10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended September 30, 2014

OR

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

Commission File Number 1-7293

TENET HEALTHCARE CORPORATION

(Exact name of Registrant as specified in its charter)

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

1445 Ross Avenue, Suite1400
Dallas, TX 75202

(Address of principal executive offices, including zip code)

(469) 893-2200

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.   Yes ☒ No ☐

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

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule12b-2).  Yes ☐ No ☒

As of October 31, 2014, there were 98,280,152 shares of the Registrant’s common stock, $0.05 par value, outstanding.

TENET HEALTHCARE CORPORATION

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Financial Statements	1
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 4.	Controls and Procedures	60
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	61
Item 1A.	Risk Factors	61
Item 6.	Exhibits	62

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PARTI. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Dollars in Millions

(Unaudited)

	September 30,		December 31,
	2014		2013
ASSETS
Current assets:
Cash and cash equivalents	$	200	$	113
Accounts receivable, less allowance for doubtful accounts ($773 at September 30, 2014 and $589 at December 31, 2013)		2,238		1,890
Inventories of supplies, at cost		270		260
Income tax receivable		22		—
Current portion of deferred income taxes		725		692
Other current assets		746		737
Total current assets		4,201		3,692
Investments and other assets		366		357
Deferred income taxes, net of current portion		100		148
Property and equipment, at cost, less accumulated depreciation and amortization ($4,347 at September 30, 2014 and $3,907 at December 31, 2013)		7,749		7,582
Goodwill		3,705		3,566
Other intangible assets, at cost, less accumulated amortization ($623 at September 30, 2014 and $516 at December 31, 2013)		1,191		1,105
Total assets	$	17,312	$	16,450
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	98	$	153
Accounts payable		1,068		1,085
Accrued compensation and benefits		735		622
Professional and general liability reserves		175		156
Accrued interest payable		265		198
Other current liabilities		804		879
Total current liabilities		3,145		3,093
Long-term debt, net of current portion		11,455		10,696
Professional and general liability reserves		525		555
Defined benefit plan obligations		381		398
Other long-term liabilities		544		490
Total liabilities		16,050		15,232
Commitments and contingencies
Redeemable noncontrolling interests in equity of consolidated subsidiaries		396		340
Equity:
Shareholders’ equity:
Common stock, $0.05 par value; authorized 262,500,000 shares; 145,421,213 shares issued at September 30, 2014 and 144,057,351 shares issued at December 31, 2013		7		7
Additional paid-in capital		4,597		4,572
Accumulated other comprehensive loss		(20)		(24)
Accumulated deficit		(1,471)		(1,422)
Common stock in treasury, at cost, 47,196,935 shares at September 30, 2014 and 47,197,722 shares at December 31, 2013		(2,378)		(2,378)
Total shareholders’ equity		735		755
Noncontrolling interests		131		123
Total equity		866		878
Total liabilities and equity	$	17,312	$	16,450

See accompanying Notes to Condensed Consolidated Financial Statements.

TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Dollars in Millions, Except Per-Share Amounts

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Net operating revenues:
Net operating revenues before provision for doubtful accounts	$	4,428	$	2,618	$	13,096	$	7,841
Less: Provision for doubtful accounts		249		210		949		624
Net operating revenues		4,179		2,408		12,147		7,217
Operating expenses:
Salaries, wages and benefits		2,028		1,172		5,905		3,499
Supplies		665		387		1,942		1,158
Other operating expenses, net		1,032		575		3,066		1,710
Electronic health record incentives		(5)		(14)		(72)		(48)
Depreciation and amortization		207		119		609		354
Impairment and restructuring charges, and acquisition-related costs		37		20		90		45
Litigation and investigation costs		4		1		19		3
Operating income		211		148		588		496
Interest expense		(186)		(91)		(558)		(292)
Loss from early extinguishment of debt		(24)		—		(24)		(348)
Investment earnings		—		—		—		1
Net income (loss) from continuing operations, before income taxes		1		57		6		(143)
Income tax benefit (expense)		18		(16)		11		57
Net income (loss) from continuing operations, before discontinued operations		19		41		17		(86)
Discontinued operations:
Loss from operations		(2)		(8)		(17)		(5)
Litigation and investigation costs		—		(2)		(18)		(2)
Income tax benefit		1		5		13		3
Net loss from discontinued operations		(1)		(5)		(22)		(4)
Net income (loss)		18		36		(5)		(90)
Less: Net income attributable to noncontrolling interests		9		8		44		20
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders	$	9	$	28	$	(49)	$	(110)
Amounts attributable to Tenet Healthcare Corporation common shareholders
Net income (loss) from continuing operations, net of tax	$	10	$	33	$	(27)	$	(106)
Net loss from discontinued operations, net of tax		(1)		(5)		(22)		(4)
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders	$	9	$	28	$	(49)	$	(110)
Earnings (loss) per share attributable to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations	$	0.10	$	0.33	$	(0.27)	$	(1.03)
Discontinued operations		(0.01)		(0.05)		(0.23)		(0.04)
	$	0.09	$	0.28	$	(0.50)	$	(1.07)
Diluted
Continuing operations	$	0.10	$	0.32	$	(0.27)	$	(1.03)
Discontinued operations		(0.01)		(0.05)		(0.23)		(0.04)
	$	0.09	$	0.27	$	(0.50)	$	(1.07)
Weighted average shares and dilutive securities outstanding (in thousands):
Basic		98,036		100,894		97,625		102,669
Diluted		100,926		103,098		97,625		102,669

See accompanying Notes to Condensed Consolidated Financial Statements.

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TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME

Dollars in Millions

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Net income (loss)	$	18	$	36	$	(5)	$	(90)
Other comprehensive income:
Amortization of prior-year service costs included in net periodic benefit costs		1		—		4		—
Unrealized gains (losses) on securities held as available-for-sale		(1)		—		2		—
Other comprehensive income before income taxes		—		—		6		—
Income tax expense related to items of other comprehensive income		—		—		(2)		—
Total other comprehensive income, net of tax		—		—		4		—
Comprehensive net income (loss)		18		36		(1)		(90)
Less: Comprehensive income attributable to noncontrolling interests		9		8		44		20
Comprehensive net income (loss) attributable to Tenet Healthcare Corporation common shareholders	$	9	$	28	$	(45)	$	(110)

See accompanying Notes to Condensed Consolidated Financial Statements.

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TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in Millions

(Unaudited)

	Nine Months Ended
	September 30,
	2014		2013
Net loss	$	(5)	$	(90)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		609		354
Provision for doubtful accounts		949		624
Deferred income tax benefit		(22)		(60)
Stock-based compensation expense		41		26
Impairment and restructuring charges, and acquisition-related costs		90		45
Litigation and investigation costs		19		3
Loss from early extinguishment of debt		24		348
Amortization of debt discount and debt issuance costs		21		12
Pre-tax loss from discontinued operations		35		7
Other items, net		(16)		(19)
Changes in cash from operating assets and liabilities:
Accounts receivable		(1,309)		(662)
Inventories and other current assets		12		(159)
Income taxes		(7)		(5)
Accounts payable, accrued expenses and other current liabilities		120		(44)
Other long-term liabilities		38		(5)
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements		(115)		(36)
Net cash used in operating activities from discontinued operations, excluding income taxes		(16)		(5)
Net cash provided by operating activities		468		334
Cash flows from investing activities:
Purchases of property and equipment — continuing operations		(734)		(398)
Purchases of businesses or joint venture interests, net of cash acquired		(185)		(142)
Proceeds from sales of facilities and other assets — discontinued operations		4		11
Proceeds from sales of marketable securities, long-term investments and other assets		2		6
Other long-term assets		(4)		11
Other items, net		3		3
Net cash used in investing activities		(914)		(509)
Cash flows from financing activities:
Repayments of borrowings under credit facility		(1,965)		(1,001)
Proceeds from borrowings under credit facility		1,560		1,211
Repayments of other borrowings		(655)		(1,987)
Proceeds from other borrowings		1,608		1,907
Repurchases of common stock		—		(300)
Deferred debt issuance costs		(26)		(31)
Distributions paid to noncontrolling interests		(30)		(18)
Contributions from noncontrolling interests		15		98
Proceeds from exercise of stock options		23		22
Other items, net		3		(8)
Net cash provided by (used in) financing activities		533		(107)
Net increase (decrease) in cash and cash equivalents		87		(282)
Cash and cash equivalents at beginning of period		113		364
Cash and cash equivalents at end of period	$	200	$	82
Supplemental disclosures:
Interest paid, net of capitalized interest	$	(487)	$	(295)
Income tax payments, net	$	(5)	$	(5)

See accompanying Notes to Condensed Consolidated Financial Statements.

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TENET HEALTHCARE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

Description of Business and Basis of Presentation

Tenet Healthcare Corporation (together with our subsidiaries, referred to herein as “Tenet,” “we” or “us”) is a national, diversified healthcare services company. As of September 30, 2014, we operated 80 hospitals,  198 outpatientcenters, six health plans and Conifer Health Solutions, LLC (“Conifer”), which provides healthcare business process services in the areas of revenue cycle management, value-based care and patient communications.

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, which was recently completed), 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 $4.3billion 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). The accompanying Condensed Consolidated Balance Sheet as ofDecember 31, 2013was derived from the audited consolidatedfinancial statements included in our Annual Report, but has been revised to reflect the impact of completing the purchase price allocation for the acquisition of Vanguard, as described in Note 14. Additionally, 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 and nine months ended September 30, 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 and other supplemental 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

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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.

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				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
General Hospitals:
Medicare	$	838	$	501	$	2,560	$	1,543
Medicaid		340		206		1,012		630
Managed care		2,369		1,378		6,787		4,126
Indemnity, self-pay and other		357		262		1,172		783
Acute care hospitals — other revenue		8		14		45		53
Other:
Other operations		516		257		1,520		706
Net operating revenues before provision for doubtful accounts	$	4,428	$	2,618	$	13,096	$	7,841

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 $200 million and $113 million at September 30, 2014 and December 31, 2013, respectively. As of September 30, 2014 and December 31, 2013, our book overdrafts were approximately $194 million and $245 million, respectively, which were classified as accounts payable.

At September 30, 2014 and December 31, 2013, approximately $98 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 September 30, 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, $62 million and $138 million, respectively, were included in accounts payable.

During the nine months ended September 30, 2014 and 2013, we entered into non-cancellable capital leases of approximately $112 million and $99 million, respectively, primarily for buildings and equipment.

