UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2021

OR

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from               to               

Commission File Number 1-7293

_________________________________________

TENET HEALTHCARE CORPORATION

(Exact name of Registrant as specified in its charter)

_________________________________________

Nevada	95-2557091
(State of Incorporation)	(IRS Employer Identification No.)

14201 Dallas Parkway

Dallas, TX 75254

(Address of principal executive offices, including zip code)

(469) 893-2200

(Registrant’s telephone number, including area code)

_________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol	Name of each exchange on which registered
Common stock,	$0.05 par value	THC	New York Stock Exchange
6.875% Senior Notes due 2031		THC31	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.   Yes x No ¨

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.   Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company (each as defined in Exchange Act Rule 12b-2).

Large accelerated filer	x		Accelerated filer	¨	Non-accelerated filer		¨
Smaller reporting company		☐			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2).   Yes ☐ No x

At July 23, 2021, there were 107,053,834 shares of the Registrant’s common stock outstanding.

TENET HEALTHCARE CORPORATION

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Financial Statements	1
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	58
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 6.	Exhibits	59

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Dollars in Millions

(Unaudited)

	June 30,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	2,194	$	2,446
Accounts receivable	2,643		2,690
Inventories of supplies, at cost	364		368
Assets held for sale	828		140
Other current assets	1,388		1,503
Total current assets	7,417		7,147
Investments and other assets	2,525		2,534
Deferred income taxes	276		325
Property and equipment, at cost, less accumulated depreciation and amortization ($5,775 at June 30, 2021 and $6,043 at December 31, 2020)	6,166		6,692
Goodwill	8,659		8,808
Other intangible assets, at cost, less accumulated amortization ($1,285 at June 30, 2021 and $1,284 at December 31, 2020)	1,522		1,600
Total assets	$	26,565	$	27,106
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	127	$	145
Accounts payable	1,084		1,207
Accrued compensation and benefits	954		942
Professional and general liability reserves	234		243
Accrued interest payable	220		248
Liabilities held for sale	145		70
Contract liabilities	1,055		659
Other current liabilities	1,252		1,333
Total current liabilities	5,071		4,847
Long-term debt, net of current portion	15,091		15,574
Professional and general liability reserves	782		735
Defined benefit plan obligations	459		497
Deferred income taxes	29		29
Contract liabilities – long-term	351		918
Other long-term liabilities	1,579		1,617
Total liabilities	23,362		24,217
Commitments and contingencies
Redeemable noncontrolling interests in equity of consolidated subsidiaries	2,034		1,952
Equity:
Shareholders’ equity:
Common stock, $0.05 par value; authorized 262,500,000 shares; 155,201,582 shares issued at June 30, 2021 and 154,407,524 shares issued at December 31, 2020	8		7
Additional paid-in capital	4,854		4,844
Accumulated other comprehensive loss	(277)		(281)
Accumulated deficit	(1,912)		(2,128)
Common stock in treasury, at cost, 48,334,331 shares at June 30, 2021 and 48,337,947 shares at December 31, 2020	(2,412)		(2,414)
Total shareholders’ equity	261		28
Noncontrolling interests	908		909
Total equity	1,169		937
Total liabilities and equity	$	26,565	$	27,106

See accompanying Notes to Condensed Consolidated Financial Statements.

TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Dollars in Millions, Except Per-Share Amounts

(Unaudited) 

