NOTE 1. BASIS OF PRESENTATION

Description of Business and Basis of Presentation

Tenet Healthcare Corporation (together with our subsidiaries, referred to herein as “Tenet,” the “Company,” “we” or “us”) is an investor-owned health care services company whose subsidiaries and affiliates as of September 30, 2013 primarily operated 49 hospitals with a total of 13,180 licensed beds, 134 outpatient centers and Conifer Health Solutions (“Conifer”), which provides business process solutions to more than 700 hospital and other clients nationwide.

This quarterly report supplements our Annual Report on Form 10-K for the year ended December 31, 2012 (“Annual Report”). As permitted by the Securities and Exchange Commission (“SEC”) 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). All amounts related to shares, share prices and earnings per share have been restated to give retrospective presentation for the reverse stock split described in Note 2 of our Annual Report. Furthermore, certain prior-year amounts have been reclassified to conform to the current-year presentation.

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 of America (“GAAP”), we must use 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 nine month periods ended September 30, 2013 are not necessarily indicative of the results that may be expected for the full year. Reasons for this include, but are not limited to: 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; changes in Medicare and Medicaid regulations; Medicaid funding levels set by the states in which we operate; the timing of approval by the Centers for Medicare and Medicaid Services (“CMS”) of Medicaid provider fee revenue programs; trends in patient accounts receivable collectability and associated provisions for doubtful accounts; fluctuations in interest rates; levels of malpractice insurance expense and settlement trends; the timing of when we meet the criteria to recognize electronic health record incentives; impairment of long-lived assets and goodwill; restructuring charges; acquisition-related costs; losses, costs and insurance recoveries related to natural disasters; litigation and investigation costs; acquisitions and dispositions of facilities and other assets; 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 or losses from early extinguishment of debt; and changes in occupancy levels and patient volumes. Factors that affect patient volumes and, thereby, the results of operations at our hospitals and related health care facilities include, but are not limited to: the business environment, economic conditions and demographics of local communities; the number of uninsured and underinsured individuals in local communities treated at our hospitals; seasonal cycles of illness; climate and weather conditions; physician recruitment, retention and attrition; advances in technology and treatments that reduce length of stay; local health care competitors; managed care contract negotiations or terminations; the number of patients with high-deductible health insurance plans or plans with annual or lifetime coverage caps; any unfavorable publicity about us, which impacts our relationships with physicians and patients; changes in health care regulations and the participation of individual states in federal programs; and the timing of elective procedures. These considerations apply to year-to-year comparisons as well.

Net Operating RevenuesBefore Provision for Doubtful Accounts

We recognize net operating revenues before provision for doubtful accounts in the period in which our services are performed. Net operating revenues before provision for doubtful accounts primarily consist of net patient service revenues that are recorded based on established billing rates (i.e., gross charges), less estimated discounts for contractual and other allowances, principally for patients covered by Medicare, Medicaid, managed care and other health plans, as well as certain uninsured patients under ourCompact with Uninsured Patients (“Compact”).

The table below shows the sources of net operating revenues before provision for doubtful accounts:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
General Hospitals:
Medicare	$	501	$	505	$	1,543	$	1,666
Medicaid	206		176		630		587
Managed care	1,378		1,348		4,126		4,002
Indemnity, self-pay and other	262		261		783		747
Acute care hospitals — other revenue	14		8		53		45
Other:
Other operations	257		129		706		326
Net operating revenues before provision for doubtful accounts	$	2,618	$	2,427	$	7,841	$	7,373

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 approximately $82 million and $364 million at September 30, 2013 and December 31, 2012, respectively. As of September 30, 2013 and December 31, 2012, our book overdrafts were approximately $182 million and $232 million, respectively, which were classified as accounts payable.

At September 30, 2013 and December 31, 2012, approximately $51 million and $65 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 September 30, 2013 and December 31, 2012, we had $63 million and $98 million, respectively, of property and equipment purchases accrued for items received but not yet paid. Of these amounts, $50 million and $93 million, respectively, were included in accounts payable.

During the nine months ended September 30, 2013 and 2012, we entered into non-cancellable capital leases of approximately $99 million and $54 million, respectively, primarily for equipment.

Other Intangible Assets

The following table provides information regarding other intangible assets, which are included in the accompanying Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012:

	Gross Carrying Amount		Accumulated Amortization			Net Book Value
September 30, 2013:
Capitalized software costs	$	1,048	$	(455	)	$	593
Long-term debt issuance costs	107		(25		)	82
Other	58		(10		)	48
Total	$	1,213	$	(490	)	$	723

December 31, 2012:
Capitalized software costs	$	927	$	(399	)	$	528
Long-term debt issuance costs	106		(25		)	81
Other	43		(2		)	41
Total	$	1,076	$	(426	)	$	650

Estimated future amortization of other intangible assets with finite useful lives as of September 30, 2013 is as follows:

			Years Ending December 31,										Later
	Total		2013		2014		2015		2016		2017		Years
Amortization of intangible assets	$	723	$	49	$	97	$	80	$	71	$	56	$	370