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Other Intangible Assets

The following tables provide information regarding other intangible assets, which are included in the accompanying Condensed Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013:

	Gross
	Carrying		Accumulated		Net Book
	Amount		Amortization		Value
As of September 30, 2014:
Capitalized software costs	$	1,326	$	(552)	$	774
Long-term debt issuance costs		245		(42)		203
Trade names		106		—		106
Contracts		57		(5)		52
Other		80		(24)		56
Total	$	1,814	$	(623)	$	1,191

	Gross
	Carrying		Accumulated		Net Book
	Amount		Amortization		Value
As of December 31, 2013:
Capitalized software costs	$	1,148	$	(468)	$	680
Long-term debt issuance costs		230		(31)		199
Trade names		106		—		106
Contracts		57		(2)		55
Other		80		(15)		65
Total	$	1,621	$	(516)	$	1,105

Estimated future amortization of intangibles with finite useful lives as of September 30, 2014 is as follows:

			Years Ending December 31,
	Total		2014		2015		2016		2017		2018		Later Years
Amortization of intangible assets	$	1,077	$	54	$	190	$	163	$	134	$	130	$	406

NOTE 2. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

	September 30,		December 31,
	2014		2013
Continuing operations:
Patient accounts receivable	$	2,978	$	2,459
Allowance for doubtful accounts		(772)		(589)
Estimated future recoveries from accounts assigned to our Conifer subsidiary		122		92
Net cost reports and settlements payable and valuation allowances		(92)		(75)
		2,236		1,887
Discontinued operations		2		3
Accounts receivable, net	$	2,238	$	1,890

As of September 30, 2014 and December 31, 2013, our allowance for doubtful accounts was 25.9% and 24.0%, respectively, of our patient accounts receivable. Accounts that are pursued for collection through Conifer’s regional business offices 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 September 30, 2014 and December 31, 2013, our allowance for doubtful accounts for self-pay was 79.5% and 75.9%, respectively, of our self-pay

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patient accounts receivable, including co-pays and deductibles owed by patients with insurance. As of September 30, 2014 and December 31, 2013, our allowance for doubtful accounts for managed care was 6.2% and5.9%, 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 September 30, 2014 and 2013 were approximately $135 million and $116 million, respectively, and for the nine months ended September 30, 2014 and 2013 were approximately $488 million and $342 million, respectively. Our estimated costs (based on the selected operating expenses described above) of caring for charity care patients for the three months ended September 30, 2014 and 2013 were approximately $42 million and $32 million, respectively, and for the nine months ended September 30, 2014 and 2013 were approximately $137 million and $95 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 September 30, 2014 and 2013 were approximately $178 million and $72 million, respectively, and for the nine months ended September 30, 2014 and 2013 were approximately $493 million and $257 million, respectively. These payments are intended to mitigate our cost of uncompensated care, as well as reduced Medicaid funding levels.

NOTE 3. DISCONTINUED OPERATIONS

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Net operating revenues	$	1	$	3	$	2	$	6
Net loss before income taxes		(2)		(10)		(35)		(7)

Net loss before income taxes from discontinued operations in the nine months ended September 30, 2014 included approximately $18 million of expense recorded in litigation and investigation costs allocable to one of our previously divested hospitals related to a class action lawsuit discussed in Note 10. In the nine months ended September 30, 2013, we recognized a $7 million gain in discontinued operations related to the sale of land.

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

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

During the nine months ended September 30, 2014, we recorded impairment and restructuring charges and acquisition-related costs of $90 million, consisting of$14 million of employee severance costs,$6 million of contract and lease termination fees, $19million of restructuring costs,and $51 million in acquisition-related costs, which include $7million of transaction costs and $44 million of acquisition integration charges.

During the nine months ended September 30, 2013, we recorded impairment and restructuring charges and acquisition-related costs of $45 million, consisting of $2 million relating to the impairment of property, $10 million of restructuring costs, $9 million of employee severance costs, $1 million in lease termination fees, and $23 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 September 30, 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

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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 Resolute Health, 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 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 Resolute Health market includes our hospital and other operations in the New Braunfels, Texas 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.

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NOTE 5. LONG-TERM DEBT AND LEASE OBLIGATIONS

The table below shows our long-term debt as of September 30, 2014 andDecember 31, 2013:

	September 30,		December 31,
	2014		2013
Senior notes:
97/8%, due 2014	$	—	$	60
91/4%, due 2015		—		474
5%, due 2019		1,100		—
51/%, due 2019		500		—
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		—		405
Capital leases and mortgage notes		453		417
Unamortized note discounts and premium		(21)		(28)
Total long-term debt		11,553		10,849
Less current portion		98		153
Long-term debt, net of current portion	$	11,455	$	10,696

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, which has a scheduled maturity date of November 29, 2016, 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 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 September 30, 2014, we had no cash borrowings outstanding under the revolving credit facility; however, we had approximately $6 million of standby letters of credit outstanding. Based on our eligible receivables, approximately $994 million was available for borrowing under the revolving credit facility at September 30, 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 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.

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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 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 September 30, 2014, we had approximately $115 million of standby letters of credit outstanding under the LC Facility.

Senior Notes

In September 2014, we sold $500 million aggregate principal amount of 51/₂% 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 March 1, 2015. The proceeds from the sale of the notes were used for general corporate purposes, including the repayment of indebtedness and drawings under our Credit Agreement, related transaction fees and expenses, and acquisitions.

In June and March 2014, we sold $500 million and $600 million aggregate principal amount, respectively, 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, which payments commenced on September 1, 2014. The net proceeds from the sale of the notes in June 2014 were used to redeem our 91/4% senior notes due 2015 in July 2014. In connection with the redemption, we recorded a loss from early extinguishment of debt of approximately $24 million, primarily related to the difference between the redemption price and the par value of the notes, as well as the write-off of associated unamortized note discounts and issuance costs. The net proceedsfrom the sale of the notes in March 2014 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 September 30, 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 $92 million. We had a liability of $69 million recorded for these guarantees included in other current liabilities at September 30, 2014.

NOTE 7. EMPLOYEE BENEFIT PLANS

At September 30, 2014, approximately  5.2 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 vestone-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 nine months ended September 30, 2014 and 2013 includes $38million and $29 million, respectively, of pre-tax compensation costs related to our stock-based compensation arrangements recorded in salaries, wages and benefits in the accompanying Condensed Consolidated Statements of Operations.

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Stock Options

The following table summarizes stock option activity during the nine months ended September 30, 2014:   

		Weighted Average
		Exercise Price		Aggregate		Weighted Average
	Options	Per Share		Intrinsic Value		Remaining Life
					(In Millions)
Outstanding as of  December 31, 2013	3,308,111	$	30.79
Granted	—
Exercised	(691,050)		33.72
Forfeited/Expired	(624,052)		47.97
Outstanding as of  September 30, 2014	1,993,009	$	24.40	$	70	3.9	years
Vested and expected to vest at September 30, 2014	1,984,562	$	24.31	$	70	3.9	years
Exercisable as of  September 30, 2014	1,587,878	$	21.90	$	60	3.7	years

There were 691,050 stock options exercised during the nine months ended September 30, 2014 with a $13 million aggregate intrinsic value, and 913,369 stock options exercised during the same period in 2013 with a $17 million aggregate intrinsic value.

As of September 30, 2014, there were $2 million of total unrecognized compensation costs related to stock options. These costs are expected to be recognized over a weighted average period of 1.1 years.

There were no stock options granted in the nine months ended September 30, 2014. In the nine months ended September 30, 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 nine months ended September 30, 2013 was $14.46 per share. This fair value was calculated based on the grant date, using a binomial lattice model with the following assumptions:

	Nine Months Ended September 30, 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.

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The following table summarizes information about our outstanding stock options at September 30, 2014:

	Options Outstanding					Options Exercisable
		Weighted Average
	Number of	Remaining		Weighted Average		Number of	Weighted Average
Range of Exercise Prices	Options	Contractual Life		Exercise Price		Options	Exercise Price
$0.00 to $4.569	242,753	4.4	years	$	4.56	242,753	$	4.56
$4.57 to $25.089	957,583	5.2	years		20.96	830,903		20.67
$25.09 to $32.569	402,816	1.9	years		29.32	402,816		29.32
$32.57 to $42.089	389,857	2.5	years		40.10	111,406		42.08
	1,993,009	3.9	years	$	24.40	1,587,878	$	21.90

Restricted Stock Units

The following table summarizes restricted stock unit activity during the nine months ended September 30, 2014:

	Restricted Stock	Weighted Average Grant
	Units	Date Fair Value Per Unit
Unvested as of December 31, 2013	2,707,222	$	33.34
Granted	1,768,508		48.41
Vested	(900,763)		36.51
Forfeited	(140,468)		35.23
Unvested as of September 30, 2014	3,434,499	$	41.85

In the nine months ended September 30, 2014, we granted  1,045,750 restricted stock units subject to time-vesting of which  944,249 will vest and be settled ratably over a three-year period from the date of the grant, 23,435 will vest 100% on the tenth anniversary of the grant date, 63,623 will vest 100% on the fifth anniversary of the grant date and  14,443 will vest 100% on the third anniversary of the grant date. In addition, we granted  271,815 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. The actual number of performance-based restricted stock units that could vest will range from 0% to 200% of the  271,815 units granted, depending on our level of achievement with respect to the performance goal.We also granted 450,943 special retention restricted stock units to a select group of officers; two-thirds of the award will vest contingent on our achievement of a performance goal of which one-half will vest based on performance over a one-year period ending in December 2015 and the remaining one-half will vest based on performance over a four-year period ending in December 2018.  The remaining one-third of this special retention award will vest in full on the fifth anniversary of the grant date.

In the nine months ended September 30, 2013, we granted 815,262 restricted stock units subject to time-vesting, of which 735,129 will vest and be settled ratably over a three-year period from the grant date 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. We also awarded a grant of 212,180 restricted stock units to our chief executive officer, of which 106,090 are subject to time-vesting and 106,090 are performance-based. If target conditions are met, 50% of this grant will vest three years from the grant date and the remaining 50% will vest six years from the grant date. The award also allows for an additional 106,090 shares to be issued if higher performance criteria are met.

As of September 30, 2014, there were $107 million of total unrecognized compensation costs related to restricted stock units. These costs are expected to be recognized over a weighted average period of  3.0 years.

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NOTE 8. EQUITY

Changes in Shareholders’ Equity

The following table shows the changes in consolidated equity during the nine months ended September 30,2014 and 2013 (dollars in millions, share amounts in thousands):

	Tenet Healthcare Corporation Shareholders’ Equity
	Common Stock
						Accumulated
				Additional		Other
	Shares	Issued Par		Paid-in		Comprehensive		Accumulated		Treasury		Noncontrolling
	Outstanding	Amount		Capital		Loss		Deficit		Stock		Interests		Total Equity
Balances at December 31, 2013	96,860	$	7	$	4,572	$	(24)	$	(1,422)	$	(2,378)	$	123	$	878
Net income (loss)	—		—		—		—		(49)		—		20		(29)
Distributions paid to noncontrolling interests	—		—		—		—		—		—		(27)		(27)
Contributions from noncontrolling interests	—		—		—		—		—		—		5		5
Other comprehensive income	—		—		—		4		—		—		—		4
Purchases (sales) of businesses or joint venture interests	—		—		(22)		—		—		—		10		(12)
Stock-based compensation expense and issuance of common stock	1,364		—		47		—		—		—		—		47
Balances at September 30, 2014	98,224	$	7	$	4,597	$	(20)	$	(1,471)	$	(2,378)	$	131	$	866
Balances at December 31, 2012	104,633	$	7	$	4,471	$	(68)	$	(1,288)	$	(1,979)	$	75	$	1,218
Net income (loss)	—		—		—		—		(110)		—		13		(97)
Distributions paid to noncontrolling interests	—		—		—		—		—		—		(16)		(16)
Sales of joint venture interests	—		—		53		—		—		—		—		53
Purchases of businesses or joint venture interests	—		—		—		—		—		—		23		23
Repurchase of common stock	(7,095)		—		—		—		—		(300)		—		(300)
Stock-based compensation expense and issuance of common stock	1,628		—		38		—		—		1		—		39
Balances at September 30, 2013	99,166	$	7	$	4,562	$	(68)	$	(1,398)	$	(2,278)	$	95	$	920

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 nine months ended September 30, 2014 and 2013:

	Nine Months Ended September 30,
	2014		2013
Balances at beginning of period	$	340	$	16
Net income		24		7
Distributions paid to noncontrolling interests		(3)		(2)
Contributions from noncontrolling interests		10		—
Sales of joint venture interests		—		52
Purchases of businesses		25		10
Balances at end of period	$	396	$	83

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.

