing and magnitude of price changes; fluctuations in contractual allowances and cost report settlements and valuation allowances; managed care contract negotiations, settlements or terminations and payer consolidations; trends in patient accounts receivable collectability and associated implicit price concessions; fluctuations in interest rates; levels of malpractice insurance expense and settlement trends; impairment of long-lived assets and goodwill; restructuring charges; losses, costs and insurance recoveries related to natural disasters and other weather-related occurrences; litigation and investigation costs; acquisitions and dispositions of facilities and other assets; gains (losses) on sales, consolidation and deconsolidation of facilities; income tax rates and deferred tax asset valuation allowance activity; changes in estimates of accruals for annual incentive compensation; the timing and amounts of stock option and restricted stock unit grants to employees and directors; gains (losses) from early

extinguishment of debt; and changes in occupancy levels and patient volumes. Factors that affect service mix, revenue mix, patient volumes and, thereby, the results of operations at our hospitals and related healthcare facilities include, but are not limited to: changes in federal, state and local healthcare and business regulations, including mandated closures and other operating restrictions; the business environment, economic conditions and demographics of local communities in which we operate; the number of uninsured and underinsured individuals in local communities treated at our hospitals; disease hotspots and seasonal cycles of illness; climate and weather conditions; physician recruitment, satisfaction, retention and attrition; advances in technology and treatments that reduce length of stay; local healthcare competitors; utilization pressure by managed care organizations, as well as managed care contract negotiations or terminations; hospital performance data on quality measures and patient satisfaction, as well as standard charges for services; any unfavorable publicity about us, or our joint venture partners, that impacts our relationships with physicians and patients; and changing consumer behavior, including with respect to the timing of elective procedures. These considerations apply to year-to-year comparisons as well.

We accrue for estimated professional and general liability claims when they are probable and can be reasonably estimated. The accrual, which includes an estimate for incurred but not reported claims, is updated each quarter based on a model of projected payments using case-specific facts and circumstances and our historical loss reporting, development and settlement patterns. To the extent that subsequent claims information varies from our estimates, the liability is adjusted in the period such information becomes available. Malpractice expense is presented within other operating expenses in the accompanying Condensed Consolidated Statements of Operations.

In the three months ended March 31, 2020, we changed our method of accounting for our estimated professional and general liability claims. Under the new method of accounting, the liabilities are reported on an undiscounted basis whereas, previously, the liabilities were reported on a discounted basis. We believe that the undiscounted presentation is preferable because it simplifies the accounting for the liabilities, thereby increasing understandability of our financial results and financial condition, is consistent with the manner in which management evaluates our business, and results in an accounting method and financial statement presentation that is consistent with our key peers.

Accordingly, our financial statements and corresponding footnotes for the respective prior periods have been recast to reflect retrospective application of the change in accounting principle. We recorded the cumulative effect for the change in accounting principle as an increase of $44 million to accumulated deficit as of January 1, 2017. This change increased our accumulated deficit by $46 million, $56 million and $63 million at December 31, 2019, March 31, 2019 and December 31, 2018, respectively.



	Prior to Change in Accounting Principle			Effect of Change in Accounting Principle			As Reported
At March 31, 2020:
Deferred income taxes	$	259		$	4		$	263
Professional and general liability reserves	$	622		$	16		$	638
Other long-term liabilities	$	1,402		$	3		$	1,405
Accumulated deficit	$	(2,419	)	$	(15	)	$	(2,434	)



	As Reported			Effect of Change in Accounting Principle			As Adjusted
At December 31, 2019:
Deferred income taxes	$	169		$	14		$	183
Professional and general liability reserves	$	585		$	50		$	635
Other long-term liabilities	$	1,405		$	10		$	1,415
Accumulated deficit	$	(2,467	)	$	(46	)	$	(2,513	)



	Prior to Change in Accounting Principle		Effect of Change in Accounting Principle			As Reported
Three months ended March 31, 2020:
Salaries, wages and benefits	$	2,194	$	(7	)	$	2,187
Other operating expenses, net	$	1,047	$	(34	)	$	1,013
Operating income	$	286	$	41		$	327
Income tax benefit	$	85	$	(10	)	$	75
Net income	$	128	$	31		$	159
Net income from continuing operations available to Tenet Healthcare Corporation common shareholders	$	63	$	31		$	94
Earnings per share available to Tenet Healthcare Corporation common shareholders from continuing operations:
Basic	$	0.60	$	0.30		$	0.90
Diluted	$	0.60	$	0.29		$	0.89



