PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Dollars in Millions

(Unaudited)

	March 31,			December 31,
	2014			2013
ASSETS
Current assets:
Cash and cash equivalents	$	141		$	113
Accounts receivable, less allowance for doubtful accounts ($671 at March 31, 2014 and $589 at December 31, 2013)	2,141			1,965
Inventories of supplies, at cost	261			262
Income tax receivable	19			0
Current portion of deferred income taxes	577			581
Other current assets	839			789
Total current assets	3,978			3,710
Investments and other assets	355			405
Deferred income taxes, net of current portion	129			90
Property and equipment, at cost, less accumulated depreciation and amortization ($4,018 at March 31, 2014 and $3,898 at December 31, 2013)	7,723			7,691
Goodwill	3,070			3,042
Other intangible assets, at cost, less accumulated amortization ($569 at March 31, 2014 and $523 at December 31, 2013)	1,229			1,192
Total assets	$	16,484		$	16,130

LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	622		$	149
Accounts payable	1,019			1,075
Accrued compensation and benefits	595			631
Professional and general liability reserves	140			156
Accrued interest payable	274			198
Other current liabilities	686			719
Total current liabilities	3,336			2,928
Long-term debt, net of current portion	10,612			10,690
Professional and general liability reserves	567			543
Defined benefit plan obligations	395			398
Other long-term liabilities	453			446
Total liabilities	15,363			15,005
Commitments and contingencies
Redeemable noncontrolling interests in equity of consolidated subsidiaries	267			247
Equity:
Shareholders’ equity:
Common stock, $0.05 par value; authorized 262,500,000 shares; 144,782,041 shares issued at March 31, 2014 and 144,057,351 shares issued at December 31, 2013	7			7
Additional paid-in capital	4,576			4,572
Accumulated other comprehensive loss	(23		)	(24		)
Accumulated deficit	(1,454		)	(1,422		)
Common stock in treasury, at cost, 47,197,211 shares at March 31, 2014 and 47,197,722 shares at December 31, 2013	(2,378		)	(2,378		)
Total shareholders’ equity	728			755
Noncontrolling interests	126			123
Total equity	854			878
Total liabilities and equity	$	16,484		$	16,130

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Dollars in Millions, Except Per-Share Amounts

(Unaudited)

	Three Months Ended March 31,
	2014			2013
Net operating revenues:
Net operating revenues before provision for doubtful accounts	$	4,306		$	2,594
Less: Provision for doubtful accounts	380			207
Net operating revenues	3,926			2,387
Operating expenses:
Salaries, wages and benefits	1,921			1,161
Supplies	628			384
Other operating expenses, net	999			568
Electronic health record incentives	(9		)	0
Depreciation and amortization	193			114
Impairment and restructuring charges, and acquisition-related costs	21			14
Litigation and investigation costs	3			0
Operating income	170			146
Interest expense	(182		)	(103		)
Loss from early extinguishment of debt	0			(177		)
Net loss from continuing operations, before income taxes	(12		)	(134		)
Income tax benefit	1			53
Net loss from continuing operations, before discontinued operations	(11		)	(81		)
Discontinued operations:
Loss from operations	(8		)	(3		)
Income tax benefit	3			1
Net loss from discontinued operations	(5		)	(2		)
Net loss	(16		)	(83		)
Less: Net income attributable to noncontrolling interests	16			5
Net loss attributable to Tenet Healthcare Corporation common shareholders	$	(32	)	$	(88	)
Amounts attributable to Tenet Healthcare Corporation common shareholders
Net loss from continuing operations, net of tax	$	(27	)	$	(86	)
Net loss from discontinued operations, net of tax	(5		)	(2		)
Net loss attributable to Tenet Healthcare Corporation common shareholders	$	(32	)	$	(88	)
Net loss per share attributable to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations	$	(0.28	)	$	(0.83	)
Discontinued operations	(0.05		)	(0.02		)
	$	(0.33	)	$	(0.85	)
Diluted
Continuing operations	$	(0.28	)	$	(0.83	)
Discontinued operations	(0.05		)	(0.02		)
	$	(0.33	)	$	(0.85	)
Weighted average shares and dilutive securities outstanding (in thousands):
Basic	97,161			104,103
Diluted	97,161			104,103

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in Millions

(Unaudited)

	Three Months Ended March 31,
	2014			2013
Net loss	$	(16	)	$	(83	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	193			114
Provision for doubtful accounts	380			207
Deferred income tax benefit	(3		)	(55		)
Stock-based compensation expense	12			11
Impairment and restructuring charges, and acquisition-related costs	21			14
Litigation and investigation costs	3			0
Loss from early extinguishment of debt	0			177
Amortization of debt discount and debt issuance costs	7			5
Pre-tax loss from discontinued operations	8			3
Other items, net	(3		)	(10		)
Changes in cash from operating assets and liabilities:
Accounts receivable	(557		)	(251		)
Inventories and other current assets	(60		)	(44		)
Income taxes	(2		)	3
Accounts payable, accrued expenses and other current liabilities	29			(138		)
Other long-term liabilities	13			27
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements	(30		)	(7		)
Net cash used in operating activities from discontinued operations, excluding income taxes	(14		)	(5		)
Net cash used in operating activities	(19		)	(32		)
Cash flows from investing activities:
Purchases of property and equipment — continuing operations	(281		)	(133		)
Purchases of businesses or joint venture interests, net of cash acquired	(9		)	(5		)
Proceeds from sales of marketable securities, long-term investments and other assets	3			3
Other long-term assets	(4		)	29
Other items, net	0			2
Net cash used in investing activities	(291		)	(104		)
Cash flows from financing activities:
Repayments of borrowings under credit facility	(665		)	(200		)
Proceeds from borrowings under credit facility	430			220
Repayments of other borrowings	(24		)	(899		)
Proceeds from other borrowings	600			850
Repurchases of common stock	0			(100		)
Deferred debt issuance costs	(11		)	(15		)
Distributions paid to noncontrolling interests	(11		)	(6		)
Contributions from noncontrolling interests	13			0
Proceeds from exercise of stock options	6			15
Other items, net	0			2
Net cash provided by (used in) financing activities	338			(133		)
Net increase (decrease) in cash and cash equivalents	28			(269		)
Cash and cash equivalents at beginning of period	113			364
Cash and cash equivalents at end of period	$	141		$	95
Supplemental disclosures:
Interest paid, net of capitalized interest	$	(105	)	$	(125	)
Income tax refunds (payments), net	$	(1	)	$	3

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

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” or “us”) is an investor-owned healthcare services company whose subsidiaries and affiliates as of March 31, 2014 primarily operated 77 hospitals with a total of 20,255 licensed beds, 189 outpatient centers, six health plans and Conifer Health Solutions, LLC (“Conifer”), which provides business process solutions to more than 700 hospital and other clients nationwide.

Effective October 1, 2013, we acquired the common stock of Vanguard Health Systems, Inc. (“Vanguard”) for $21 per share in an all cash transaction. Vanguard owned and operated 28 hospitals (plus one more under construction), 39 outpatient centers and five health plans with approximately 140,000 members, serving communities in Arizona, California, Illinois, Massachusetts, Michigan and Texas. We paid approximately $4.3 billion to acquire Vanguard, including the assumption of $2.5 billion of Vanguard’s net debt.

This quarterly report supplements our Annual Report on Form 10-K for the year ended December 31, 2013 (“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). Certain prior-year amounts have been adjusted to conform to the current-year presentation, including $73 million of Medicaid supplemental payments receivable that are now presented as other current assets rather than accounts receivable.

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 month period ended March 31, 2014 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 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 number of covered lives managed by our health plans and the plans’ ability to effectively manage medical costs; the timing of when we meet the criteria to recognize electronic health record incentives; impairment of long-lived assets and goodwill; restructuring charges; 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 healthcare facilities include, but are not limited to: 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; seasonal cycles of illness; climate and weather conditions; physician recruitment, retention and attrition; advances in technology and treatments that reduce length of stay; local healthcare competitors; managed care contract negotiations or terminations; any unfavorable publicity about us, which impacts our relationships with physicians and patients; changes in healthcare 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.

Table of Contents

Net Operating Revenues Before 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 our Compact with Uninsured Patients (“Compact”) and other uninsured discount and charity programs.