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Professional and General Liability Reserves

At September 30, 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 $700 million and $711 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 2.22% at September 30, 2014 and 2.45% at December 31, 2013.

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 $170 million and $71 million for the nine months ended September 30, 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. 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. In September 2014, subject to negotiation of final settlement terms, we reached a verbal financial agreement with the government to settle this matter with respect to the remaining five hospitals for approximately $2 million, which has been fully reserved as of September 30, 2014.

· Implantable Cardioverter Defibrillators (“ICDs”)—We are engaged in potential settlement discussions with the DOJ to resolve an investigation to determine whether ICD procedures performed at 56 of our hospitals from 2002 to 2010 complied with Medicare coverage requirements. It is impossible at this time to predict with any certainty the outcome of those discussions or the amount of any potential resolution. However, 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 for all of the hospitals under review as part of the government’s examination, which commenced in March 2010.

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· 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. Both the Georgia Attorney General’s Office, on behalf of the State of Georgia, and the U.S. Attorney’s Office, on behalf of the United States, have intervened in the qui tam action. We submitted answers to the complaints filed by the relator, the State of Georgia and the United States on July 15, 2014 following the court’s denial of our motions to dismiss in June 2014. The parties have agreed to stay discovery in the case until March 31, 2015.

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. In a Bill of Information filed on July 23, 2014 with the U.S. District Court for the Northern District of Georgia, Atlanta Division, the U.S. Attorney for that District asserted charges of one count of criminal conspiracy against a former owner of HMM (a non-employee of Tenet) related to the agreements between HMM and the Tenet hospitals described above. In a separate Bill of Information also filed with the court on July 23, 2014, the U.S. Attorney asserted charges of one count of criminal conspiracy against a former employee of a Tenet hospital, but such charges relate to an unaffiliated entity. It is impossible at this time to predict with any certainty the amount and terms of any potential resolution of these matters; however, we believe the amount of the reserve established continues to reflect our current estimate of probable liability. 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. Management has established reserves of approximately $38 million in the aggregate for our potential obligations with respect to all of the 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, in October 2014, we received court approval of a final agreement to settle a previously disclosed class action lawsuit captioned Doe, et al. v. Jo Ellen Smith Medical Foundation, which was filed in the Civil District

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Court for the Parish of Orleans in Louisiana in March 1997. The plaintiffs pursued a claim for tortious invasion of privacy due to the fact that in April 1996 patient identifying records from a psychiatric hospital we closed in 1995 were temporarily placed in an unsecure location while the hospital was undergoing renovations. The court certified a class 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. In an effort to avoid protracted litigation, the parties settled this matter in June 2014 for a maximum potential payment of $32.5 million, subject to the number and type of claims asserted by the class members between January 15 and March 31, 2015. The settlement will be funded in amounts and on a schedule to be agreed to by the parties. In the three months ended June 30, 2014, we established a reserve of $17 million, recorded in discontinued operations, to reflect our current estimate of probable liability for this matter based on anticipated levels of class member participation.

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 nine months ended September 30, 2014 and 2013:

	Balances at		Litigation and				Balances at
	Beginning		Investigation		Cash		End of
	of Period		Costs		Payments		Period
Nine Months Ended September 30, 2014
Continuing operations	$	64	$	19	$	(10)	$	73
Discontinued operations		6		18		(6)		18
	$	70	$	37	$	(16)	$	91
Nine Months Ended September 30, 2013
Continuing operations	$	5	$	3	$	(3)	$	5
Discontinued operations		5		2		(1)		6
	$	10	$	5	$	(4)	$	11

For the nine months ended September 30, 2014 and 2013, we recorded costs of $37 million and $5 million, respectively, primarily related to costs associated with various legal proceedings and governmental reviews.

NOTE 11. INCOME TAXES

During the nine months ended September 30, 2014, we recorded a net income tax benefit of $11 million, which includes, among other things: (1) $3 million of income tax expense to increase our valuation allowance for deferred tax assets; (2) $7 million of income tax benefit related to tax basis adjustments for state tax purposes on the Vanguard acquisition; (3) $4 million of income tax benefit related to certain amended state tax returns; and (4) $4 million of income tax benefit related to other tax adjustments. The increase in the valuation allowance relates to an estimated decrease in the future utilization of certain state net operating loss carryovers.

During the nine months ended September 30, 2014, we reduced our estimated liabilities for uncertain tax positions by $3 million, net of related deferred tax assets. The total amount of unrecognized tax benefits as of September 30, 2014 was $40 million, of which $31 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 September 30, 2014 were $5 million, all of which related to continuing operations.

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As of September 30, 2014, approximately $2 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.

NOTE 12. EARNINGS (LOSS) PER COMMON SHARE

The table below is a reconciliation of the numerators and denominators of our basic and diluted earnings (loss) per common share calculations for net income (loss) from continuing operations for the three and nine months ended September 30, 2014 and 2013. Net income (loss) is expressed in millions and weighted average shares are expressed in thousands.

			Weighted
	Net Income		Average
	(Loss)		Shares	Per-Share
	(Numerator)		(Denominator)	Amount
Three Months Ended September 30, 2014
Net income available to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	10	98,036	$	0.10
Effect of dilutive stock options, restricted stock units and deferred compensation units		—	2,890		—
Net income available to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	10	100,926	$	0.10
Three Months Ended September 30, 2013
Net income available to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	33	100,894	$	0.33
Effect of dilutive stock options, restricted stock units and deferred compensation units		—	2,204		(0.01)
Net income available to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	33	103,098	$	0.32
Nine Months Ended September 30, 2014
Net loss attributable to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	(27)	97,625	$	(0.27)
Effect of dilutive stock options, restricted stock units and deferred compensation units		—	—		—
Net loss attributable to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	(27)	97,625	$	(0.27)
Nine Months Ended September 30, 2013
Net loss attributable to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	(106)	102,669	$	(1.03)
Effect of dilutive stock options, restricted stock units and deferred compensation units		—	—		—
Net loss attributable to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	(106)	102,669	$	(1.03)

All potentially dilutive securities were excluded from the calculation of diluted loss per share for the nine months ended September 30, 2014 and 2013 because we did not report income from continuing operations available to shareholders in those periods. In circumstances where we do not have income from continuing operations available to shareholders, the effect of stock options and other potentially dilutive securities is anti-dilutive, that is, a loss from continuing operations available to shareholders has the effect of making the diluted loss per share less than the basic loss per share. Had we generated income from continuing operations available to shareholders 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  2,332 for the nine months ended September 30, 2014 and 827 for the nine months ended September 30, 2013.

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 September 30, 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

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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.

			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
Investments	September 30, 2014		(Level 1)		(Level 2)		(Level 3)
Marketable securities — current	$	2	$	2	$	—	$	—
Investments in Reserve Yield Plus Fund		2		—		2		—
Marketable debt securities — noncurrent		62		26		35		1
	$	66	$	28	$	37	$	1

			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
Investments	December 31, 2013		(Level 1)		(Level 2)		(Level 3)
Marketable securities — current	$	1	$	1	$	—	$	—
Investments in Reserve Yield Plus Fund		2		—		2		—
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 September 30, 2014 and December 31, 2013, the estimated fair value of our long-term debt was approximately103.8%and 103.5%, respectively, of the carrying value of the debt.

NOTE 14. ACQUISITIONS

During the nine months ended September 30, 2014, we acquired a majority interest in Texas Regional Medical Center at Sunnyvale, a 70-bed hospital in Sunnyvale, Texas, a suburban community east of Dallas, and completed our acquisition of Emanuel Medical Center, a 209-bed hospital in Turlock, California, located approximately 100 miles southeast of San Francisco. We also acquired four ambulatory surgery centers, three urgent care centers, one diagnostic imaging center and various physician practice entities in the same period. The fair value of the consideration conveyed in the acquisitions (the “purchase price”) was $185 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.

Preliminary purchase price allocations for the acquisitions made during the nine months ended September 30, 2014 are as follows:

Current assets	$	19
Property and equipment		104
Goodwill		137
Current liabilities		(21)
Long-term liabilities		(19)
Redeemable noncontrolling interests		(21)
Noncontrolling interests		(14)
Net cash paid	$	185

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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 $7 million in transaction costs related to prospective and closed acquisitions were expensed during the nine months ended September 30, 2014, and are included in impairment and restructuring charges, and acquisition-related costs in the accompanying Condensed Consolidated Statement of Operations.

Acquisition of Vanguard

Effective October 1, 2013, we acquired the common stock of Vanguard for $21 per share in an all cash transaction. Vanguard owned and operated 28 hospitals (plus one more under construction, which was recently completed), 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. We have completed the analysis required to finalize the purchase price allocation for this acquisition and related disclosures. We have revised our Condensed Consolidated Balance Sheet as of December 31, 2013 to reflect the impact of these adjustments.

The purchase price allocation for our Vanguard acquisition is as follows:

Current assets	$	976
Property and equipment		2,830
Other long term assets		152
Other intangible assets		155
Goodwill		2,460
Current liabilities		(1,193)
Deferred taxes-long term		(103)
Other long-term liabilities		(3,711)
Redeemable noncontrolling interests in equity of consolidated subsidiaries		(258)
Noncontrolling interests		(7)
Net cash paid	$	1,301

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 September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Net operating revenues	$	4,179	$	3,748	$	12,147	$	11,574
Net income (loss) from continuing operations, before income taxes	$	1	$	(220)	$	6	$	(418)

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 September 30, 2014, our subsidiaries operated 80 hospitals, with a total of 20,762 licensed beds, primarily serving urban and suburban communities, as well as 198 outpatient centers and six health plans.

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 September 30, 2014, Conifer provided services to more than 700 Tenet and non-Tenet hospital and other clients

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nationwide. Conifer’s two largest customers, Tenet and Catholic Health Initiatives, together comprised 82% and 78% of Conifer’s net operating revenues for the nine months ended September 30, 2014 and 2013, respectively.