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net operating revenues	$	4,954	$	3,648	$	9,735	$	8,168
Grant income	19		511		50		511
Equity in earnings of unconsolidated affiliates	54		31		96		59
Operating expenses:
Salaries, wages and benefits	2,280		1,864		4,481		4,051
Supplies	859		611		1,663		1,374
Other operating expenses, net	1,054		983		2,126		1,996
Depreciation and amortization	221		206		445		409
Impairment and restructuring charges, and acquisition-related costs	20		54		40		109
Litigation and investigation costs	22		2		35		4
Net gains on sales, consolidation and deconsolidation of facilities	(15)		(1)		(15)		(3)
Operating income	586		471		1,106		798
Interest expense	(235)		(255)		(475)		(498)
Other non-operating income (expense), net	(1)		2		9		3
Loss from early extinguishment of debt	(31)		(4)		(54)		(4)
Income from continuing operations, before income taxes	319		214		586		299
Income tax benefit (expense)	(61)		(45)		(106)		30
Income from continuing operations, before discontinued operations	258		169		480		329
Discontinued operations:
Loss from operations	(1)		—		(1)		(1)
Loss from discontinued operations	(1)		—		(1)		(1)
Net income	257		169		479		328
Less: Net income available to noncontrolling interests	138		81		263		147
Net income available to Tenet Healthcare Corporation common shareholders	$	119	$	88	$	216	$	181
Amounts available (attributable) to Tenet Healthcare Corporation common shareholders
Income from continuing operations, net of tax	$	120	$	88	$	217	$	182
Loss from discontinued operations, net of tax	(1)		—		(1)		(1)
Net income available to Tenet Healthcare Corporation common shareholders	$	119	$	88	$	216	$	181
Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations	$	1.12	$	0.84	$	2.04	$	1.74
Discontinued operations	(0.01)		—		(0.01)		(0.01)
	$	1.11	$	0.84	$	2.03	$	1.73
Diluted
Continuing operations	$	1.11	$	0.83	$	2.00	$	1.72
Discontinued operations	(0.01)		—		(0.01)		(0.01)
	$	1.10	$	0.83	$	1.99	$	1.71
Weighted average shares and dilutive securities outstanding (in thousands):
Basic	106,822		104,794		106,566		104,574
Diluted	108,569		105,578		108,317		105,656

See accompanying Notes to Condensed Consolidated Financial Statements.

2

TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME

Dollars in Millions

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	257	$	169	$	479	$	328
Other comprehensive income:
Amortization of net actuarial loss included in other non-operating income (expense), net	3		2		6		4
Unrealized gains on debt securities held as available-for-sale	—		—		—		1
Other comprehensive income before income taxes	3		2		6		5
Income tax benefit (expense) related to items of other comprehensive income	2		(1)		(2)		(3)
Total other comprehensive income, net of tax	5		1		4		2
Comprehensive net income	262		170		483		330
Less: Comprehensive income available to noncontrolling interests	138		81		263		147
Comprehensive income available to Tenet Healthcare Corporation common shareholders	$	124	$	89	$	220	$	183

See accompanying Notes to Condensed Consolidated Financial Statements.

3

TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in Millions

(Unaudited)

	Six Months Ended June 30,
	2021		2020
Net income	$	479	$	328
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	445		409
Deferred income tax expense (benefit)	48		(49)
Stock-based compensation expense	30		27
Impairment and restructuring charges, and acquisition-related costs	40		109
Litigation and investigation costs	35		4
Net gains on sales, consolidation and deconsolidation of facilities	(15)		(3)
Loss from early extinguishment of debt	54		4
Equity in earnings of unconsolidated affiliates, net of distributions received	10		(39)
Amortization of debt discount and debt issuance costs	17		20
Pre-tax loss from discontinued operations	1		1
Other items, net	(22)		(3)
Changes in cash from operating assets and liabilities:
Accounts receivable	(101)		317
Inventories and other current assets	56		44
Income taxes	25		14
Accounts payable, accrued expenses, contract liabilities and other current liabilities	(232)		1,209
Other long-term liabilities	(6)		90
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements	(85)		(114)
Net cash provided by operating activities	779		2,368
Cash flows from investing activities:
Purchases of property and equipment	(243)		(288)
Purchases of businesses or joint venture interests, net of cash acquired	(64)		(56)
Proceeds from sales of facilities and other assets	124		12
Proceeds from sales of marketable securities, long-term investments and other assets	18		35
Purchases of marketable securities and equity investments	(19)		(10)
Other items, net	(11)		18
Net cash used in investing activities	(195)		(289)
Cash flows from financing activities:
Repayments of borrowings under credit facility	—		(740)
Proceeds from borrowings under credit facility	—		740
Repayments of other borrowings	(2,012)		(229)
Proceeds from other borrowings	1,409		1,312
Debt issuance costs	(15)		(22)
Distributions paid to noncontrolling interests	(212)		(100)
Proceeds from sale of noncontrolling interests	12		5
Purchases of noncontrolling interests	(5)		—
Proceeds from exercise of stock options and employee stock purchase plan	9		5
Medicare advances and grants received by unconsolidated affiliates, net of recoupment	6		142
Other items, net	(28)		60
Net cash provided by (used in) financing activities	(836)		1,173
Net increase (decrease) in cash and cash equivalents	(252)		3,252
Cash and cash equivalents at beginning of period	2,446		262
Cash and cash equivalents at end of period	$	2,194	$	3,514
Supplemental disclosures:
Interest paid, net of capitalized interest	$	(486)	$	(465)
Income tax payments, net	$	(34)	$	(5)

See accompanying Notes to Condensed Consolidated Financial Statements.