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

	Three Months Ended March 31,
	2014		2013
General Hospitals:
Medicare	$	857	$	540
Medicaid	292		188
Managed care	2,190		1,361
Indemnity, self-pay and other	447		260
Acute care hospitals — other revenue	19		28
Other:
Other operations	501		217
Net operating revenues before provision for doubtful accounts	$	4,306	$	2,594

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 $141 million and $113 million at March 31, 2014 and December 31, 2013, respectively. As of March 31, 2014 and December 31, 2013, our book overdrafts were approximately $183 million and $245 million, respectively, which were classified as accounts payable.

At March 31, 2014 and December 31, 2013, approximately $78 million and $62 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 March 31, 2014 and December 31, 2013, we had $113 million and $193 million, respectively, of property and equipment purchases accrued for items received but not yet paid. Of these amounts, $60 million and $138 million, respectively, were included in accounts payable.

During the three months ended March 31, 2014 and 2013, we entered into non-cancellable capital leases of approximately $52 million and $31 million, respectively, primarily for buildings and 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 March 31, 2014 and December 31, 2013:

	Gross Carrying Amount		Accumulated Amortization			Net Book Value
As of March 31, 2014:
Capitalized software costs	$	1,330	$	(509	)	$	821
Long-term debt issuance costs	241		(37		)	204
Trade names	81		0			81
Contracts	64		(4		)	60
Other	82		(19		)	63
Total	$	1,798	$	(569	)	$	1,229

Table of Contents

	Gross Carrying Amount		Accumulated Amortization			Net Book Value
As of December 31, 2013:
Capitalized software costs	$	1,260	$	(475	)	$	785
Long-term debt issuance costs	230		(31		)	199
Trade names	81		0			81
Contracts	64		(2		)	62
Other	80		(15		)	65
Total	$	1,715	$	(523	)	$	1,192

Estimated future amortization of intangibles with finite useful lives as of March 31, 2014 is as follows:

			Years Ending December 31,										Later
	Total		2014		2015		2016		2017		2018		Years
Amortization of intangible assets	$	1,139	$	194	$	230	$	152	$	122	$	94	$	347

NOTE 2. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

	March 31,			December 31,
	2014			2013
Continuing operations:
Patient accounts receivable	$	2,793		$	2,537
Allowance for doubtful accounts	(671		)	(589		)
Estimated future recoveries from accounts assigned to our Conifer subsidiary	91			91
Net cost reports and settlements payable and valuation allowances	(75		)	(77		)
	2,138			1,962
Discontinued operations	3			3
Accounts receivable, net	$	2,141		$	1,965

As of March 31, 2014 and December 31, 2013, our allowance for doubtful accounts was 24.0% and 23.2%, respectively, of our patient accounts receivable. The increase in the provision for doubtful accounts primarily related to a decrease in our self-pay collection rate, as well as increased uninsured patient revenues, higher patient co-pays and deductibles, and a temporary increase in the aging of our receivables due to payment timing issues with certain payers in the three months ended March 31, 2014. Accounts that are pursued for collection through the regional business offices of Conifer are maintained on our hospitals’ books and reflected in patient accounts receivable with an allowance for doubtful accounts established to reduce the carrying value of such receivables to their estimated net realizable value. Generally, we estimate this allowance based on the aging of our accounts receivable by hospital, our historical collection experience by hospital and for each type of payer, and other relevant factors. As of March 31, 2014 and December 31, 2013, our allowance for doubtful accounts for self-pay was 79.6% and 75.9%, respectively, of our self-pay patient accounts receivable, including co-pays and deductibles owed by patients with insurance. As of March 31, 2014 and December 31, 2013, our allowance for doubtful accounts for managed care was 5.5% and 5.6%, respectively, of our managed care patient accounts receivable.

The estimated costs (based on selected operating expenses, which include salaries, wages and benefits, supplies and other operating expenses) of caring for our self-pay patients for the three months ended March 31, 2014 and 2013 were approximately $189 million and $104 million, respectively. Our estimated costs (based on the selected operating expenses described above) of caring for charity care patients for the three months ended March 31, 2014 and 2013 were $40 million and $32 million, respectively. Most states include an estimate of the cost of charity care in the determination of a hospital’s eligibility for Medicaid disproportionate share hospital (“DSH”) payments. Revenues attributable to DSH payments and other state-funded subsidy payments for the three months ended March 31, 2014 and 2013 were approximately $154 million and $67 million, respectively. These payments are intended to mitigate our cost of uncompensated care, as well as reduced Medicaid funding levels.

Table of Contents

NOTE 3. DISCONTINUED OPERATIONS

Net operating revenues and net loss before income taxes reported in discontinued operations are as follows:

	Three Months Ended March 31,
	2014			2013
Net operating revenues	$	1		$	3
Net loss before income taxes	(8		)	(3		)

Should we dispose of additional hospitals or other assets in the future, we may incur additional asset impairment and restructuring charges in future periods.

NOTE 4. IMPAIRMENT AND RESTRUCTURING CHARGES, AND ACQUISITION-RELATED COSTS

During the three months ended March 31, 2014, we recorded impairment and restructuring charges and acquisition-related costs of $21 million, consisting $6 million of employee severance costs, $5 million of other exit costs, and $10 million in acquisition-related costs, which include both transaction costs and acquisition integration charges.

During the three months ended March 31, 2013, we recorded impairment and restructuring charges and acquisition-related costs of $14 million, consisting of $7 million of restructuring costs, $2 million of employee severance costs, $1 million of lease termination costs, and $4 million in acquisition-related costs.

Our impairment tests presume stable, improving or, in some cases, declining operating results in our hospitals, which are based on programs and initiatives being implemented that are designed to achieve the hospital’s most recent projections. If these projections are not met, or if in the future negative trends occur that impact our future outlook, impairments of long-lived assets and goodwill may occur, and we may incur additional restructuring charges, which could be material.

As of March 31, 2014, our continuing operations consisted of two operating segments, our hospital and other operations and our Conifer subsidiary. During the three months ended March 31, 2014, we combined our California region and our Phoenix market to form our Western region. Our hospital and other operations are currently structured as follows:

· Our Central region includes all of our hospitals and other operations in Missouri, New Mexico, Tennessee and Texas, except for those in the San Antonio and South Texas markets;

· Our Florida region includes all of our hospitals and other operations in Florida;

· Our Northeast region includes all of our hospitals and other operations in Illinois, Massachusetts and Pennsylvania;

· Our Southern States region includes all of our hospitals and other operations in Alabama, Georgia, North Carolina and South Carolina;

· Our Western region includes all of our hospitals and other operations in Arizona and California;

· Our Detroit market includes all of our hospitals and other operations in the Detroit, Michigan area;

· Our San Antonio market includes all of our hospitals and other operations in the San Antonio, Texas area; and

· Our South Texas market includes all of our hospitals and other operations in the Brownsville and Harlingen, Texas areas.

These regions and markets are reporting units used to perform our goodwill impairment analysis and are one level below our hospital operations reportable business segment level.

We periodically incur costs to implement restructuring efforts for specific operations, which are recorded in our statement of operations as they are incurred. Our restructuring plans focus on various aspects of operations, including aligning our operations in the most strategic and cost-effective structure. Certain restructuring and acquisition-related costs are based on estimates. Changes in estimates are recognized as they occur.