The following tables include 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:

	September 30,		December 31,
	2014		2013
Assets:
Hospital operations and other	$	16,988	$	16,194
Conifer		324		256
Total	$	17,312	$	16,450

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Capital expenditures:
Hospital operations and other	$	207	$	139	$	717	$	387
Conifer		4		3		17		11
Total	$	211	$	142	$	734	$	398
Net operating revenues:
Hospital operations and other	$	4,031	$	2,275	$	11,707	$	6,840
Conifer
Tenet		148		92		426		278
Other customers		148		133		440		377
		4,327		2,500		12,573		7,495
Intercompany eliminations		(148)		(92)		(426)		(278)
Total	$	4,179	$	2,408	$	12,147	$	7,217
Adjusted EBITDA:
Hospital operations and other	$	412	$	252	$	1,167	$	802
Conifer		47		36		139		96
Total	$	459	$	288	$	1,306	$	898
Depreciation and amortization:
Hospital operations and other	$	202	$	114	$	594	$	339
Conifer		5		5		15		15
Total	$	207	$	119	$	609	$	354
Adjusted EBITDA	$	459	$	288	$	1,306	$	898
Depreciation and amortization		(207)		(119)		(609)		(354)
Impairment and restructuring charges, and acquisition-related costs		(37)		(20)		(90)		(45)
Litigation and investigation costs		(4)		(1)		(19)		(3)
Interest expense		(186)		(91)		(558)		(292)
Loss from early extinguishment of debt		(24)		—		(24)		(348)
Investment earnings		—		—		—		1
Net income (loss) from continuing operations before income taxes	$	1	$	57	$	6	$	(143)

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NOTE 16. RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”). ASU 2014-08 changes the requirements for reporting discontinued operations in FASB Accounting Standards Codification Subtopic 205-20, such that a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. ASU 2014-08 requires an entity to present, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of financial position, as well as additional disclosures about discontinued operations. Additionally, ASU 2014-08 requires disclosures about a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements and expands the disclosures about an entity’s significant continuing involvement with a discontinued operation. We are currently evaluating the potential impact of this guidance, which will be effective for us beginning in 2015.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principle of the guidance in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We are currently evaluating the potential impact of this guidance, which will be effective for us beginning in 2017.

NOTE 17. SUBSEQUENT EVENTS

Acquisition of Revenue Cycle Services for Physician Practices—In October 2014, Conifer acquired SPi Healthcare, a provider of revenue cycle management, health information management and software solutions for independent and provider-owned physician practices. The base purchase price was$235 million. We have not yet finalized the analysis required to complete the purchase price allocation for this acquisition and the related disclosures.

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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 through 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 patient 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, (ii) Vanguard Health Systems, Inc. (“Vanguard”) and its consolidated subsidiaries, which we acquired effective October 1, 2013, but only for the three and nine months ended September 30, 2014, and (iii) Resolute Health Hospital, a newly constructed facility opened in June 2014, Texas Regional Medical Center at Sunnyvale,  in which we acquired a majority interest in June 2014,  and Emanuel Medical Center, which we acquired in August 2014, in each case only for the period of time from such opening or acquisition to September 30, 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 and nine months ended September 30, 2014 and2013, but excludes the results of (i) legacy Vanguard operations, (ii) Resolute Health Hospital, Texas Regional Medical Centerand Emanuel Medical Center, and (iii) 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

RECENT DEVELOPMENTS

Acquisition of Revenue Cycle Services for Physician Practices—In October 2014, Conifer acquired SPi Healthcare, a provider of revenue cycle management, health information management and software solutions for independent and provider-owned physician practices. We believe the combined organization will drive incremental growth for Conifer in the physician revenue cycle marketplace.

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.

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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 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 markets where we believe our operating strategies can improve performance and create shareholder value. Most recently, we purchased Emanuel Medical Center, a 209-bed hospital located in Northern California, we opened a newly constructed 128-bed hospital and wellness campus in New Braunfels, Texas, and we acquired a majority interest in a 70-bed regional medical center in a suburban community east of Dallas. In addition, in May 2014, we announced a joint venture with Texas Tech University Health Sciences Center at El Paso to develop and build a new 140-bed teaching hospital and a medical office building in west El Paso, Texas. In the nine months ended September 30, 2014, we also acquired four ambulatory surgery centers, three urgent care centers, one diagnostic imaging center and various physician practice entities.

Historically, our outpatient services have generated significantly higher margins for us than inpatient services. During the nine months ended September 30, 2014, we derived approximately 37% 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. In addition, we expect that our new national MedPost brand will assist us in growing our urgent care business as part of our broader strategy to offer more services to patients and to expand into faster-growing, less capital intensive, higher-margin businesses. Furthermore, 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 services 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

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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 employers and other entities.In October 2014, Conifer acquired SPi Healthcare, which is expected to drive Conifer’s incremental growth in the areas of revenue cycle management, health information management and software solutions services for independent and provider-owned physician practices.

Realizing HIT Incentive Payments and Other Benefits—Beginning in the year ended December 31, 2011, we began achieving 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 nine months ended September 30, 2014, we recognized approximately $72 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 in some of the markets our hospitals serve and other adverse economic conditions are continuing to have a negative impact on our bad debt expense levels and payer mix. However, as the economy recovers, we expect to experience improvements in these metrics relative to current levels. We believe our volumes were positively impacted in the nine months ended September 30, 2014 by incremental market share we generated through improved physician alignment and service line expansion, insurance coverage for a greater number of individuals as a result of the Affordable Care Act, and a strengthening economy.

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 business, implementation of new payer contracting strategies, and improved quality metrics at our hospitals will improve our patient volumes. We believe our 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. For example, 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 have begun to 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 began 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

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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 and the Risk Factors section in Part II of this 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 results of the 28 hospitals we acquired from Vanguard on October 1, 2013, Texas Regional Medical Center, in which we acquired a majority interest on June 3, 2014, Resolute Health Hospital, which we opened on June 24, 2014, and Emanuel Medical Center, which we acquired on August 1, 2014, in each case only for the period of time from such acquisition or opening to September 30, 2014. We believe this information is useful to investors because it reflects our current portfolio of hospitals and the significant increase in the scale of our operations as a result of these investments.

	Total Hospital
	Continuing Operations
	Three Months Ended September 30,
							Increase
	2014			2013			(Decrease)
Total admissions		199,914			121,569		64.4	%
Adjusted patient admissions(1)		345,787			196,761		75.7	%
Paying admissions (excludes charity and uninsured)		188,924			112,760		67.5	%
Charity and uninsured admissions		10,990			8,809		24.8	%
Admissions through emergency department		123,147			75,512		63.1	%
Emergency department visits		719,835			400,345		79.8	%
Total emergency department admissions and visits		842,982			475,857		77.2	%
Surgeries — inpatient		55,339			34,971		58.2	%
Surgeries — outpatient		123,100			76,084		61.8	%
Total surgeries		178,439			111,055		60.7	%
Patient days — total		921,228			569,833		61.7	%
Adjusted patient days(1)		1,574,346			912,483		72.5	%
Average length of stay (days)		4.61			4.69		(1.7)	%
Average licensed beds		20,692			13,180		57.0	%
Utilization of licensed beds(2)		48.4	%		47.0	%	1.4	%(3)
Total visits		2,125,002			1,071,421		98.3	%
Paying visits (excludes charity and uninsured)		1,954,980			956,871		104.3	%
Charity and uninsured visits		170,022			114,550		48.4	%
Net inpatient revenues	$	2,463		$	1,502		64.0	%
Net outpatient revenues	$	1,441		$	845		70.5	%
Net inpatient revenue per admission	$	12,320		$	12,355		(0.3)	%
Net inpatient revenue per patient day	$	2,674		$	2,636		1.4	%
Net outpatient revenue per visit	$	678		$	789		(14.1)	%
Net patient revenue per adjusted patient admission(1)	$	11,290		$	11,928		(5.3)	%
Net patient revenue per adjusted patient day(1)	$	2,480		$	2,572		(3.6)	%

⁽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 September 30, 2014 compared to the three months ended September 30, 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 September 30, 2014 and 2013 on a same-hospital basis, where noted, excluding the results of the 28 hospitals we acquired from Vanguard on

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October 1, 2013, Texas Regional Medical Center, in which we acquired a majority interest on June 3, 2014, Resolute Health Hospital, which we opened on June 24, 2014, and Emanuel Medical Center, which we acquired on August 1, 2014.

	Same-Hospital
	Continuing Operations
	Three Months Ended September 30,
					Increase
Admissions, Patient Days and Surgeries	2014		2013		(Decrease)
Total admissions	127,118		121,569		4.6	%
Adjusted patient admissions(1)	208,229		196,761		5.8	%
Paying admissions (excludes charity and uninsured)	118,580		112,760		5.2	%
Charity and uninsured admissions	8,538		8,809		(3.1)	%
Admissions through emergency department	80,328		75,512		6.4	%
Paying admissions as a percentage of total admissions	93.3	%	92.8	%	0.5	%(2)
Charity and uninsured admissions as a percentage of total admissions	6.7	%	7.2	%	(0.5)	%(2)
Emergency department admissions as a percentage of total admissions	63.2	%	62.1	%	1.1	%(2)
Surgeries — inpatient	35,570		34,971		1.7	%
Surgeries — outpatient	91,472		76,084		20.2	%
Total surgeries	127,042		111,055		14.4	%
Patient days — total	594,664		569,833		4.4	%
Adjusted patient days(1)	962,054		912,483		5.4	%
Average length of stay (days)	4.68		4.69		(0.2)	%
Number of acute care hospitals (at end of period)	49		49		—
Licensed beds (at end of period)	13,231		13,180		0.4	%
Average licensed beds	13,231		13,180		0.4	%
Utilization of licensed beds(3)	48.9	%	47.0	%	1.9	%(2)

⁽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⁾ The change is the difference between the amounts shown for the three months ended September 30, 2014 compared to the three months ended September 30, 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 increased by 5,549, or 4.6%, in the three months ended September 30, 2014 compared to the three months ended September 30, 2013. Total surgeries increased by 14.4% in the three months ended September 30, 2014 compared to the same period in 2013, comprised of a 20.2% increase in outpatient surgeries primarily due to our outpatient development strategies and a 1.7% increase in inpatient surgeries. Our emergency department admissions increased 6.4% in the three months ended September 30, 2014 compared to the same period in the prior year. We believe our volumes were positively impacted by incremental market share we generated through improved physician alignment and service line expansion, insurance coverage for a greater number of individuals as a result of the ACA, and a strengthening economy. Charity and uninsured admissions decreased 3.1% in the three months ended September 30, 2014 compared to the three months ended September 30, 2013 primarily due to Medicaid expansion in California and health insurance exchange coverage under the ACA.

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	Same-Hospital
	Continuing Operations
	Three Months Ended September 30,
					Increase
Outpatient Visits	2014		2013		(Decrease)
Total visits	1,155,852		1,071,421		7.9	%
Paying visits (excludes charity and uninsured)	1,042,636		956,871		9.0	%
Charity and uninsured visits	113,216		114,550		(1.2)	%
Emergency department visits	433,174		400,345		8.2	%
Surgery visits	91,472		76,084		20.2	%
Paying visits as a percentage of total visits	90.2	%	89.3	%	0.9	%(1)
Charity and uninsured visits as a percentage of total visits	9.8	%	10.7	%	(0.9)	%(1)

⁽¹⁾ The change is the difference between the amounts shown for the three months ended September 30, 2014 compared to the three months ended September 30, 2013.