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TENET HEALTHCARE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

NOTE 1. BASIS OF PRESENTATION 

Description of Business and Basis of Presentation

Tenet Healthcare Corporation (together with our subsidiaries, referred to herein as “Tenet,” “we,” “our” 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 June 30, 2021 we operated 65 hospitals and over 460 other healthcare facilities, including surgical hospitals, ambulatory surgery centers, 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, health systems, physician practices, employers and other clients.

This quarterly report supplements our Annual Report on Form 10-K for the year ended December 31, 2020 (“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).

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 and six-month periods ended June 30, 2021 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 COVID-19 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.

Certain prior-year amounts have been reclassified to conform to the current year presentation. In the accompanying Condensed Consolidated Balance Sheets, income tax receivable has been reclassified to other current assets, as it is no longer significant enough to present separately. In the accompanying Condensed Consolidated Statements of Cash Flows, long‑term

5

assets has been combined with other items, net, as it is no longer significant enough to present separately, but it remains located within cash flows from investing activities.

COVID-19 Pandemic

During 2020, federal, state and local authorities undertook several actions designed to assist healthcare providers in providing care to COVID-19 and other patients and to mitigate the adverse economic impact of the COVID-19 pandemic. Legislative actions taken by the federal government during 2020 included the Coronavirus Aid, Relief, and Economic Security Act, the Paycheck Protection Program and Health Care Enhancement Act, the Continuing Appropriations Act, 2021 and Other Extensions Act, and the Consolidated Appropriations Act, 2021 (collectively, the “COVID Acts”). With the COVID Acts, the federal government authorized funding to be distributed through the Public Health and Social Services Emergency Fund (“Provider Relief Fund” or “PRF”). In June 2021, the U.S. Department of Health and Human Services (“HHS”) established new deadlines for when recipients of PRF grants must use the funding received, generally 12 to 18 months after receipt of the grant funds. HHS will recoup PRF grant funds not utilized by the established deadlines. The COVID Acts also revised the Medicare accelerated payment program in an attempt to disburse payments to hospitals and other care providers more quickly and permitted employers to defer payment of the 6.2% employer Social Security tax beginning March 27, 2020 through December 31, 2020. Our participation in these programs and the related accounting policies are summarized below.

Grant Income. During the three and six months ended June 30, 2021, we received cash payments of $4 million and $63 million, respectively, from the Provider Relief Fund and state and local grant programs, including $27 million received by our unconsolidated affiliates during the six-month period. During the three and six months ended June 30, 2020, we received cash payments of $712 million from the Provider Relief Fund and state and local grant programs, including $38 million received by our unconsolidated affiliates. We recognize grant payments as income when there is reasonable assurance that we have complied with the conditions associated with the grant. Our estimates could change materially in the future based on our operating performance or COVID-19 activities, as well as the government’s grant compliance guidance. Grant income recognized by our Hospital Operations and other (“Hospital Operations”) and Ambulatory Care segments is presented in grant income and grant income recognized through our unconsolidated affiliates is presented in equity in earnings of unconsolidated affiliates in our statement of operations. During the three and six months ended June 30, 2021, we recognized grant income of $4 million and $28 million, respectively, in our Hospital Operations segment, and $15 million and $22 million, respectively, in our Ambulatory Care segment. We recognized an additional $5 million and $11 million of Provider Relief Fund income during these periods, which was classified as equity in earnings of unconsolidated affiliates in the accompanying Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021, respectively. During the three and six months ended June 30, 2020, we recognized grant income of $474 million in our Hospital Operations segment and $37 million in our Ambulatory Care segment. Additionally, we recognized $12 million of grant income as equity in earnings of unconsolidated affiliates during the three and six months ended June 30, 2020. At June 30, 2021 and December 31, 2020, we had deferred grant payments remaining of $4 million and $18 million, respectively, which amounts were recorded in other current liabilities in the accompanying Condensed Consolidated Balance Sheets for those periods.