Table of Contents

NOTE 5. LONG-TERM DEBT AND LEASE OBLIGATIONS

The table below shows our long-term debt as of March 31, 2014 and December 31, 2013:

	March 31,			December 31,
	2014			2013
Senior notes:
97¤8%, due 2014	$	60		$	60
91¤4%, due 2015	474			474
5%, due 2019	600			0
63¤4%, due 2020	300			300
8%, due 2020	750			750
81/8%, due 2022	2,800			2,800
67¤8%, due 2031	430			430
Senior secured notes:
61¤4%, due 2018	1,041			1,041
43/4%, due 2020	500			500
6%, due 2020	1,800			1,800
41/2%, due 2021	850			850
43/8%, due 2021	1,050			1,050
Credit facility due 2016	170			405
Capital leases and mortgage notes	437			407
Unamortized note discounts and premium	(28		)	(28		)
Total long-term debt	11,234			10,839
Less current portion	622			149
Long-term debt, net of current portion	$	10,612		$	10,690

Credit Agreement

We have a senior secured revolving credit facility (as amended, “Credit Agreement”) that provides, subject to borrowing availability, for revolving loans in an aggregate principal amount of up to $1 billion, with a $300 million subfacility for standby letters of credit. The Credit Agreement has a scheduled maturity date of November 29, 2016, subject to our repayment or refinancing on or before November 3, 2014 of approximately $238 million of the aggregate outstanding principal amount of our 91/4% senior notes due 2015 (approximately $474 million of which was outstanding at March 31, 2014). If such repayment or refinancing does not occur, borrowings under the Credit Agreement will be due November 3, 2014. The revolving credit facility is collateralized by patient accounts receivable of all of our wholly owned acute care and specialty hospitals. In addition, borrowings under the Credit Agreement are guaranteed by our wholly owned hospital subsidiaries. Outstanding revolving loans accrue interest at a base rate plus a margin ranging from 1.00% to 1.50% or the London Interbank Offered Rate (“LIBOR”) plus a margin ranging from 2.00% to 2.50% per annum based on available credit. An unused commitment fee payable on the undrawn portion of the revolving loans ranges from 0.375% to 0.500% per annum based on available credit. Our borrowing availability is based on a specified percentage of eligible accounts receivable, including self-pay accounts. At March 31, 2014, we had $170 million of cash borrowings outstanding under the revolving credit facility subject to an interest rate of 2.62%, and we had approximately $5 million of standby letters of credit outstanding. Based on our eligible receivables, approximately $825 million was available for borrowing under the revolving credit facility at March 31, 2014.

Letter of Credit Facility

On March 7, 2014, we entered into a new letter of credit facility agreement (“LC Facility”) that provides for the issuance of standby and documentary letters of credit (including certain letters of credit issued under our existing Credit Agreement, which we transferred, or expect to transfer, to the LC Facility (the “Existing Letters of Credit”)), from time to time, in an aggregate principal amount of up to $180 million (subject to increase to up to $200 million). The LC Facility has a scheduled maturity date of March 7, 2017, and obligations thereunder are guaranteed by and secured by a first priority pledge of the capital stock and other ownership interests of certain of our hospital subsidiaries on an equal ranking basis with our existing senior secured notes.

Drawings under any letter of credit issued under the LC Facility (including the Existing Letters of Credit) that we have not reimbursed within three business days after notice thereof will accrue interest at a base rate plus a margin equal to 0.875% per annum. An unused commitment fee is payable at an initial rate of 0.50% per annum with a step down to 0.375% per annum based on the secured debt to EBITDA ratio of 3.00 to 1.00. A per annum fee on the aggregate outstanding amount of issued but

Table of Contents

undrawn letters of credit (including Existing Letters of Credit) will accrue at a rate of 1.875% per annum. An issuance fee equal to 0.125% per annum of the aggregate face amount of each outstanding letter of credit is payable to the account of the issuer of the related letter of credit. At March 31, 2014, we had approximately $180 million of standby letters of credit outstanding under the LC Facility.

Senior Notes

In March 2014, we sold $600 million aggregate principal amount of 5% senior notes, which will mature on March 1, 2019. We will pay interest on the notes semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2014. The proceeds from the sale of the notes were used for general corporate purposes, including the repayment of borrowings under our Credit Agreement. All of our senior notes are general unsecured senior debt obligations that rank equally in right of payment with all of our other unsecured senior indebtedness, but are effectively subordinated to our senior secured notes described in our Annual Report, the obligations of our subsidiaries, and any obligations under our Credit Agreement and the LC Facility to the extent of the collateral. Our Annual Report also describes the covenants and conditions, as well as other provisions, including our redemption rights, set forth in the indentures governing our senior notes.

NOTE 6. GUARANTEES

At March 31, 2014, the maximum potential amount of future payments under our income guarantees to certain physicians who agree to relocate and revenue collection guarantees to hospital-based physician groups providing certain services at our hospitals was $98 million. We had a liability of $73 million recorded for these guarantees included in other current liabilities at March 31, 2014.

We have also guaranteed minimum rent revenue to certain landlords who built medical office buildings on or near our hospital campuses. The maximum potential amount of future payments under these guarantees at March 31, 2014 was $15 million. We had a liability of $2 million recorded for these guarantees at March 31, 2014, of which $1 million was included in other current liabilities and $1 million was included in other long-term liabilities.

NOTE 7. EMPLOYEE BENEFIT PLANS

At March 31, 2014, approximately 1.8 million shares of common stock were available under our 2008 Stock Incentive Plan for future stock option grants and other incentive awards, including restricted stock units. Options have an exercise price equal to the fair market value of the shares on the date of grant and generally expire 10 years from the date of grant. A restricted stock unit is a contractual right to receive one share of our common stock or the equivalent value in cash in the future. Options and restricted stock units typically vest one-third on each of the first three anniversary dates of the grant; however, from time to time, we grant (i) options and restricted stock units with different time-based vesting terms, and (ii) performance-based options and restricted stock units that vest subject to the achievement of specified performance goals within a specified timeframe.

Our income from continuing operations for the three months ended March 31, 2014 and 2013 includes $12 million and $13 million, respectively, of pre-tax compensation costs related to our stock-based compensation arrangements.

Stock Options

The following table summarizes stock option activity during the three months ended March 31, 2014:

	Options		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value		Weighted Average Remaining Life
					(In Millions)
Outstanding as of December 31, 2013	3,308,111		$	30.79
Granted	0
Exercised	(159,501	)	34.62
Forfeited/Expired	(609,999	)	47.92
Outstanding as of March 31, 2014	2,538,611		$	26.43	$	42	3.9 years
Vested and expected to vest at March 31, 2014	2,526,717		$	26.38	$	42	3.9 years
Exercisable as of March 31, 2014	2,120,980		$	24.96	$	38	3.6 years

There were 159,501 stock options exercised during the three months ended March 31, 2014 with a $2 million aggregate intrinsic value, and 654,264 stock options exercised during the same period in 2013 with a $11 million aggregate intrinsic value.

As of March 31, 2014, there were $4 million of total unrecognized compensation costs related to stock options. These costs are expected to be recognized over a weighted average period of 1.5 years.

Table of Contents

There were no stock options granted in the three months ended March 31, 2014. In the three months ended March 31, 2013, we granted an aggregate of 295,639 stock options under our 2008 Stock Incentive Plan to certain of our senior officers. These stock options will all vest on the third anniversary of the grant date, subject to the terms of the Plan, and will expire on the fifth anniversary of the grant date.

The weighted average estimated fair value of stock options we granted in the three months ended March 31, 2013 was $14.46 per share. These fair values were calculated based on the grant date, using a binomial lattice model with the following assumptions:

		Three Months Ended March 31, 2013
Expected volatility		50%
Expected dividend yield		0%
Expected life		3.6 years
Expected forfeiture rate		6%
Risk-free interest rate		0.48%
Early exercise threshold		100% gain
Early exercise rate		50% per year

The expected volatility used in the binomial lattice model incorporated historical and implied share-price volatility and was based on an analysis of historical prices of our stock and open-market exchanged options. The expected volatility reflects the historical volatility for a duration consistent with the contractual life of the options, and the volatility implied by the trading of options to purchase our stock on open-market exchanges. The historical share-price volatility excludes the movements in our stock price on two dates (one in 2010 and one in 2011) with unusual volatility due to an unsolicited acquisition proposal. The expected life of options granted is derived from the output of the binomial lattice model and represents the period of time that the options are expected to be outstanding. This model incorporates an early exercise assumption in the event of a significant increase in stock price. The risk-free interest rates are based on zero-coupon United States Treasury yields in effect at the date of grant consistent with the expected exercise timeframes.

The following table summarizes information about our outstanding stock options at March 31, 2014:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number of Options	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number of Options	Weighted Average Exercise Price
$0.00 to $4.569	309,718	4.9 years	$	4.56	309,718	$	4.56
$4.57 to $25.089	1,019,131	5.7 years	20.81		879,951	20.46
$25.09 to $32.569	466,304	2.3 years	29.44		466,304	29.44
$32.57 to $42.529	719,092	2.1 years	41.08		440,641	42.20
$42.53 to $55.129	24,366	0.7 years	49.71		24,366	49.71
	2,538,611	3.9 years	$	26.43	2,120,980	$	24.96

Restricted Stock Units

The following table summarizes restricted stock unit activity during the three months ended March 31, 2014:

	Restricted Stock Units		Weighted Average Grant Date Fair Value Per Unit
Unvested as of December 31, 2013	2,707,222		$	33.34
Granted	1,236,975		44.34
Vested	(839,353	)	29.72
Forfeited	(46,230	)	30.83
Unvested as of March 31, 2014	3,058,614		$	37.89

In the three months ended March 31, 2014, we granted 1,236,975 restricted stock units subject to time-vesting of which 918,924 will vest and be settled ratably over a three-year period from the date of the grant and 47,359 will vest 100% on the fifth anniversary of the grant date. In addition, we granted 270,692 performance-based restricted stock units to certain of our senior officers; the vesting of these restricted stock units is contingent on our achievement of a specified one-year performance goal for the year ending December 31, 2014. Provided the goal is achieved, the performance-based restricted stock units will vest ratably over a three-year period from the grant date. If the performance goal is not achieved, the restricted stock units will be forfeited.