Total same-hospital outpatient visits increased 84,431, or 7.9%, in the three months ended September 30, 2014 compared to the three months ended September 30, 2013, which included 9.0% growth for paying visits. Approximately 81% of the growth in outpatient visits was organic.

Outpatient surgery visits increased by 20.2% in the three months ended September 30, 2014 compared to the same period in 2013. Charity and uninsured outpatient visits decreased by 1.2% in the three months ended September 30, 2014 compared to the three months ended September 30, 2013.

	Same-Hospital
	Continuing Operations
	Three Months Ended September 30,
					Increase
Revenues	2014		2013		(Decrease)
Net operating revenues	$	2,684	$	2,408	11.5	%
Revenues from the uninsured	$	150	$	167	(10.2)	%
Net inpatient revenues(1)	$	1,602	$	1,502	6.7	%
Net outpatient revenues(1)	$	924	$	845	9.3	%

⁽¹⁾ Net inpatient revenues and net outpatient revenues are components of net operating revenues. Net inpatient revenues include self-pay revenues of $56 million and $68 million for the three months ended September 30, 2014 and 2013, respectively. Net outpatient revenues include self-pay revenues of $94 million and $99 million for the three months ended September 30, 2014 and 2013, respectively.

Net operating revenues increased by $276 million, or 11.5%, on a same-hospital basis in the three months ended September 30, 2014 compared to the same period in 2013, primarily due to increases in inpatient and outpatient volumes, improved managed care pricing, and increased revenues from services provided by our Conifer subsidiary to third parties. Revenues from the uninsured decreased 10.2% in the three months ended September 30, 2014 compared to the three months ended September 30, 2013 primarily due to Medicaid expansion in California and health insurance exchange coverage under the ACA. Net operating revenues in the three months ended September 30, 2014 included $74 million of Medicaid disproportionate share hospital (“DSH”) and other state-funded subsidy revenues compared to $72 million in the same period in 2013 on a same-hospital basis. During the three months ended September 30, 2013, we recognized $19 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 September 30, 2014 because the current program has not been approved by CMS yet. Net patient revenues increased by 7.6% in the three months ended September 30, 2014 compared to the same period in 2013.

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	Same-Hospital
	Continuing Operations
	Three Months Ended September 30,
					Increase
Revenues on a Per Admission, Per Patient Day and Per Visit Basis	2014		2013		(Decrease)
Net inpatient revenue per admission	$	12,602	$	12,355	2.0	%
Net inpatient revenue per patient day	$	2,694	$	2,636	2.2	%
Net outpatient revenue per visit	$	799	$	789	1.3	%
Net patient revenue per adjusted patient admission(1)	$	12,131	$	11,928	1.7	%
Net patient revenue per adjusted patient day(1)	$	2,626	$	2,572	2.1	%

⁽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.

Net inpatient revenue per admission and net outpatient revenue per visit increased 2.0%  and 1.3%, respectively, in the three months ended September 30, 2014 compared to the same period in 2013. The increases were primarily due to improved terms of our managed care contracts.

	Same-Hospital
	Continuing Operations
	Three Months Ended September 30,
							Increase
Provision for Doubtful Accounts	2014			2013			(Decrease)
Provision for doubtful accounts	$	163		$	210		(22.4)	%
Provision for doubtful accounts as a percentage of net operating revenues before provision for doubtful accounts		5.7	%		8.0	%	(2.3)	%(1)
Collection rate on self-pay accounts(2)		27.5	%		28.8	%	(1.3)	%(1)
Collection rate on commercial managed care accounts		98.3	%		98.3	%	—	%(1)

⁽¹⁾ The change is the difference between the amounts shown for the three months ended September 30, 2014 compared to the three months ended September 30, 2013.

⁽²⁾ Self-pay accounts receivable are comprised of both uninsured and balance after insurance receivables.

Provision for doubtful accounts decreased by $47 million, or 22.4%, inthe three months ended September 30, 2014 compared to the same period in 2013. The decrease in the provision for doubtful accounts primarily related to the decrease in revenues from the uninsured and the impact of favorable experience related to our estimated future recoveries in the 2014 period, partially offset by the 130 basis point decrease in our self-pay collection rate, as well as higher patient co‑pays and deductibles. Our self-pay collection rate, which is the blended collection rate for uninsured and balance after insurance accounts receivable, was approximately 27.5% at September 30, 2014 and 28.8% at September 30, 2013.

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	Same-Hospital
	Continuing Operations
	Three Months Ended September 30,
					Increase
Selected Operating Expenses	2014		2013		(Decrease)
Hospital Operations and other
Salaries, wages and benefits	$	1,150	$	1,032	11.4	%
Supplies		416		387	7.5	%
Other operating expenses		587		526	11.6	%
Total	$	2,153	$	1,945	10.7	%
Conifer
Salaries, wages and benefits	$	182	$	140	30.0	%
Other operating expenses		67		49	36.7	%
Total	$	249	$	189	31.7	%
Total
Salaries, wages and benefits	$	1,332	$	1,172	13.7	%
Supplies		416		387	7.5	%
Other operating expenses		654		575	13.7	%
Total	$	2,402	$	2,134	12.6	%
Rent/lease expense(1)
Hospital Operations and other	$	37	$	41	(9.8)	%
Conifer		5		3	66.7	%
Total	$	42	$	44	(4.5)	%
Hospital Operations and other(2)
Salaries, wages and benefits per adjusted patient day	$	1,193	$	1,130	5.6	%
Supplies per adjusted patient day		432		424	1.9	%
Other operating expenses per adjusted patient day		593		565	5.0	%
Total per adjusted patient day	$	2,218	$	2,119	4.7	%
Salaries, wages and benefits per adjusted patient admission	$	5,513	$	5,240	5.2	%
Supplies per adjusted patient admission		1,998		1,967	1.6	%
Other operating expenses per adjusted patient admission		2,737		2,622	4.4	%
Total per adjusted patient admission	$	10,248	$	9,829	4.3	%

⁽¹⁾ Included in other operating expenses.

⁽²⁾ Adjusted patient days/admissions represents actual patient days/admissions adjusted to include outpatient services by multiplying actual patient days/admissions by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues. These metrics exclude the expenses related to the provider network based in Southern California that includes contracted independent physicians, ancillary providers and hospitals, which we acquired during the three months ended September 30, 2013.

Total selected operating expenses, which is defined as salaries, wages and benefits, supplies and other operating expenses, increased by 4.7% and 4.3% on a per adjusted patient day and per adjusted patient admission basis, respectively, in the three months ended September 30, 2014 compared to the three months ended September 30, 2013.

Salaries, wages and benefits per adjusted patient admission increased by approximately 5.2% in the three months ended September 30, 2014 compared to the same period in 2013. This change is primarily due to a greater number of employed physicians, annual merit increases for certain of our employees, increased incentive compensation expense, an increase in the 401(k) plan maximum matching percentage for certain employee populations and increased health benefits costs in the three months ended September 30, 2014 compared to the three months ended September 30, 2013.

Supplies expense per adjusted patient admission increased by 1.6% in the three months ended September 30, 2014 compared to the three months ended September 30, 2013. The change in supplies expense was primarily attributable to higher costs for pharmaceuticals and volume growth in our supply-intensive surgical services.

Other operating expenses per adjusted patient admission increased by 4.4% in the three months ended September 30, 2014compared to the same period in 2013. This change is due to increased costs of contracted services,

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higher medical fees primarily related to a greater number of employed and contracted physicians, increased malpractice expense and increased costs associated with funding indigent care services by certain of our Texas hospitals, which were substantially offset by additional net patient revenues. Malpractice expense in the 2014 period included a favorable adjustment of approximately $1 million due to anine basis point increase in the interest rate used to estimate the discounted present value of projected future malpractice liabilities compared to a favorable adjustment of approximately $2 million as a result of a six basis point increase in the interest rate in the 2013 period.

Salaries, wages and benefits expense for Conifer increased by $42 million in the three months ended September 30, 2014 compared to the three months ended September 30, 2013 due to an increase in employee headcount as a result of the growth in Conifer’s business primarily attributable to the integration of the Vanguard facilities’ revenue cycle operations now managed by Conifer.

Other operating expenses for Conifer increased by $18 million in the three months ended September 30, 2014 compared to the three months ended September 30, 2013 primarily due to higher costs related to the integration of the Vanguard facilities’ revenue cycle operations now managed by Conifer.

The table below shows the pre-tax and after-tax impact on continuing operations forthe three and nine months ended September 30, 2014 and 2013 of the following items:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
	(Expense) Income
Impairment and restructuring charges, and acquisition-related costs	$	(37)	$	(20)	$	(90)	$	(45)
Litigation and investigation costs		(4)		(1)		(19)		(3)
Loss from early extinguishment of debt		(24)		—		(24)		(348)
Pre-tax impact	$	(65)	$	(21)	$	(133)	$	(396)
Other tax adjustments	$	14	$	—	$	18	$	(6)
Total after-tax impact	$	(26)	$	(13)	$	(66)	$	(255)
Diluted per-share impact of above items	$	(0.26)	$	(0.13)	$	(0.68)	$	(2.45)
Diluted earnings per share, including above items	$	0.10	$	0.32	$	(0.27)	$	(1.03)

LIQUIDITY AND CAPITAL RESOURCES OVERVIEW

Cash and cash equivalents were $200 million at September 30, 2014, a decrease of $206 million from $406 million at June 30, 2014.

Significant cash flow items in the three months ended September 30, 2014 included:

· $221 million of cash provided by operations;

· Capital expenditures of $211 million;

· Purchases of businesses for  $143 million;

· Interest payments of $127 million;

· $493 million of net proceeds from the issuance of our 51/₂% senior notes due 2019;

· $60 million of payments on our 97/₈% senior notes due 2014; and

· $497 of net payments to redeemour 91/₄% senior notes due 2015.

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Net cash provided by operating activities was $468 million in the nine months ended September 30, 2014 compared to $334 million in the nine months ended September 30, 2013. Key positive and negative factors contributing to the change between the 2014 and 2013 periods include the following:

· Increased income from continuing operations before income taxes of $408 million, excluding loss from early extinguishment of debt, interest expense, investment earnings, litigation and investigation costs, impairment and restructuring charges, and acquisition-related costs, and depreciation and amortization, in the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013;

· $11 million more cash used in operating activities from discontinued operations;

· An increase of $79 million in payments on reserves for restructuring charges, acquisition-related costs, and litigation costs and settlements; and

· Higher interest payments of $192 million.

FORWARD-LOOKING STATEMENTS

The information in this report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, each as amended. All statements, other than statements of historical or present facts, that address activities, events, outcomes, business strategies and other matters that we plan, expect, intend, assume, believe, budget, predict, forecast, project, estimate or anticipate (and other similar expressions) will, should or may occur in the future are forward-looking statements. These forward-looking statements represent management’s current belief, based on currently available information, as to the outcome and timing of future events. They involve known and unknown risks, uncertainties and other factors — many of which we are unable to predict or control — that may cause our actual results, performance or achievements, or healthcare industry results, to be materially different from those expressed or implied by forward-looking statements. Such factors include, but are not limited to, the risks described in the Forward-Looking Statements and Risk Factors sections in Part I of our Annual Report and the Risk Factors section in Part II of this report.