Medicare Accelerated Payment Program. In certain circumstances, when a hospital is experiencing financial difficulty due to delays in receiving payment for the Medicare services it provided, it may be eligible for an accelerated or advance payment pursuant to the Medicare accelerated payment program. The COVID Acts revised the Medicare accelerated payment program in an attempt to disburse payments to healthcare providers more quickly. Recipients may retain the accelerated payments for one year from the date of receipt before recoupment commences, which is effectuated by a 25% offset of claims payments for 11 months, followed by a 50% offset for the succeeding six months. At the end of the 29-month period, interest on the unpaid balance will be assessed at 4.00% per annum. The initial 11-month recoupment period began in April 2021.

Our Hospital Operations and Ambulatory Care segments both received advance payments from the Medicare accelerated payment program during 2020. No additional advances were received in the six months ended June 30, 2021. The recoupment period for the advances we received during the three months ended June 30, 2020 commenced during the three months ended June 30, 2021. During this period, $141 million and $11 million of advances received by our Hospital Operations and Ambulatory Care segments, respectively, were recouped through a reduction of our Medicare claims payments. In addition, $12 million of advances received by unconsolidated affiliates for which we provide cash management services were recouped through a reduction of those affiliates’ Medicare claims payments during the three months ended June 30, 2021. Advances totaling $997 million and $603 million were included in contract liabilities, and advances totaling $335 million and $902 million were included in contract liabilities – long term in the accompanying Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020, respectively.

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Deferral of Employer Payroll Tax Match Payments. Social Security taxes deferred under the COVID Acts are required to be paid in equal amounts over two years, with payments due in December 2021 and December 2022. We had deferred Social Security tax payments totaling $130 million included in accrued compensation and benefits and $130 million included in other long‑term liabilities in the accompanying Condensed Consolidated Balance Sheets at both June 30, 2021 and December 31, 2020.

Cash and Cash Equivalents

We treat highly liquid investments with original maturities of three months or less as cash equivalents. Cash and cash equivalents were $2.194 billion and $2.446 billion at June 30, 2021 and December 31, 2020, respectively. At June 30, 2021 and December 31, 2020, our book overdrafts were $185 million and $154 million, respectively, which were classified as accounts payable.

At June 30, 2021 and December 31, 2020, $173 million and $166 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.

Also at June 30, 2021 and December 31, 2020, we had $50 million and $93 million, respectively, of property and equipment purchases accrued for items received but not yet paid. Of these amounts, $44 million and $85 million, respectively, were included in accounts payable.

During the six months ended June 30, 2021 and 2020, we recorded right-of-use assets related to non‑cancellable finance leases of $40 million and $43 million, respectively, and related to non-cancellable operating leases of $96 million and $88 million, respectively.

Other Intangible Assets

The following tables provide information regarding other intangible assets, which were included in the accompanying Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020: 

	Gross Carrying Amount		Accumulated Amortization		Net Book Value
At June 30, 2021:
Capitalized software costs	$	1,733	$	(1,087)	$	646
Trade names	102		—		102
Contracts	871		(120)		751
Other	101		(78)		23
Total	$	2,807	$	(1,285)	$	1,522

	Gross Carrying Amount		Accumulated Amortization		Net Book Value
At December 31, 2020:
Capitalized software costs	$	1,800	$	(1,084)	$	716
Trade names	102		—		102
Contracts	872		(111)		761
Other	110		(89)		21
Total	$	2,884	$	(1,284)	$	1,600

Estimated future amortization of intangibles with finite useful lives at June 30, 2021 is as follows: 

			Six Months Ending		Years Ending								Later Years
					December 31,
	Total		2021		2022		2023		2024		2025
Amortization of intangible assets	$	838	$	91	$	122	$	108	$	97	$	83	$	337

We recognized amortization expense of $95 million and $79 million in the accompanying Condensed Consolidated Statements of Operations for the six months ended June 30, 2021 and 2020, respectively.