Table of Contents

The actual number of performance-based restricted stock units that could vest will range from 0% to 200% of the 270,692 units granted, depending on our level of achievement with respect to the performance goal.

In the three months ended March 31, 2013, we granted 770,554 restricted stock units subject to time-vesting, of which 690,421 will vest and be settled ratably over a three-year period from the date of the grant and 80,133 will vest 100% on the fifth anniversary of the grant date. In addition, we granted 206,058 performance-based restricted stock units to certain of our senior officers. Because the performance goal for the year ended December 31, 2013 was met at the target level, 100% of the performance-based restricted stock units will vest and be settled ratably over a three-year period from the grant date.

As of March 31, 2014, there were $102 million of total unrecognized compensation costs related to restricted stock units. These costs are expected to be recognized over a weighted average period of 2.8 years.

NOTE 8. EQUITY

Changes in Shareholders’ Equity

The following table shows the changes in consolidated equity during the three months ended March 31, 2014 and 2013 (dollars in millions, share amounts in thousands):

	Tenet Healthcare Corporation Shareholders’ Equity
	Common Stock
	Shares Outstanding		Issued Par Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Treasury Stock			Noncontrolling Interests			Total Equity
Balances at December 31, 2013	96,860		$	7	$	4,572	$	(24	)	$	(1,422	)	$	(2,378	)	$	123		$	878
Net income (loss)	0		0		0		0			(32		)	0			5			(27		)
Distributions paid to noncontrolling interests	0		0		0		0			0			0			(10		)	(10		)
Contributions from noncontrolling interests	0		0		0		0			0			0			3			3
Other comprehensive income	0		0		0		1			0			0			0			1
Purchases of businesses or joint venture interests	0		0		0		0			0			0			5			5
Stock-based compensation expense and issuance of common stock	725		0		4		0			0			0			0			4
Balances at March 31, 2014	97,585		$	7	$	4,576	$	(23	)	$	(1,454	)	$	(2,378	)	$	126		$	854

Balances at December 31, 2012	104,633		$	7	$	4,471	$	(68	)	$	(1,288	)	$	(1,979	)	$	75		$	1,218
Net income (loss)	0		0		0		0			(88		)	0			5			(83		)
Distributions paid to noncontrolling interests	0		0		0		0			0			0			(6		)	(6		)
Purchases of businesses or joint venture interests	0		0		0		0			0			0			3			3
Repurchase of common stock	(2,455	)	0		0		0			0			(100		)	0			(100		)
Stock-based compensation expense and issuance of common stock	1,248		0		13		0			0			1			0			14
Balances at March 31, 2013	103,426		$	7	$	4,484	$	(68	)	$	(1,376	)	$	(2,078	)	$	77		$	1,046

Changes in Redeemable Noncontrolling Interests in Equity of Consolidated Subsidiaries

The following table shows the changes in redeemable noncontrolling interests in equity of consolidated subsidiaries during the three months ended March 31, 2014 and 2013:

	Three Months Ended March 31,
	2014			2013
Balances at beginning of period	$	247		$	16
Net income	11			0
Distributions paid to noncontrolling interests	(1		)	0
Contributions from noncontrolling interests	10			0
Sales of joint venture interests	0			10
Purchases of businesses	0			10
Balances at end of period	$	267		$	36

Table of Contents

NOTE 9. PROPERTY AND PROFESSIONAL AND GENERAL LIABILITY INSURANCE

Property Insurance

We have property, business interruption and related insurance coverage to mitigate the financial impact of catastrophic events or perils that is subject to deductible provisions based on the terms of the policies. These policies are on an occurrence basis.

Professional and General Liability Reserves

At March 31, 2014 and December 31, 2013, the aggregate current and long-term professional and general liability reserves in our accompanying Condensed Consolidated Balance Sheets were approximately $707 million and $699 million, respectively. These reserves include the reserves recorded by our captive insurance subsidiaries and our self-insured retention reserves recorded based on actuarial estimates for the portion of our professional and general liability risks, including incurred but not reported claims, for which we do not have insurance coverage. We estimated the reserves for losses and related expenses using expected loss-reporting patterns discounted to their present value under a risk-free rate approach using a Federal Reserve seven-year maturity rate of 2.30% and 2.45% at March 31, 2014 and December 31, 2013, respectively.

If the aggregate limit of any of our professional and general liability policies is exhausted, in whole or in part, it could deplete or reduce the limits available to pay any other material claims applicable to that policy period.

Included in other operating expenses, net, in the accompanying Condensed Consolidated Statements of Operations is malpractice expense of $49 million and $26 million for the three months ended March 31, 2014 and 2013, respectively.

NOTE 10. CLAIMS AND LAWSUITS

We operate in a highly regulated and litigious industry. As a result, we commonly become involved in disputes, litigation and regulatory matters incidental to our operations, including governmental investigations, personal injury lawsuits, employment claims and other matters arising out of the normal conduct of our business.

We record accruals for estimated losses relating to claims and lawsuits when available information indicates that a loss is probable and we can reasonably estimate the amount of the loss or a range of loss. If a loss on a material matter is reasonably possible and estimable, we disclose an estimate of the loss or a range of loss. In cases where we have not disclosed an estimate, we have concluded that the loss is either not reasonably possible or the loss, or a range of loss, is not reasonably estimable, based on available information.

Governmental Reviews

Healthcare companies are subject to numerous investigations by various governmental agencies. Further, private parties have the right to bring qui tam or “whistleblower” lawsuits against companies that allegedly submit false claims for payments to, or improperly retain overpayments from, the government and, in some states, private payers. Certain of our individual facilities have received inquiries from government agencies, and our facilities may receive such inquiries in future periods. The following material governmental reviews, which have been previously reported, are currently pending.

· Kyphoplasty—From March 2009 through July 2010, seven of our hospitals became the subject of a review by the U.S. Department of Justice (“DOJ”) and certain other federal agencies regarding the appropriateness of inpatient treatment for Medicare patients receiving kyphoplasty, which is a surgical procedure used to treat certain spinal conditions. We believe this review is part of a national investigation and is related to a qui tam settlement between the government and the manufacturer and distributor of Kyphon, the product used in performing kyphoplasty procedures. In January 2013, we paid $900,000 to settle claims against one of our hospitals subject to this review, and, in April 2014, we confirmed that another hospital is no longer the subject of investigation. We continue to engage in settlement discussions with the DOJ to resolve this matter with respect to the remaining five hospitals. Although it is impossible to predict the ultimate outcome of those discussions, we believe it is possible that a settlement could be reached in the three months ended June 30, 2014. Furthermore, based on current discussions, we believe the amount of the reserve management has established for this matter, as described below, continues to reflect our current estimate of probable liability.

· Implantable Cardioverter Defibrillators (“ICDs”)—At this time, 52 of our hospitals are part of a nationwide investigation to determine if ICD procedures from 2002 to 2010 complied with Medicare coverage requirements. In August 2012, the DOJ released its “Medical Review Guidelines/Resolution Model,” which sets out, for purposes of this investigation, the patient conditions and criteria for the medical necessity of the implantation of

Table of Contents

ICDs in Medicare beneficiaries and how the DOJ will enforce the repayment obligations of hospitals. Management has established a reserve, as described below, to reflect the current estimate of probable liability for 21 of the hospitals under review as part of the government’s examination, which commenced in March 2010. We are unable to calculate an estimate of loss or a range of loss with respect to the 31 other hospitals because our external clinical expert has not completed its report on the billing practices of those hospitals. We are engaged in potential settlement discussions with the DOJ to resolve this matter, but it is impossible at this time to predict the outcome of those discussions or the amount of any potential resolution.