When considering forward-looking statements, a reader should keep in mind the risk factors and other cautionary statements in our Annual Report and in this report. Should one or more of the risks and uncertainties described in our Annual Report or this report occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. We specifically disclaim any obligation to update any information contained in a forward-looking statement or any forward-looking statement in its entirety and, therefore, disclaim any resulting liability for potentially related damages.

All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.

SOURCES OF REVENUE

We receive revenues for patient services from a variety of sources, primarily managed care payers and the federal Medicare program, as well as state Medicaid programs, indemnity-based health insurance companies and self-pay patients (that is, patients who do not have health insurance and are not covered by some other form of third-party arrangement).

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The table below shows the sources of net patient revenues before provision for doubtful accounts for our continuing general hospitals, expressed as percentages of net patient revenues before provision for doubtful accounts from all sources:

	Three Months Ended September 30,						Nine Months Ended September 30,
					Increase						Increase
Net Patient Revenues from:	2014		2013		(Decrease)(1)		2014		2013		(Decrease)(1)
Medicare	21.5	%	21.3	%	0.2	%	22.2	%	21.8	%	0.4	%
Medicaid	8.7	%	8.8	%	(0.1)	%	8.8	%	8.9	%	(0.1)	%
Managed care	60.7	%	58.8	%	1.9	%	58.8	%	58.2	%	0.6	%
Indemnity, self-pay and other	9.1	%	11.1	%	(2.0)	%	10.2	%	11.1	%	(0.9)	%

⁽¹⁾ The increase (decrease) is the difference between the 2014 and 2013 percentages shown.

Our payer mix on an admissions basis for our continuing general hospitals, expressed as a percentage of total admissions from all sources, is shown below:

	Three Months Ended September 30,						Nine Months Ended September 30,
					Increase						Increase
Admissions from:	2014		2013		(Decrease)(1)		2014		2013		(Decrease)(1)
Medicare	26.6	%	27.1	%	(0.5)	%	27.6	%	28.2	%	(0.6)	%
Medicaid	9.9	%	12.6	%	(2.7)	%	10.8	%	12.1	%	(1.3)	%
Managed care	56.1	%	49.6	%	6.5	%	53.9	%	49.3	%	4.6	%
Indemnity, self-pay and other	7.4	%	10.7	%	(3.3)	%	7.7	%	10.4	%	(2.7)	%

⁽¹⁾ The increase (decrease) is the difference between the 2014 and 2013 percentages shown.

GOVERNMENT PROGRAMS

The Centers for Medicare and Medicaid Services is the single largest payer of healthcare services in the United States. Nearly 90 million Americans rely on healthcare benefits through Medicare, Medicaid, and the Children’s Health Insurance Program (“CHIP”). These three major programs are authorized by federal law and directed by CMS, an agency of the U.S. Department of Health and Human Services (“HHS”). Medicare is a federally funded health insurance program primarily for individuals 65 years of age and older, certain younger people with disabilities, and people with end-stage renal disease, and is provided without regard to income or assets. Medicaid is administered by the states and is jointly funded by the federal government and state governments. Medicaid is the nation’s main public health insurance program for people with low incomes and is the largest source of health coverage in the United States. The CHIP is also administered by the states and jointly funded and provides health coverage to children in families with incomes too high to qualify for Medicaid, but too low to afford private coverage.

The Affordable Care Act is changing how healthcare services in the United States are covered, delivered and reimbursed. One key provision of the ACA is the individual mandate, which requires most Americans to maintain “minimum essential” health insurance coverage. For individuals who are not exempt from the individual mandate, and who do not receive health insurance through an employer or government program, the means of satisfying the requirement is to purchase insurance from a private company or a health insurance exchange. Beginning in 2014, individuals who are enrolled in a health benefits plan purchased through an exchange may be eligible for a premium credit or cost-sharing subsidy. Earlier this year, two federal appeals court panels issued conflicting rulings on whether the government could subsidize health insurance premiums under the ACA. Pending further review of the issue by the courts, the government has stated that it will continue paying the subsidies to insurance companies on behalf of consumers in the 36 states that use the federal exchange. Also beginning in 2014, those who do not comply with the individual mandate must make a “shared responsibility payment” to the federal government in the form of a tax penalty. The “employer mandate” provision of the ACA requires the imposition of penalties on employers having 50 or more employees who do not offer affordable health insurance coverage to those working 30 or more hours per week. In July 2013, the U.S. Treasury Department announced a one-year delay (to January 1, 2015) in the imposition of penalties and the reporting requirements of the employer mandate. On February 10, 2014, the requirements of the employer mandate were further delayed until January 1, 2016. Based on the Congressional Budget Office’s most recent estimates, we do not believe that the delays in the employer mandate will have a discernible effect on insurance coverage. Another

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key provision of the ACA is the expansion of Medicaid coverage. Prior to the passage of the ACA, the Medicaid program offered federal funding to states to assist only limited categories of low-income individuals (including children, pregnant women, the blind and the disabled) in obtaining medical care. The ACA expanded eligibility under existing Medicaid programs to virtually all individuals under 65 years old with incomes up to 138% of the federal poverty level beginning in 2014. Under the ACA, the federal government will pay 100% of the costs of Medicaid expansion in 2014, 2015 and 2016; federal funding will be reduced to 90% over the course of the four-year period from 2017 through 2020, and it will remain at 90% for 2021 and beyond. The expansion of the Medicaid program in each state will require state legislative or regulatory action and the approval by CMS of a state Medicaid plan amendment. As of September 30, 2014, 27 states and the District of Columbia have taken action to expand Medicaid and two others are considering action to expand in the near future. We currently operate hospitals in five of the states that have expanded in 2014 and one of the states that is expanding in 2015. We cannot provide any assurances as to whether or when the other states in which we operate might choose to expand their Medicaid programs. We anticipate that healthcare providers will generally benefit over time from insurance coverage provisions of the ACA; however, the ACA also contains a number of provisions designed to significantly reduce Medicare and Medicaid program spending, including: (1) negative adjustments to the annual market basket updates for Medicare inpatient, outpatient, long-term acute and inpatient rehabilitation prospective payment systems, which began in 2010, as well as additional “productivity adjustments” that began in 2011; and (2) reductions to Medicare and Medicaid DSH payments, which began for Medicare payments in federal fiscal year (“FFY”) 2014 and will begin for Medicaid payments in FFY 2017, as the number of uninsured individuals declines. We are unable to predict the net effect of the ACA on our future revenues and operations at this time due to uncertainty regarding the ultimate number of uninsured patients who will obtain insurance coverage, uncertainty regarding future negotiations with payers, uncertainty regarding Medicaid expansion, and gradual and, in some cases, delayed implementation. Furthermore, we are unable to predict the outcome of legal challenges to certain provisions (including the provisions regarding subsidies) of the ACA, what action, if any, Congress might take with respect to the ACA or the actions individual states might take with respect to expanding Medicaid coverage. For a discussion of the risks and uncertainties associated with the Affordable Care Act, including the future course of related legislation and regulations, see Item 1A, Risk Factors, of Part I of our Annual Report.

The Medicare and Medicaid programs are also subject to statutory and regulatory changes, administrative and judicial rulings, interpretations and determinations, requirements for utilization review, and federal and state funding restrictions, all of which could materially increase or decrease payments from these government programs in the future, as well as affect the cost of providing services to our patients and the timing of payments to our facilities. We are unable to predict the effect of future government healthcare funding policy changes on our operations. If the rates paid by governmental payers are reduced, if the scope of services covered by governmental payers is limited, or if we or one or more of our subsidiaries’ hospitals are excluded from participation in the Medicare or Medicaid program or any other government healthcare program, there could be a material adverse effect on our business, financial condition, results of operations or cash flows.

Medicare

Medicare offers its beneficiaries different ways to obtain their medical benefits. One option, the Original Medicare Plan (which includes “Part A” and “Part B”), is a fee-for-service payment system. The other option, called Medicare Advantage (sometimes called “Part C” or “MA Plans”), includes health maintenance organizations (“HMOs”), preferred provider organizations (“PPOs”), private fee-for-service Medicare special needs plans and Medicare medical savings account plans. The major components of our net patient revenues, including our general hospitals and other operations, for services provided to patients enrolled in the Original Medicare Plan for the three and nine months ended September 30, 2014 and 2013 are set forth in the following table:

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	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Revenue Descriptions	2014(1)		2013		2014(1)		2013
Medicare severity-adjusted diagnosis-related group — operating	$	407	$	252	$	1,248	$	807
Medicare severity-adjusted diagnosis-related group  — capital		37		22		114		70
Outliers		16		12		52		37
Outpatient		234		138		710		408
Disproportionate share		96		51		287		157
Direct Graduate and Indirect Medical Education(2)		55		24		186		76
Other(3)		30		6		55		19
Adjustments for prior-year cost reports and related valuation allowances		(1)		18		18		34
Total Medicare net patient revenues	$	874	$	523	$	2,670	$	1,608

⁽¹⁾ Includes revenues related to the 28 hospitals we acquired from Vanguard on October 1, 2013, as well as Texas Regional Medical Center, Resolute Health Hospital and Emanuel Medical Center.

⁽²⁾ Includes Indirect Medical Education revenues earned by our children’s hospitals under the Children’s Hospitals Graduate Medical Education Payment Program administered by the Health Resources and Services Administration of HHS.

⁽³⁾ The other revenue category includes inpatient psychiatric units, inpatient rehabilitation units, one long-term acute care hospital, other revenue adjustments, and adjustments related to the estimates for current-year cost reports and related valuation allowances.

A general description of the types of payments we receive for services provided to patients enrolled in the Original Medicare Plan is provided in our Annual Report. Recent regulatory and legislative updates to the terms of these payment systems and their estimated effect on our revenues can be found under “Regulatory and Legislative Changes” below.

Disproportionate Share Hospital Payments

As previously disclosed, the statutes and regulations that govern Medicare DSH payments have been the subject of various administrative appeals and lawsuits, and our hospitals have been participating in such appeals, including challenges to the inclusion of the Medicare Advantage days used in the DSH calculation as set forth in the Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2005 Rates (“FFY 2005 Final Rule”). During the three months ended December 31, 2012, the federal district court in the District of Columbia ruled in Allina Health Services v. Sebelius that the Secretary of HHS (“Secretary”) failed to follow the Administrative Procedures Act when promulgating the regulation requiring the inclusion of the Medicare Advantage days in the DSH calculation. The court vacated the regulation and remanded the matter to the Secretary to recalculate the DSH reimbursement without using the interpretation set forth in the FFY 2005 Final Rule. The Secretary appealed the district court’s decision to the U.S. Court of Appeals for the D.C. Circuit (“Circuit Court”). On April 1, 2014, the Circuit Court: (1) affirmed the district court’s order to vacate the regulation; (2) reversed the district court’s order regarding the manner in which the reimbursement should be calculated; and (3) remanded the matter to HHS. During the three months ended June 30, 2014, the Secretary announced that HHS would not seek a rehearing at the Circuit Court or petition the U.S. Supreme Court to review the Circuit Court’s decision. We are not able to predict what action the Secretary might take with respect to the DSH calculation; however, a favorable outcome of our DSH appeals could have a material impact on our future revenues and cash flows.