	As Reported			Effect of Change in Accounting Principle			As Adjusted
Three months ended March 31, 2019:
Salaries, wages and benefits	$	2,153		$	(2	)	$	2,151
Other operating expenses, net	$	1,073		$	(8	)	$	1,065
Operating income	$	371		$	10		$	381
Income tax expense	$	(17	)	$	(3	)	$	(20	)
Net income	$	65		$	7		$	72
Net loss from continuing operations attributable to Tenet Healthcare Corporation common shareholders	$	(27	)	$	7		$	(20	)
Loss per share attributable to Tenet Healthcare Corporation common shareholders from continuing operations:
Basic	$	(0.26	)	$	0.07		$	(0.19	)
Diluted	$	(0.26	)	$	0.07		$	(0.19	)



	Prior to Change in Accounting Principle			Effect of Change in Accounting Principle			As Reported
Three months ended March 31, 2020:
Net income	$	128		$	31		$	159
Deferred income tax benefit	$	(89	)	$	10		$	(79	)
Accounts payable, accrued expenses and other current liabilities	$	(103	)	$	(41	)	$	(144	)
Net cash provided by operating activities	$	129		$	—		$	129



	As Reported			Effect of Change in Accounting Principle			As Adjusted
Three months ended March 31, 2019:
Net income	$	65		$	7		$	72
Deferred income tax expense	$	19		$	3		$	22
Accounts payable, accrued expenses and other current liabilities	$	(109	)	$	(10	)	$	(119	)
Net cash provided by operating activities	$	10		$	—		$	10

We recognize net operating revenues in the period in which we satisfy our performance obligations under contracts by transferring services to our customers. Net operating revenues are recognized in the amounts we expect to be entitled to, which are the transaction prices allocated for the distinct services. Net operating revenues for our Hospital Operations and other

(“Hospital Operations”) and Ambulatory Care segments primarily consist of net patient service revenues, principally for patients covered by Medicare, Medicaid, managed care and other health plans, as well as certain uninsured patients under our Compact with Uninsured Patients (“Compact”) and other uninsured discount and charity programs. Net operating revenues for our Conifer segment primarily consist of revenues from providing revenue cycle management services to healthcare systems, as well as individual hospitals, physician practices, self-insured organizations, health plans and other entities.

Net Patient Service Revenues—We report net patient service revenues at the amounts that reflect the consideration we expect to be entitled to in exchange for providing patient care. These amounts are due from patients, third-party payers (including managed care payers and government programs) and others, and they include variable consideration for retroactive revenue adjustments due to settlement of audits, reviews and investigations. Generally, we bill our patients and third-party payers several days after the services are performed or shortly after discharge. Revenues are recognized as performance obligations are satisfied.

Conifer Revenues—Our Conifer segment recognizes revenue from its contracts when Conifer’s performance obligations are satisfied, which is generally as services are rendered. Revenue is recognized in an amount that reflects the consideration to which Conifer expects to be entitled.

We treat highly liquid investments with original maturities of three months or less as cash equivalents. Cash and cash equivalents were $613 million and $262 million at March 31, 2020 and December 31, 2019, respectively. At March 31, 2020 and December 31, 2019, our book overdrafts were $225 million and $246 million, respectively, which were classified as accounts payable.

At March 31, 2020 and December 31, 2019, $152 million and $176 million, respectively, of total cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets were intended for the operations of our captive insurance subsidiaries, and $2 million for both periods of total cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets were intended for the operations of our health plan-related businesses.

We control 244 of the facilities within our Ambulatory Care segment and, therefore, consolidate their results. We account for many of the facilities our Ambulatory Care segment operates (107 of 351 at March 31, 2020), as well as additional companies in which our Hospital Operations segment holds ownership interests, under the equity method as investments in unconsolidated affiliates and report only our share of net income as equity in earnings of unconsolidated affiliates in the accompanying Condensed Consolidated Statements of Operations. Summarized financial information for these equity method investees is included in the following table. For investments acquired during the reporting periods, amounts reflect 100% of the investee’s results beginning on the date of our acquisition of the investment.