· Clinica de la Mama Investigations and Qui Tam Action—As previously reported, we received a subpoena in May 2012 from the Office of Inspector General (“OIG”) of U.S. Department of Health and Human Services in Atlanta seeking documents from January 2004 through May 2012 related to the relationship that certain of our Georgia and South Carolina hospitals had with Hispanic Medical Management, Inc. (“HMM”). HMM was an unaffiliated entity that owned and operated clinics that provided, among other things, prenatal care predominantly to uninsured patients. The hospitals contracted with HMM for translation, marketing, management and Medicaid eligibility determination services. The civil investigation is being conducted by the Civil Division of the DOJ, the U.S. Attorney’s Office for the Middle District of Georgia and the Georgia Attorney General’s Office, while the parallel criminal investigation is being conducted by the Criminal Division of the DOJ and the U.S. Attorney’s Office for the Northern District of Georgia.

The investigations arose out of a qui tam action captioned United States of America, ex. rel. Ralph D. Williams v. Health Management Associates, Inc., et al. filed in the U.S. District Court for the Middle District of Georgia. Tenet and four of its hospital subsidiaries are defendants in the qui tam action, which alleges that the arrangements the hospitals had with HMM violated the federal and state anti-kickback statutes and false claims acts. The Georgia Attorney General’s Office, on behalf of the State of Georgia, has intervened in the qui tam action and the United States filed its complaint in intervention on March 18, 2014. Our motion to dismiss both the state’s and the relator’s complaints, which was filed in November 2013, is pending. We plan to file our motion to dismiss the United States’ complaint in May 2014.

If we or our subsidiaries were determined to have violated the anti-kickback statutes, the government could require us to reimburse related government program payments received during the subject period, assess civil monetary penalties including treble damages, exclude individuals or subsidiaries from participation in federal healthcare programs, or seek criminal sanctions against current or former employees of our hospital subsidiary companies or the hospital companies themselves. Management has established a reserve, as described below, to reflect the current estimate of probable liability for these matters, but it is impossible at this time to predict the amount and terms of any potential resolution. We will continue to vigorously defend against the government’s allegations.

Except with respect to the matter settled in January 2013 involving one hospital, as discussed above, our analysis of each of these pending reviews is still ongoing, and we are unable to predict with any certainty the progress or final outcome of any discussions with government agencies at this time. Based on currently available information, as of March 31, 2014, we had recorded reserves of approximately $28 million in the aggregate for our potential reimbursement obligations with respect to 25 hospitals under review for their billing practices for kyphoplasty and cardiac defibrillator implantation procedures, as well as the Clinica de la Mama matters. Changes in the reserves may be required in the future as additional information becomes available. We cannot predict the ultimate resolution of any governmental review, and the final amounts paid in settlement or otherwise, if any, could differ materially from our currently recorded reserves.

Ordinary Course Matters

We are also subject to other claims and lawsuits arising in the ordinary course of business, including potential claims related to, among other things, the care and treatment provided at our hospitals and outpatient facilities, the application of various federal and state labor laws, tax audits and other matters. Although the results of these claims and lawsuits cannot be predicted with certainty, we believe that the ultimate resolution of these ordinary course claims and lawsuits will not have a material effect on our business, financial condition or results of operations.

In addition to the proceedings described above, we are defendants in a class action lawsuit in which the plaintiffs claim that in April 1996 patient identifying records from a psychiatric hospital that we closed in 1995 were temporarily placed in an unsecure location while the hospital was undergoing renovations. The lawsuit, Doe, et al. v. Jo Ellen Smith Medical Foundation, was filed in the Civil District Court for the Parish of Orleans in Louisiana in March 1997. The plaintiffs allege tortious invasion of privacy and negligent infliction of emotional distress. The plaintiffs contend that the class consists of over 5,000 persons; however, only eight individuals (in addition to the two plaintiffs) have been identified to date in the class certification process. The plaintiffs have asserted each member of the class is entitled to common damages under a theory of presumed “common damage” regardless of whether or not any members of the class were actually harmed or even aware of the incident. We believe

Table of Contents

there is no authority for an award of common damages under Louisiana law. In addition, we believe that there is no basis for the certification of this proceeding as a class action under applicable federal and Louisiana law precedents. In an effort to potentially avoid protracted litigation, at the parties’ request and recommendation, on March 31, 2014, the court appointed as a “special master” a retired judge to facilitate settlement discussions in this case. Those discussions are in a preliminary stage, and the parties have not yet, as of the date hereof, had substantive discussions regarding settlement terms. There can be no assurances that a settlement will be reached. Furthermore, we are not able to estimate the reasonably possible loss or a reasonably possible range of loss given: the small number of class members that have been identified or otherwise responded to the class certification process; the novel theories asserted by plaintiffs, including their assertion that a theory of presumed common damage exists under Louisiana law; and the failure of the plaintiffs to provide any evidence of damages. The portion of the lawsuit relating to plaintiffs’ common damage theory is scheduled to be tried beginning on June 16, 2014. If we are unable to reach a reasonable settlement, we intend to continue to vigorously contest the plaintiffs’ claims at trial.

New claims or inquiries may be initiated against us from time to time. These matters could (1) require us to pay substantial damages or amounts in judgments or settlements, which individually or in the aggregate could exceed amounts, if any, that may be recovered under our insurance policies where coverage applies and is available, (2) cause us to incur substantial expenses, (3) require significant time and attention from our management, and (4) cause us to close or sell hospitals or otherwise modify the way we conduct business.

The table below presents reconciliations of the beginning and ending liability balances in connection with legal settlements and related costs recorded during the three months ended March 31, 2014 and 2013:

	Balances at Beginning of Period		Litigation and Investigation Costs		Cash Payments			Balances at End of Period
Three Months Ended March 31, 2014
Continuing operations	$	40	$	3	$	(3	)	$	40
Discontinued operations	6		0		(6		)	0
	$	46	$	3	$	(9	)	$	40

Three Months Ended March 31, 2013
Continuing operations	$	5	$	0	$	(1	)	$	4
Discontinued operations	5		0		0			5
	$	10	$	0	$	(1	)	$	9

For the three months ended March 31, 2014, we recorded costs of $3 million primarily related to costs associated with various legal proceedings and governmental reviews.

NOTE 11. INCOME TAXES

During the three months ended March 31, 2014, we recorded an income tax benefit of $1 million, which was net of an income tax expense of $3 million to increase our valuation allowance for deferred tax assets. The increase in the valuation allowance relates to an estimated decrease in the future utilization of state net operating loss carryovers.

During the three months ended March 31, 2014, there were no adjustments to our estimated liabilities for uncertain tax positions. The total amount of unrecognized tax benefits as of March 31, 2014 was $43 million, of which $34 million, if recognized, would impact our effective tax rate and income tax expense (benefit) from continuing operations.

Our practice is to recognize interest and penalties related to income tax matters in income tax expense in our consolidated statements of operations. Total accrued interest and penalties on unrecognized tax benefits as of March 31, 2014 were $5 million, all of which related to continuing operations.

As of March 31, 2014, approximately $1 million of unrecognized federal and state tax benefits, as well as reserves for interest and penalties, may decrease in the next 12 months as a result of the settlement of audits, the filing of amended tax returns or the expiration of statutes of limitations.

Table of Contents

NOTE 12. EARNINGS (LOSS) PER COMMON SHARE

The table below is a reconciliation of the numerators and denominators of our basic and diluted loss per common share calculations for net loss from continuing operations for the three months ended March 31, 2014 and 2013. Net loss is expressed in millions and weighted average shares are expressed in thousands.

	Net Loss (Numerator)			Weighted Average Shares (Denominator)	Per-Share Amount
Three Months Ended March 31, 2014
Net loss attributable to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	(27	)	97,161	$	(0.28	)
Effect of dilutive stock options and restricted stock units	0			0	0.00
Net loss attributable to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	(27	)	97,161	$	(0.28	)

Three Months Ended March 31, 2013
Net loss attributable to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	(86	)	104,103	$	(0.83	)
Effect of dilutive stock options and restricted stock units	0			0	0.00
Net loss attributable to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	(86	)	104,103	$	(0.83	)

All potentially dilutive securities were excluded from the calculation of diluted loss per share for the three months ended March 31, 2014 and 2013 because we did not report income from continuing operations in those periods. In circumstances where we do not have income from continuing operations, the effect of stock options and other potentially dilutive securities is anti-dilutive, that is, a loss from continuing operations has the effect of making the diluted loss per share less than the basic loss per share. Had we generated income from continuing operations in those periods, the effect (in thousands) of employee stock options, restricted stock units and deferred compensation units on the diluted shares calculation would have been an increase in shares of 1,984 and 2,239, respectively.