Medicare Hospital Appeals Settlement

During the three months ended September 30, 2014, CMS offered hospitals an opportunity to settle certain Medicare inpatient claims in the appeals process or within the timeframe to request an appeal. Generally, the one-time settlement offer applies to payment denials for inpatient services on the basis that the services were reasonable and necessary, but treatment as an inpatient was not. All of our hospitals with claims that are eligible for settlement are accepting the settlement offer. The estimated cash value of the settlement for our hospitals’ claims is approximately $18 million.

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Medicaid

Medicaid programs and the corresponding reimbursement methodologies are administered by the states and vary from state to state and from year to year. Estimated revenues under various state Medicaid programs, including state-funded managed care Medicaid programs, constituted approximately 17.4% and 15.7% of net patient revenues before provision for doubtful accounts at our continuing general hospitals for the nine months ended September 30, 2014 and 2013, respectively. We also receive DSH payments under various state Medicaid programs. For the nine months ended September 30, 2014 and 2013, our revenues attributable to DSH payments and other state-funded subsidy payments for our continuing operations were approximately $493 million and $257 million, respectively.

Several states in which we operate continue to face budgetary challenges due to the slow economic recovery and other factors that have resulted, and likely will continue to result, in reduced Medicaid funding levels to hospitals and other providers. Because most states must operate with balanced budgets, and the Medicaid program is generally a significant portion of a state’s budget, states can be expected to adopt or consider adopting future legislation designed to reduce their Medicaid expenditures. In addition, some states delay issuing Medicaid payments to providers to manage state expenditures. As an alternative means of funding provider payments, many of the states in which we operate have adopted broad-based provider taxes to fund the non-federal share of Medicaid programs. Continuing pressure on state budgets and other factors could result in future reductions to Medicaid payments, payment delays or additional taxes on hospitals.

Because we cannot predict what actions the federal government or the states may take under existing legislation and future legislation to address budget gaps, deficits, Medicaid expansion or Medicaid section 1115 waivers, we are unable to assess the effect that any such legislation might have on our business, but the impact on our future financial position, results of operations or cash flows could be material.

Medicaid-related patient revenues recognized by our continuing general hospitals from Medicaid-related programs in the states in which they are located, as well as from Medicaid programs in neighboring states, for the nine months ended September 30, 2014 and 2013 are set forth in the table below:

	Nine Months Ended September 30,
	2014(1)				2013
			Managed				Managed
Hospital Location	Medicaid		Medicaid		Medicaid		Medicaid
Michigan	$	253	$	197	$	—	$	—
Texas		208		174		84		93
Florida		134		68		136		47
California		108		180		188		123
Illinois		62		23		—		—
Georgia		57		27		60		25
Pennsylvania		57		145		55		148
Missouri		51		6		49		5
Massachusetts		28		35		—		—
North Carolina		22		6		25		3
South Carolina		12		23		18		19
Alabama		10		—		10		—
Arizona		5		87		—		—
Tennessee		5		22		5		21
	$	1,012	$	993	$	630	$	484

⁽¹⁾ Includes revenues related to the 28 hospitals we acquired from Vanguard on October 1, 2013, as well as Texas Regional Medical Center, Resolute Health Hospital and Emanuel Medical Center.

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Regulatory and Legislative Changes

Material updates to the information set forth in our Annual Report about the Medicare and Medicaid payment systems are provided below.

Payment and Policy Changes to the Medicare Inpatient Prospective Payment Systems

Under Medicare law, CMS is required to annually update certain rules governing the inpatient prospective payment systems (“IPPS”). The updates generally become effective October 1, the beginning of the federal fiscal year.On August 4, 2014, CMS issued Changes to the Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and Fiscal Year 2015 Rates, and, on October 3, 2014, CMS issued a Correction Notice to the August 4, 2014 rule (together, the “Final IPPS Rule”). The Final IPPS Rule includes the following payment and policy changes:

· A market basket increase of 2.9% for Medicare severity-adjusted diagnosis-related group (“MS-DRG”) operating payments for hospitals reporting specified quality measure data and that are meaningful users of EHR technology (hospitals that do not report specified quality measure data and/or are not meaningful users of EHR technology would receive a reduced market basket increase); CMS is also making certain adjustments to the estimated 2.9% market basket increase that result in a net market basket update of 1.4% (before budget neutrality adjustments), including:

· Market basket index and multifactor productivity reductions required by the ACA of 0.2% and 0.5%, respectively; and

· A documentation and coding recoupment reduction of 0.8% as required by the American Taxpayer Relief Act of 2012;

· Updates to the factors used to determine the amount and distribution of Medicare uncompensated care disproportionate share (“UC-DSH”) payments;

· Implementation of a 1% payment decrease for hospitals that rank in the top 25% of CMS’ measurement of hospital acquired conditions;

· Updates to the Core Based Statistical Areas that affect the wage index used to adjust MS-DRG payments for geographic differences;

· A 1.32% net increase in the capital federal MS-DRG rate; and

· An increase in the cost outlier threshold from $21,748 to $24,626.

CMS projects that the combined impact of the payment and policy changes in the Final IPPS Rule will yield an average 0.6% decrease in payments for hospitals in large urban areas (populations over one million). Using the impact percentages in the Final IPPS Rule as applied to our IPPS payments for the 12 months ended September 30, 2014, the estimated annual impact for all changes in the Final IPPS Rule on our hospitals is a decrease in our Medicare inpatient revenues of approximately $13 million, most of which is related to an expected decrease in UC-DSH reimbursement. Because of the uncertainty regarding factors that may influence our future IPPS payments by individual hospital, including admission volumes, length of stay and case mix, we cannot provide any assurances regarding our estimate.

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Payment and Policy Changes to the Medicare Inpatient Psychiatric Facility Prospective Payment System

On July 31, 2014, CMS issued a final rule updating Medicare payment policies and rates for the Medicare inpatient psychiatric facility (“IPF”) prospective payment system for FFY 2015 (“IPF-PPS Final Rule”). The IPF-PPS Final Rule includes the following payment and policy change for IPFs:

· A net payment increase for IPFs of 2.1%, which reflects a market basket increase of 2.9% reduced by market basket index and multifactor productivity adjustments required by the ACA of 0.3% and 0.5%, respectively; and

· A decrease in the outlier fixed-dollar loss threshold from $10,245 to $8,755.

At September 30, 2014, 21 of our general hospitals operated IPF units. CMS projects that the payment changes in the IPF-PPS Final Rule will result in an estimated total increase in aggregate IPF payments of 2.5%, which includes an average 2.7% increase for IPF units in hospitals located in urban areas for FFY 2015. Using the urban IPF unit impact percentage as applied to our Medicare IPF payments for the 12 months ended September 30, 2014, the annual impact of the payment and policy changes in the IPF-PPS Final Rule may result in an estimated increase in our Medicare revenues of approximately $1  million. Because of the uncertainty associated with various factors that may influence our future IPF payments, including legislative action, admission volumes, length of stay and case mix, we cannot provide any assurances regarding our estimate of the impact of these changes.

Payment and Policy Changes to the Medicare Inpatient Rehabilitation Facility Prospective Payment System

On July 31, 2014, CMS issued a final rule updating Medicare payment policies and rates for the Medicare inpatient rehabilitation facility (“IRF”) prospective payment system for FFY 2015 (“IRF-PPS Final Rule”). The IRF-PPS Final Rule includes the following payment and policy changes for IRFs:

· A net payment increase for IRFs of 2.2%, which reflects a market basket increase of 2.9% reduced by market basket index and multifactor productivity adjustments required by the ACA of 0.2% and 0.5%, respectively; and

· An additional 0.2% aggregate payment increase due to updated outlier threshold results.

At September 30, 2014, we operated one freestanding IRF, and 14 of our general hospitals operated IRF units. CMS projects that the payment changes in the IRF-PPS Final Rule will result in an estimated total increase in aggregate IRF payments of 2.4%, which includes an average 2.2% increase for freestanding IRFs, and an average 2.6% increase for IRF units in hospitals located in urban areas for FFY 2015. Using the applicable freestanding and urban IRF unit impact percentages as applied to our Medicare IRF payments for the 12 months ended September 30, 2014, the annual impact of the payment and policy changes in the IRF-PPS Final Rule may result in an estimated increase in our Medicare revenues of approximately $1 million. Because of the uncertainty associated with various factors that may influence our future IRF payments, including legislative action, admission volumes, length of stay and case mix, as well as the related effects of compliance with admission criteria, we cannot provide any assurances regarding our estimate of the impact of these changes.

Payment and Policy Changes to the Medicare Outpatient Prospective Payment System

On October 31, 2014, CMS released the Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems changes for calendar year 2015 (“OPPS Final Rule”). The OPPS Final Rule includes the following payment and policy changes:

· An estimated market basket increase of 2.9%, minus market basket index and multifactor productivity reductions required by the ACA of 0.2% and 0.5%, respectively; and

· An expansion of the items and services that are packaged into the outpatient prospective payment system (“OPPS”) payments.

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CMS projects that the combined impact of the payment and policy changes in the OPPS Final Rule will yield an average 2.3% increase in OPPS payments for all hospitals and an average 2.5% increase in OPPS payments for hospitals in large urban areas (populations over one million). According to CMS’ estimates, the projected annual impact of the payment and policy changes in the OPPS Final Rule on our hospitals is a $13 million increase in Medicare outpatient revenues. Because of the uncertainty associated with other factors that may influence our future OPPS payments by individual hospital, including legislative action, patient volumes and case mix, we cannot provide any assurances regarding this estimate.

Payment and Policy Changes to the Medicare Physician Fee Schedule

On October 31, 2014, CMS released the update to the Medicare Physician Fee Schedule (“MPFS”). The MPFS is the schedule of rates Medicare pays for physician and other professional services and is updated annually. The MPFS update is determined by the “sustainable growth rate” (“SGR”) formula in accordance with the Balanced Budget Act of 1997. The Protecting Access to Medicare Act of 2014 (“PAMA”), described below, includes a zero percent update to the 2015 MPFS through March 31, 2015. However, the SGR takes effect on April 1, 2015 unless Congress intervenes. In March 2014 (prior to the enactment of the PAMA), CMS estimated that the MPFS SGR-based update for calendar year 2015 would be a reduction of 20.9%. In most prior years, Congress has taken action to avert a large reduction in MPFS rates before it went into effect. These actions have often resulted in payment reductions to other health care providers (including hospitals) to maintain budget neutrality. Although the historical pattern suggests that Congress will override the SGR formula for the nine months commencing April 1, 2015, we cannot provide any assurances in that regard. In addition, we cannot predict the level or type of payment reductions affecting our hospitals that might be used to offset a temporary override or permanent replacement of the SGR formula.