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Investments in Unconsolidated Affiliates

We control 232 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 (109 of 341 at June 30, 2021), 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. Equity in earnings of unconsolidated affiliates included $5 million and $11 million for the three and six months ended June 30, 2021, respectively, from PRF grants recognized by our Ambulatory Care segment’s unconsolidated affiliates. During the three and six months ended June 30, 2020, equity in earnings of unconsolidated affiliates included $12 million from PRF grants recognized by these unconsolidated affiliates. Summarized financial information for these equity method investees is included in the following table. For investments acquired during the reported periods, amounts reflect 100% of the investee’s results beginning on the date of our acquisition of the investment.

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net operating revenues	$	711	$	468	$	1,345	$	1,034
Net income	$	197	$	138	$	362	$	247
Net income available to the investees	$	115	$	83	$	217	$	152

NOTE 2. ACCOUNTS RECEIVABLE

The principal components of accounts receivable are shown in the table below: 

	June 30, 2021		December 31, 2020
Continuing operations:
Patient accounts receivable	$	2,448	$	2,499
Estimated future recoveries	139		156
Net cost reports and settlements receivable and valuation allowances	55		34
	2,642		2,689
Discontinued operations	1		1
Accounts receivable, net	$	2,643	$	2,690

The following table summarizes the amount and classification of assets and liabilities in the accompanying Condensed Consolidated Balance Sheets related to California’s provider fee program at June 30, 2021 and December 31, 2020:

	June 30, 2021		December 31, 2020
Assets:
Other current assets	$	249	$	378
Investments and other assets	$	247	$	206
Liabilities:
Other current liabilities	$	90	$	110
Other long-term liabilities	$	74	$	56

The following table shows our estimated costs (based on selected operating expenses, which include salaries, wages and benefits, supplies and other operating expenses) of caring for our uninsured and charity patients in the three and six months ended June 30, 2021 and 2020:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Estimated costs for:
Uninsured patients	$	158	$	145	$	326	$	301
Charity care patients	29		43		49		83
Total	$	187	$	188	$	375	$	384

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NOTE 3. CONTRACT BALANCES

Hospital Operations Segment

Amounts related to services provided to patients for which we have not billed and that do not meet the conditions of unconditional right to payment at the end of the reporting period are contract assets. For our Hospital Operations segment, our contract assets include services that we have provided to patients who are still receiving inpatient care in our facilities at the end of the reporting period. Our Hospital Operations segment’s contract assets were included in other current assets in the accompanying Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020. Approximately 91% of our Hospital Operations segment’s contract assets meet the conditions for unconditional right to payment and are reclassified to patient receivables within 90 days.

In certain circumstances, when a hospital is experiencing financial difficulty due to delays in receiving payment for the Medicare services it provided, it may be eligible for an accelerated or advance payment pursuant to the Medicare accelerated payment program. As discussed in Note 1, the COVID Acts revised the Medicare accelerated payment program in an attempt to disburse payments to hospitals more quickly. During the year ended December 31, 2020, our Hospital Operations segment received advance payments from the Medicare accelerated payment program following its expansion under the COVID Acts. These advance payments were recorded as contract liabilities in the accompanying Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020. No additional advances were received in the three and six months ended June 30, 2021.

The opening and closing balances of contract assets and contract liabilities for our Hospital Operations segment are as follows:

			Contract Liability –		Contract Liability –
			Current		Long-term
	Contract Assets		Advances from Medicare		Advances from Medicare
December 31, 2020	$	208	$	510	$	819
June 30, 2021	170		891		301
Increase (decrease)	$	(38)	$	381	$	(518)

December 31, 2019	$	170	$	—	$	—
June 30, 2020	176		1,266		—
Increase	$	6	$	1,266	$	—

During the three months ended June 30, 2021, $141 million of Medicare advance payments included in the opening contract liabilities balance for our Hospital Operations segment were recouped through a reduction of our Medicare claims payments.

Ambulatory Care Segment

During the year ended December 31, 2020, our Ambulatory Care segment also received advance payments from the expanded Medicare accelerated payment program. At June 30, 2021 and December 31, 2020, contract liabilities included $61 million and $51 million, respectively, and contract liabilities – long-term included $31 million and $62 million, respectively, of Medicare advance payments received by our unconsolidated affiliates for whom we provide cash management services.