NOTE 13. FAIR VALUE MEASUREMENTS

Our financial assets and liabilities recorded at fair value on a recurring basis primarily relate to investments in available-for-sale securities held by our captive insurance subsidiaries. The following tables present information about our assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013. The following tables also indicate the fair value hierarchy of the valuation techniques we utilized to determine such fair values. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. We consider a security that trades at least weekly to have an active market. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

Investments:	March 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Marketable securities — current	$	1	$	1	$	0	$	0
Investments in Reserve Yield Plus Fund	2		0		2		0
Marketable debt securities — noncurrent	62		24		37		1
	$	65	$	25	$	39	$	1

Table of Contents

Investments:	December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Marketable securities — current	$	1	$	1	$	0	$	0
Investments in Reserve Yield Plus Fund	2		0		2		0
Marketable debt securities — noncurrent	62		23		38		1
	$	65	$	24	$	40	$	1

The fair value of our long-term debt is based on quoted market prices (Level 1). At March 31, 2014 and December 31, 2013, the estimated fair value of our long-term debt was approximately 105.4% and 103.5%, respectively, of the carrying value of the debt.

NOTE 14. ACQUISITIONS

During the three months ended March 31, 2014, we acquired two ambulatory surgery centers, two urgent care centers and various physician practice entities. The fair value of the consideration conveyed in the acquisitions (the “purchase price”) was $9 million.

We are required to allocate the purchase prices of the acquired businesses to assets acquired or liabilities assumed and, if applicable, noncontrolling interests based on their fair values. The excess of the purchase price allocation over those fair values is recorded as goodwill. We are in process of finalizing the purchase price allocations, including valuations of the acquired property and equipment primarily for several recent acquisitions; therefore, those purchase price allocations are subject to adjustment once the valuations are completed. During the three months ended March 31, 2014, we made adjustments to purchase price allocations for businesses acquired in 2013 that increased goodwill by approximately $17 million due to additional information received during the period.

Preliminary purchase price allocations for the acquisitions made during the three months ended March 31, 2014 are as follows:

Current assets	$	1
Property and equipment	2
Goodwill	11
Noncontrolling interests	(5		)
Net cash paid	$	9

The goodwill generated from these transactions, the majority of which will be deductible for income tax purposes, can be attributed to the benefits that we expect to realize from operating efficiencies and increased reimbursement. Approximately $6 million in transaction costs related to prospective and closed acquisitions were expensed during the three months ended March 31, 2014, and are included in impairment and restructuring charges, and acquisition-related costs in the accompanying Condensed Consolidated Statement of Operations.

Pro Forma Information - Unaudited

The following table provides certain pro forma financial information for Tenet as if the Vanguard acquisition had occurred at the beginning of the year ended December 31, 2013.

	Three Months Ended March 31,
	2014			2013

Net operating revenues	$	3,926		$	3,886
Net loss from continuing operations, before income taxes	$	(12	)	$	(132	)

NOTE 15. SEGMENT INFORMATION

Our core business is hospital operations and other, which is focused on owning and operating acute care hospitals and outpatient facilities. We also own various related healthcare businesses. At March 31, 2014, our subsidiaries operated 77 hospitals with a total of 20,255 licensed beds, primarily serving urban and suburban communities, as well as 189 outpatient centers and six health plans.

Table of Contents

We operate revenue cycle management and patient communications and engagement services businesses under our Conifer subsidiary. In addition, Conifer operates a management services business that supports value-based performance through clinical integration, financial risk management and population health management. At March 31, 2014, Conifer provided services to more than 700 Tenet and non-Tenet hospital and other clients nationwide. Conifer’s two largest customers, Tenet and Catholic Health Initiatives, together comprised 81% and 79% of Conifer’s net operating revenues for the three months ended March 31, 2014 and 2013, respectively.

The following table includes amounts for each of our reportable segments and the reconciling items necessary to agree to amounts reported in the accompanying Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations:

	March 31,		December 31,
	2014		2013
Assets:
Hospital operations and other	$	16,162	$	15,874
Conifer	322		256
Total	$	16,484	$	16,130

	Three Months Ended
	March 31,
	2014			2013
Capital expenditures:
Hospital operations and other	$	273		$	131
Conifer	8			2
Total	$	281		$	133

Net operating revenues:
Hospital operations and other	$	3,781		$	2,268
Conifer
Tenet	140			92
Other customers	145			119
	4,066			2,479
Intercompany eliminations	(140		)	(92		)
Total	$	3,926		$	2,387

Adjusted EBITDA:
Hospital operations and other	$	339		$	242
Conifer	48			32
Total	$	387		$	274

Depreciation and amortization:
Hospital operations and other	$	188		$	110
Conifer	5			4
Total	$	193		$	114

Adjusted EBITDA	$	387		$	274
Depreciation and amortization	(193		)	(114		)
Impairment and restructuring charges, and acquisition-related costs	(21		)	(14		)
Litigation and investigation costs	(3		)	0
Interest expense	(182		)	(103		)
Loss from early extinguishment of debt	0			(177		)
Net loss from continuing operations before income taxes	$	(12	)	$	(134	)

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION TO MANAGEMENT’S DISCUSSION AND ANALYSIS

The purpose of this section, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), is to provide a narrative explanation of our financial statements that enables investors to better understand our business, to enhance our overall financial disclosures, to provide the context within which our financial information may be analyzed, and to provide information about the quality of, and potential variability of, our financial condition, results of operations and cash flows. Our core business is hospital operations and other, which is focused on owning and operating acute care hospitals and outpatient facilities. We also operate revenue cycle management, patient communications and engagement services and management services businesses under our Conifer Health Solutions, LLC (“Conifer”) subsidiary, which is a separate reportable business segment. MD&A, which should be read in conjunction with the accompanying Condensed Consolidated Financial Statements, includes the following sections:

· Management Overview

· Forward-Looking Statements

· Sources of Revenue

· Results of Operations

· Liquidity and Capital Resources

· Off-Balance Sheet Arrangements

· Critical Accounting Estimates

Unless otherwise indicated, all financial and statistical information included in MD&A relates to our continuing operations, with dollar amounts expressed in millions (except per share, per admission, per adjusted admission, per patient day, per adjusted patient day and per visit amounts). Continuing operations information includes the results of (i) our same-hospital operations, as described below, and (ii) Vanguard Health Systems, Inc. (“Vanguard”) and its consolidated subsidiaries, which we acquired effective October 1, 2013, but only for the three months ended March 31, 2014. Continuing operations information excludes the results of our hospitals and other businesses that have previously been classified as discontinued operations for accounting purposes. Same-hospital information includes the results of our operations for all periods presented, including the same 49 hospitals operated during the three months ended March 31, 2014 and 2013, but excludes the results of legacy Vanguard operations, as well as our hospitals and other businesses that have previously been classified as discontinued operations for accounting purposes. We present same-hospital data because we believe it provides investors with useful information regarding the performance of our hospitals and other operations that are comparable for the periods presented.

MANAGEMENT OVERVIEW

STRATEGIES AND TRENDS

We are committed to providing the communities our hospitals, outpatient centers and other healthcare facilities serve with high quality, cost-effective healthcare while growing our business, increasing our profitability and creating long-term value for our shareholders. We believe that our success in increasing our profitability depends in part on our success in executing the strategies and managing the trends discussed below.

Core Business Strategy—We are focused on providing high quality care to patients through our hospitals and outpatient centers, and offering an array of business process solutions primarily to healthcare providers through Conifer. With respect to our hospitals and outpatient business, we seek to offer superior quality and patient services to meet community needs, to make capital and other investments in our facilities and technology to remain competitive, to recruit and retain physicians, to increase the number of outpatient centers we own, and to negotiate favorable contracts with managed care and other private payers. With respect to business process services, we provide comprehensive operational management for revenue cycle functions, including patient access, health information management, revenue integrity and patient financial services. We also offer communication and engagement solutions to optimize the relationship between providers and patients. In addition, our management services offerings have expanded to support value-based performance through clinical integration, financial risk management and population health management.

Commitment to Quality—We have made significant investments in the last decade in equipment, technology, education and operational strategies designed to improve clinical quality at our hospitals and outpatient centers. As a result of our efforts, our Hospital Compare Core Measures scores from the Centers for Medicare and Medicaid Services (“CMS”) have consistently exceeded the national average since the end of 2005, and major national private payers have also recognized our achievements relative to quality. These designations are expected to become increasingly important as governmental and private payers move

Table of Contents

to pay-for-performance models, and the commercial market moves to more narrow networks and other methods designed to encourage covered individuals to use certain facilities over others. Through our Commitment to Quality and Performance Excellence Program initiatives, we continually collaborate with physicians to implement the most current evidence-based medicine techniques to improve the way we provide care, while using labor management tools and supply chain initiatives to reduce variable costs. We believe the use of these practices will promote the most effective and efficient utilization of resources and result in shorter lengths of stay, as well as reductions in redundant ancillary services and readmissions for hospitalized patients. In general, we believe that quality of care improvements may have the effect of reducing costs, increasing payments from Medicare and certain managed care payers for our services, and increasing physician and patient satisfaction, which may improve our volumes.

Development Strategies—We remain focused on opportunities to increase our hospital and outpatient revenues through organic growth and acquisitions, and to expand our Conifer services business.

From time to time, we build new facilities, make strategic acquisitions of healthcare assets and companies, and enter into joint venture arrangements or affiliations with healthcare businesses — in each case in markets where we believe our operating strategies can improve performance and create shareholder value. On October 1, 2013, we acquired 28 hospitals (plus one more under construction), 39 outpatient centers and five health plans with approximately 140,000 members, serving communities in Arizona, California, Illinois, Massachusetts, Michigan and Texas, through our acquisition of Vanguard. During 2013, we also purchased: (1) 11 ambulatory surgery centers (in one of which we had previously held a noncontrolling interest); (2) an urgent care center; (3) a provider network based in Southern California that includes contracted independent physicians, ancillary providers and hospitals; (4) a medical office building; and (5) various physician practice entities. In addition, we entered into a partnership with John Muir Health, a not-for-profit integrated system of doctors, hospitals and other healthcare services in the San Francisco Bay area, through which we will jointly develop and expand outpatient services and physician relationships to improve the efficiency and coordination of care in the Tri-Valley area and nearby communities in Northern California. Furthermore, we have signed a definitive agreement to acquire Emanuel Medical Center, a 209-bed hospital located in Turlock, California. During the three months ended March 31, 2014, we acquired two ambulatory surgery centers, two urgent care centers and various physician practice entities.

Historically, our outpatient services have generated significantly higher margins for us than inpatient services. During the three months ended March 31, 2014, we derived approximately 36% of our net patient revenues from outpatient services. By expanding our outpatient business, we expect to increase our profitability over time. We believe that growth by strategic acquisitions, when and if opportunities are available, can supplement the growth we believe we can generate organically in our existing markets. We continually evaluate collaboration opportunities with outpatient facilities, healthcare providers, physician groups and others in our markets to maximize effectiveness, reduce costs and build clinically integrated networks that provide quality service across the care continuum.

We intend to continue expanding Conifer’s revenue cycle management, patient communications and engagement services, and management services businesses by marketing these services to non-Tenet hospitals and other healthcare-related entities. Conifer provides services to more than 700 Tenet and non-Tenet hospital and other clients nationwide. We believe this business has the potential over time to generate high margins and improve our results of operations. Conifer’s service offerings have also expanded to support value-based performance through clinical integration, financial risk management and population health management, which are integral parts of the healthcare industry’s movement toward accountable care organizations (“ACOs”) and similar risk-based or capitated contract models. In addition to hospitals, clients for these services include health plans, self-insured employees and other entities.

Realizing HIT Incentive Payments and Other Benefits—Beginning in the year ended December 31, 2011, we achieved compliance with certain of the health information technology (“HIT”) requirements under the American Recovery and Reinvestment Act of 2009 (“ARRA”). In 2013, we recognized approximately $96 million of Medicare electronic health record (“EHR”) and Medicaid ARRA HIT incentives. During the three months ended March 31, 2014, we recognized approximately $9 million of Medicare and Medicaid EHR ARRA incentives. These incentives partially offset the operating expenses and capital costs we have incurred and continue to incur to invest in HIT systems. We expect to recognize additional incentives in the future. Furthermore, we believe that the operational benefits of HIT, including improved clinical outcomes and increased operating efficiencies, will contribute to our long-term ability to grow our business.

General Economic Conditions—We believe that high unemployment rates and other adverse economic conditions are continuing to have a negative impact on our bad debt expense levels, patient volumes and payer mix. However, as the economy recovers, we expect to experience improvements in these metrics relative to current levels.

Improving Operating Leverage—We believe targeted capital spending on critical growth opportunities for our hospitals, emphasis on higher demand clinical service lines (including outpatient lines), focus on expanding our outpatient

Table of Contents

business, implementation of new payer contracting strategies, and improved quality metrics at our hospitals will improve our patient volumes. Increases in patient volumes have been constrained by the slow pace of the current economic recovery, increased competition, utilization pressure by managed care organizations, the effects of higher patient co-pays and deductibles, and demographic trends. We continue to pursue integrated contracting models that maximize our system-wide skills and capabilities in conjunction with our strong market positions to accommodate new payment models. In several markets, we have formed clinical integration organizations, which are collaborations with independent physicians and hospitals to develop ongoing clinical initiatives designed to control costs and improve the quality of care delivered to patients. Most recently, in January 2014, our Abrazo Health network of hospitals in the Phoenix, Arizona area entered into a joint venture with Dignity Health to fund and expand the Arizona Care Network, a physician-led, physician-governed ACO and clinically integrated network focused on improved quality through shared resources, advanced technology and clinical best practices that align with emerging models of care delivery. Arrangements like these provide a foundation for negotiating with plans under an ACO structure or other risk-sharing model.

Impact of Affordable Care Act—We anticipate that we will benefit over time from the provisions of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (“Affordable Care Act” or “ACA”) that will extend insurance coverage through Medicaid or private insurance to a broader segment of the U.S. population. Although we are unable to predict the ultimate net effect of the Affordable Care Act on our future results of operations, and while there have been and will continue to be some reductions in reimbursement rates by governmental payers, we have begun to receive reimbursement for caring for previously uninsured and underinsured patients in 2014. Through collaborative efforts with local community organizations, we have launched a campaign under the banner “Path to Health” to assist our hospitals in educating and enrolling uninsured patients in insurance plans. Effective January 1, 2014, four of the states in which we operate (Arizona, California, Illinois and Massachusetts) expanded their Medicaid programs under the ACA. A fifth state (Michigan) expanded its Medicaid program effective April 1, 2014.

Our ability to execute on these strategies and manage these trends is subject to a number of risks and uncertainties that may cause actual results to be materially different from expectations. In addition, it is critical that we continue to make steady and measurable progress in 2014 in successfully integrating Vanguard’s business and operations into our business processes. For information about risks and uncertainties that could affect our results of operations, see the Forward-Looking Statements and Risk Factors sections in Part I of our Annual Report.

RESULTS OF OPERATIONS—OVERVIEW

Selected Operating Statistics for All Continuing Operations Hospitals—The following table shows certain selected operating statistics for our continuing operations on a total hospital basis, which includes the statistics from the hospitals included in the Vanguard acquisition only for the three months ended March 31, 2014. We believe this information is useful to investors because it reflects the significant increase to the scale of our operations as a result of our acquisition of Vanguard.