The opening and closing balances of contract liabilities for our Ambulatory Care segment are as follows:

	Contract Liability –		Contract Liability –
	Current		Long-term
	Advances from Medicare		Advances from Medicare
December 31, 2020	$	93	$	83
June 30, 2021	106		34
Increase (decrease)	$	13	$	(49)
December 31, 2019	$	—	$	—
June 30, 2020	167		—
Increase	$	167	$	—

During the three months ended June 30, 2021, $11 million of Medicare advance payments included in the opening contract liabilities balance for our Ambulatory Care segment were recouped through a reduction of our Medicare claims

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payments. Additionally, $12 million of Medicare advances received by our unconsolidated affiliates for whom we provide cash management services in the opening contract liabilities balance were recouped in the same manner during the three months ended June 30, 2021.

Conifer Segment

Conifer enters into contracts with customers to provide revenue cycle management and other services, such as value‑based care, consulting and project services. The payment terms and conditions in our customer contracts vary. In some cases, customers are invoiced in advance and (for other than fixed-price fee arrangements) a true-up to the actual fee is included on a subsequent invoice. In other cases, payment is due in arrears. In addition, some contracts contain performance incentives, penalties and other forms of variable consideration. When the timing of Conifer’s delivery of services is different from the timing of payments made by the customers, Conifer recognizes either unbilled revenue (performance precedes contractual right to invoice the customer) or deferred revenue (customer payment precedes Conifer service performance). In the following table, customers that prepay prior to obtaining control/benefit of the service are represented by deferred contract revenue until the performance obligations are satisfied. Unbilled revenue represents arrangements in which Conifer has provided services to and the customer has obtained control/benefit of services prior to the contractual invoice date. Contracts with payment in arrears are recognized as receivables in the month the service is performed.

The opening and closing balances of Conifer’s receivables, contract assets and contract liabilities are as follows:

					Contract Liability –		Contract Liability –
			Contract Asset –		Current		Long-Term
	Receivables		Unbilled Revenue		Deferred Revenue		Deferred Revenue
December 31, 2020	$	56	$	20	$	56	$	16
June 30, 2021	59		15		58		16
Increase (decrease)	$	3	$	(5)	$	2	$	—
December 31, 2019	$	26	$	11	$	61	$	18
June 30, 2020	28		12		63		17
Increase (decrease)	$	2	$	1	$	2	$	(1)

The difference between the opening and closing balances of Conifer’s contract assets and contract liabilities are primarily related to prepayments for those customers who are billed in advance, changes in estimates related to metric-based services, and up-front integration services that are typically not distinct and are, therefore, recognized over the performance obligation period to which they relate. Our Conifer segment’s receivables and contract assets were reported as part of other current assets in our accompanying Condensed Consolidated Balance Sheets, and its current and long-term contract liabilities were reported as part of contract liabilities and contract liabilities – long-term, respectively, in our accompanying Condensed Consolidated Balance Sheets.

In the six months ended June 30, 2021 and 2020, Conifer recognized $55 million and $56 million, respectively, of revenue that was included in the opening current deferred revenue liability. This revenue consists primarily of prepayments for those customers who are billed in advance, changes in estimates related to metric-based services, and up‑front integration services that are recognized over the services period.

Contract Costs

During both of the three months ended June 30, 2021 and 2020, we recognized amortization expense related to deferred contract setup costs of $1 million. In both of the six months ended June 30, 2021 and 2020, we recognized amortization expense related to deferred contract setup costs of $2 million. At both June 30, 2021 and December 31, 2020, the unamortized customer contract costs were $24 million and are presented as part of investments and other assets in the accompanying Condensed Consolidated Balance Sheets.

NOTE 4. ASSETS AND LIABILITIES HELD FOR SALE 

In June 2021, certain of our subsidiaries entered into a definitive agreement to sell five of our Miami-area hospitals and certain related operations. As a result, the assets and liabilities associated with these facilities were classified as held for sale at June 30, 2021 in the accompanying Condensed Consolidated Balance Sheets. We expect to complete the sale of these facilities in the third quarter of 2021.

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Assets and liabilities classified as held for sale at June 30, 2021 were comprised of the following:

Accounts receivable	$	150
Other current assets	40
Investments and other long-term assets	41
Property and equipment	371
Other intangible assets