	Total Hospital Continuing Operations
	Three Months Ended March 31,
	2014			2013			Increase (Decrease)
Total admissions	194,273			125,929			54.3	%
Adjusted patient admissions(1)	323,810			197,665			63.8	%
Charity and uninsured admissions	12,530			8,603			45.6	%
Admissions through emergency department	122,601			80,208			52.9	%
Emergency department outpatient visits	665,002			402,078			65.4	%
Total emergency department	787,603			482,286			63.3	%
Surgeries — inpatient	51,576			33,204			55.3	%
Surgeries — outpatient	110,706			68,209			62.3	%
Total surgeries	162,282			101,413			60.0	%
Patient days — total	929,164			603,285			54.0	%
Adjusted patient days(1)	1,525,379			939,840			62.3	%
Average length of stay (days)	4.78			4.79			(0.2	)%
Average licensed beds	20,255			13,180			53.7	%
Utilization of licensed beds(2)	51.0		%	50.9		%	0.1	%(3)
Total outpatient visits	1,947,687			1,054,789			84.7	%
Charity and uninsured outpatient visits	165,248			110,240			49.9	%
Net inpatient revenues	$	2,440		$	1,536		58.9	%
Net outpatient revenues	$	1,346		$	813		65.6	%
Net inpatient revenue per admission	$	12,560		$	12,197		3.0	%

Table of Contents

	Total Hospital Continuing Operations
	Three Months Ended March 31,
	2014		2013		Increase (Decrease)
Net inpatient revenue per patient day	$	2,626	$	2,546	3.1	%
Net outpatient revenue per visit	$	691	$	771	(10.4	)%
Net patient revenue per adjusted admission	$	11,692	$	11,884	(1.6	)%

(1) Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services by multiplying actual patient admissions/days by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues.

(2) Utilization of licensed beds represents patient days divided by number of days in the period divided by average licensed beds.

(3) The change is the difference between the amounts shown for the three months ended March 31, 2014 compared to the three months ended March 31, 2013.

Operating Statistics on a Same-Hospital Basis—Our results of operations have been and continue to be influenced by industry-wide and company-specific challenges, including constrained volume growth and high levels of bad debt, that have affected our revenue growth and operating expenses. We believe our results of operations for our most recent fiscal quarter best reflect recent trends we are experiencing with respect to volumes, revenues and expenses; therefore, we have provided below information about these metrics for the three months ended March 31, 2014 and 2013 on a same-hospital basis, where noted, excluding the results of the 28 hospitals we acquired from Vanguard on October 1, 2013.

	Same-Hospital Continuing Operations
	Three Months Ended March 31,
Admissions, Patient Days and Surgeries	2014		2013		Increase (Decrease)
Total admissions	124,451		125,929		(1.2	)%
Adjusted patient admissions(1)	196,855		197,665		(0.4	)%
Paying admissions (excludes charity and uninsured)	116,064		117,326		(1.1	)%
Charity and uninsured admissions	8,387		8,603		(2.5	)%
Admissions through emergency department	80,910		80,208		0.9	%
Paying admissions as a percentage of total admissions	93.3	%	93.2	%	0.1	%(2)
Charity and uninsured admissions as a percentage of total admissions	6.7	%	6.8	%	(0.1	)%(2)
Emergency department admissions as a percentage of total admissions	65.0	%	63.7	%	1.3	%(2)
Surgeries — inpatient	33,529		33,204		1.0	%
Surgeries — outpatient	81,205		68,209		19.1	%
Total surgeries	114,734		101,413		13.1	%
Patient days — total	605,042		603,285		0.3	%
Adjusted patient days(1)	949,403		939,840		1.0	%
Average length of stay (days)	4.86		4.79		1.5	%
Number of acute care hospitals (at end of period)	49		49		—
Licensed beds (at end of period)	13,178		13,180		—	%
Average licensed beds	13,178		13,180		—	%
Utilization of licensed beds(3)	51.0	%	50.9	%	0.1	%(2)

(2) The change is the difference between the amounts shown for the three months ended March 31, 2014 compared to the three months ended March 31, 2013.

(3) Utilization of licensed beds represents patient days divided by number of days in the period divided by average licensed beds.

Total same-hospital admissions decreased by 1,478, or 1.2%, in the three months ended March 31, 2014 compared to the three months ended March 31, 2013. Total surgeries increased by 13.1% in the three months ended March 31, 2014 compared to the same period in 2013, comprised of a 19.1% increase in outpatient surgeries primarily due to our outpatient development strategies and a 1.0% increase in inpatient surgeries. Our emergency department admissions increased 0.9% in the three months ended March 31, 2014 compared to the same period in the prior year. We believe the current economic conditions continue to have an adverse impact on the level of elective procedures performed at our hospitals, which contributed to the decrease in our total admissions. Charity and uninsured admissions decreased 2.5% in the three months ended March 31, 2014 compared to the three months ended March 31, 2013, primarily due to Medicaid expansion in California and exchange coverage under the ACA, and paying admissions decreased 1.1%.

Table of Contents

	Same-Hospital Continuing Operations
	Three Months Ended March 31,
Outpatient Visits	2014		2013		Increase (Decrease)
Total visits	1,080,674		1,054,789		2.5	%
Paying visits (excludes charity and uninsured)	968,817		944,549		2.6	%
Charity and uninsured visits	111,857		110,240		1.5	%
Emergency department visits	414,193		402,078		3.0	%
Surgery visits	81,205		68,209		19.1	%
Paying visits as a percentage of total visits	89.6	%	89.5	%	0.1	%(1)
Charity and uninsured visits as a percentage of total visits	10.4	%	10.5	%	(0.1	)%(1)

(1) The change is the difference between the amounts shown for the three months ended March 31, 2014 compared to the three months ended March 31, 2013.

Total same-hospital outpatient visits increased 25,885, or 2.5%, in the three months ended March 31, 2014 compared to the three months ended March 31, 2013, which included 2.6% for paying visits. Three of our same-hospital regions reported increased outpatient visits in the three months ended March 31, 2014, with the strongest growth occurring in our California and Central regions. Approximately 36% of the growth in outpatient visits was organic.

Outpatient surgery visits increased by 19.1% in the three months ended March 31, 2014 compared to the same period in 2013. Charity and uninsured outpatient visits increased by 1.5% in the three months ended March 31, 2014 compared to the three months ended March 31, 2013.

	Same-Hospital Continuing Operations
	Three Months Ended March 31,
Revenues	2014		2013		Increase (Decrease)
Net operating revenues	$	2,513	$	2,387	5.3	%
Revenues from the uninsured	$	170	$	165	3.0	%
Net inpatient revenues(1)	$	1,569	$	1,536	2.1	%
Net outpatient revenues(1)	$	859	$	813	5.7	%

(1) Net inpatient revenues and net outpatient revenues are components of net operating revenues. Net inpatient revenues include self-pay revenues of $73 million and $70 million for the three months ended March 31, 2014 and 2013, respectively. Net outpatient revenues include self-pay revenues of $97 million and $95 million for the three months ended March 31, 2014 and 2013, respectively.

Net operating revenues increased by $126 million, or 5.3%, on a same-hospital basis in the three months ended March 31, 2014 compared to the same period in 2013, primarily due to an increase in outpatient volumes, improved managed care pricing, and increased revenues from services provided by our Conifer subsidiary to third parties, partially offset by a decrease in inpatient volumes. Net operating revenues in the three months ended March 31, 2014 included $53 million of Medicaid disproportionate share hospital (“DSH”) and other state-funded subsidy revenues compared to $67 million in the same period in 2013 on a same-hospital basis. During the three months ended March 31, 2013, we recognized $12 million of net revenues related to the California provider fee program; we did not recognize any revenues related to this program during the three months ended March 31, 2014 because the current program has not yet been approved by CMS. Net patient revenues increased by 3.4% in the three months ended March 31, 2014 compared to the same period in 2013.

	Same-Hospital Continuing Operations
	Three Months Ended March 31,
Revenues on a Per Admission, Per Patient Day and Per Visit Basis	2014		2013		Increase (Decrease)
Net inpatient revenue per admission	$	12,607	$	12,197	3.4	%
Net inpatient revenue per patient day	$	2,593	$	2,546	1.8	%
Net outpatient revenue per visit	$	795	$	771	3.1	%
Net patient revenue per adjusted patient admission(1)	$	12,334	$	11,884	3.8	%
Net patient revenue per adjusted patient day(1)	$	2,557	$	2,499	2.3	%

Large accelerated filer x		Accelerated filer o

Non-accelerated filer o		Smaller reporting company o

		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	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45

Item 4.	Controls and Procedures	45

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	46

Item 6.	Exhibits	46

	Same-Hospital Continuing Operations
	Three Months Ended March 31,
Provision for Doubtful Accounts	2014			2013			Increase (Decrease)
Provision for doubtful accounts	$	229		$	207		10.6	%
Provision for doubtful accounts as a percentage of net operating revenues before provision for doubtful accounts	8.4		%	8.0		%	0.4	%(1)
Collection rate on self-pay accounts(2)