The Protecting Access to Medicare Act of 2014

On April 1, 2014, President Obama signed into law the Protecting Access to Medicare Act of 2014. This new law prevented a scheduled payment reduction for physicians and other practitioners who treat Medicare patients from taking effect on April 1, 2014. The law includes the following provisions:

· An extension of the 0.5% update for services reimbursed under the MPFS that applied from January 1, 2014 through March 31, 2014 for the period April 1, 2014 through December 31, 2014;

· A zero percent update to the 2015 MPFS through March 31, 2015;

· A delay in the implementation of ICD-10 (as discussed in our Annual Report) from October 1, 2014 until at least October 1, 2015 (based on recent CMS announcements, we expect the use of ICD-10 to begin on October 1, 2015);

· An additional one-year delay of the ACA Medicaid DSH reduction to October 1, 2016 (funding of this delay will be achieved by a net increase in the FFY 2017 through 2023 ACA Medicaid DSH reductions);

· A one-year extension of the ACA Medicaid DSH reduction through FFY 2024;

· A six-month partial extension of the moratorium on enforcement of the “two-midnight rule” (as discussed in our Annual Report) through March 31, 2015; and

· Modification of the FFY 2024 Medicare sequestration consisting of a 4% increase to the sequestration reduction for the first six months of FFY 2024, and then a decrease of the reduction to zero percent for the second six months of that FFY.

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PRIVATE INSURANCE

Managed Care

We currently have thousands of managed care contracts with various HMOs and PPOs. HMOs generally maintain a full-service healthcare delivery network comprised of physician, hospital, pharmacy and ancillary service providers that HMO members must access through an assigned “primary care” physician. The member’s care is then managed by his or her primary care physician and other network providers in accordance with the HMO’s quality assurance and utilization review guidelines so that appropriate healthcare can be efficiently delivered in the most cost-effective manner. HMOs typically provide reduced benefits or reimbursement (or none at all) to their members who use non-contracted healthcare providers for non-emergency care.

PPOs generally offer limited benefits to members who use non-contracted healthcare providers. PPO members who use contracted healthcare providers receive a preferred benefit, typically in the form of lower co-pays, co-insurance or deductibles. As employers and employees have demanded more choice, managed care plans have developed hybrid products that combine elements of both HMO and PPO plans, including high-deductible healthcare plans that may have limited benefits, but cost the employee less in premiums.

The amount of our managed care net patient revenues during the nine months ended September 30, 2014 and 2013 was $6.8 billion and $4.1 billion, respectively. Approximately 62% of our managed care net patient revenues for the nine months ended September 30, 2014 was derived from our top ten managed care payers. National payers generated approximately 46% of our total net managed care revenues. The remainder comes from regional or local payers. At September 30, 2014 and December 31, 2013, approximately 61% and 58%, respectively, of our net accounts receivable related to continuing operations were due from managed care payers.

Revenues under managed care plans are based primarily on payment terms involving predetermined rates per diagnosis, per-diem rates, discounted fee-for-service rates and other similar contractual arrangements. These revenues are also subject to review and possible audit by the payers, which can take several years before they are completely resolved. The payers are billed for patient services on an individual patient basis. An individual patient’s bill is subject to adjustment on a patient-by-patient basis in the ordinary course of business by the payers following their review and adjudication of each particular bill. We estimate the discounts for contractual allowances at the individual hospital level utilizing billing data on an individual patient basis. At the end of each month, on an individual hospital basis, we estimate our expected reimbursement for patients of managed care plans based on the applicable contract terms. We believe it is reasonably likely for there to be an approximately 3% increase or decrease in the estimated contractual allowances related to managed care plans. Based on reserves as of September 30, 2014, a 3% increase or decrease in the estimated contractual allowances would impact the estimated reserves by approximately $13 million. Some of the factors that can contribute to changes in the contractual allowance estimates include: (1) changes in reimbursement levels for procedures, supplies and drugs when threshold levels are triggered; (2) changes in reimbursement levels when stop-loss or outlier limits are reached; (3) changes in the admission status of a patient due to physician orders subsequent to initial diagnosis or testing; (4) final coding of in-house and discharged-not-final-billed patients that change reimbursement levels; (5) secondary benefits determined after primary insurance payments; and (6) reclassification of patients among insurance plans with different coverage levels. Contractual allowance estimates are periodically reviewed for accuracy by taking into consideration known contract terms, as well as payment history. Although we do not separately accumulate and disclose the aggregate amount of adjustments to the estimated reimbursement for every patient bill, we believe our estimation and review process enables us to identify instances on a timely basis where such estimates need to be revised. We do not believe there were any adjustments to estimates of patient bills that were material to our operating income. In addition, on a corporate-wide basis, we do not record any general provision for adjustments to estimated contractual allowances for managed care plans.

We expect managed care governmental admissions to continue to increase as a percentage of total managed care admissions over the near term. However, the managed Medicare and Medicaid insurance plans typically generate lower yields than commercial managed care plans, which have been experiencing an improved pricing trend. Although we have experienced improved year-over-year managed care pricing, we expect some moderation in the pricing percentage increases in future years. In the nine months ended September 30, 2014, our commercial managed care net inpatient revenue per admission from our acute care hospitals was approximately 74% higher than our aggregate yield on a per admission basis from governmental payers, including managed Medicare and Medicaid insurance plans.

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Indemnity

An indemnity-based agreement generally requires the insurer to reimburse an insured patient for healthcare expenses after those expenses have been incurred by the patient, subject to policy conditions and exclusions. Unlike an HMO member, a patient with indemnity insurance is free to control his or her utilization of healthcare and selection of healthcare providers.

SELF-PAY PATIENTS

Self-pay patients are patients who do not qualify for government programs payments, such as Medicare and Medicaid, do not have some form of private insurance and, therefore, are responsible for their own medical bills. A significant portion of our self-pay patients is admitted through our hospitals’ emergency departments and often requires high-acuity treatment that is more costly to provide and, therefore, results in higher billings, which are the least collectible of all accounts. We believe that our level of self-pay patients has been higher in the last several years than previous periods due to a combination of broad economic factors, including high unemployment rates in some of the markets our hospitals serve, reductions in state Medicaid budgets, increasing numbers of individuals and employers who choose not to purchase insurance, and an increased burden of co-pays and deductibles to be made by patients instead of insurers.

Self-pay accounts pose significant collectability problems. At September 30, 2014 and December 31, 2013, approximately 6% and 7%, respectively, of our net accounts receivable related to continuing operations were due from self-pay patients. Further, a significant portion of our provision for doubtful accounts relates to self-pay patients, as well as co-pays and deductibles owed to us by patients with insurance. We provide revenue cycle management services through our Conifer subsidiary, which has performed systematic analyses to focus our attention on the drivers of bad debt for each hospital. While emergency department use is the primary contributor to our provision for doubtful accounts in the aggregate, this is not the case at all hospitals. As a result, we have been increasing our focus on targeted initiatives that concentrate on non-emergency department patients as well. These initiatives are intended to promote process efficiencies in collecting self-pay accounts, as well as co-pay and deductible amounts owed to us by patients with insurance, that we deem highly collectible. We are dedicated to modifying and refining our processes as needed, enhancing our technology and improving staff training throughout the revenue cycle process in an effort to increase collections and reduce accounts receivable.

Over the longer term, several other initiatives we have previously announced should also help address this challenge. For example, our Compact with Uninsured Patients (“Compact”) is designed to offer managed care-style discounts to certain uninsured patients, which enables us to offer lower rates to those patients who historically have been charged standard gross charges. A significant portion of those charges had previously been written down in our provision for doubtful accounts. Under the Compact, the discount offered to uninsured patients is recognized as a contractual allowance, which reduces net operating revenues at the time the self-pay accounts are recorded. The uninsured patient accounts, net of contractual allowances recorded, are further reduced to their net realizable value through provision for doubtful accounts based on historical collection trends for self-pay accounts and other factors that affect the estimation process.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), a new Consumer Financial Protection Bureau (“CFPB”) was formed within the U.S. Federal Reserve to promote transparency, simplicity, fairness, accountability and equal access in the market for consumer financial products or services, including debt collection services. The Dodd-Frank Act gives significant discretion to the CFPB in establishing regulatory requirements and enforcement priorities. We believe that the CFPB regulatory and enforcement processes will have a significant impact on the operations of Conifer’s debt collection agency subsidiary, Syndicated Office Systems, LLC. For additional information, see Item 1, Business – Regulations Affecting Conifer, of Part I of our Annual Report and Item 1, Legal Proceedings, in Part II of this report.

Our 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 September 30, 2014 and 2013 were approximately $135 million and $116 million, respectively, and for the nine months ended September 30, 2014 and 2013 were approximately $488 million and $342 million, respectively. (All 2014 amounts in

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this paragraph include the 28 hospitals we acquired from Vanguard on October 1, 2013, as well as Texas Regional Medical Center, Resolute Health Hospital and Emanuel Medical Center.) We also provide charity care to patients who are financially unable to pay for the healthcare services they receive. Most patients who qualify for charity care are charged a per-diem amount for services received, subject to a cap. Except for the per-diem amounts, our policy is not to pursue collection of amounts determined to qualify as charity care; therefore, we do not report these amounts in net operating revenues. Most states include an estimate of the cost of charity care in the determination of a hospital’s eligibility for Medicaid DSH payments. Revenues attributable to DSH payments and other state-funded subsidy payments for the three months ended September 30, 2014 and 2013 were approximately $178 million and $72 million, respectively, and for the nine months ended September 30, 2014 and 2013 were approximately $493 million and $257 million, respectively. These payments are intended to mitigate our cost of uncompensated care, as well as reduced Medicaid funding levels. Our estimated costs (based on the selected operating expenses described above) of caring for charity care patients for the three months ended September 30, 2014 and 2013 were approximately$42 million and $32 million, respectively, and for the nine months ended September 30, 2014 and 2013 were approximately $137 million and $95 million, respectively. Generally, our method of measuring the estimated costs uses adjusted self-pay/charity patient days multiplied by selected operating expenses per adjusted patient day. The adjusted self-pay/charity patient days represents actual self-pay/charity patient days adjusted to include self-pay/charity outpatient services by multiplying actual self-pay/charity patient days by the sum of gross self-pay/charity inpatient revenues and gross self-pay/charity outpatient revenues and dividing the results by gross self-pay/charity inpatient revenues.

The expansion of health insurance coverage under the Affordable Care Act has resulted in an increase in the number of patients using our facilities who have either health insurance exchange or government healthcare insurance program coverage. However, even with the implementation of the ACA, we continue to have to provide uninsured discounts and charity care due to the failure of states to expand Medicaid coverage under the ACA and for persons living in the country without legal permission who are not permitted to enroll in a health insurance exchange or government healthcare insurance program.

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RESULTS OF OPERATIONS

The following two tables summarize our net operating revenues, operating expenses and operating income from continuing operations, both in dollar amounts and as percentages of net operating revenues, for the three and nine months ended September 30, 2014 and 2013:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Net operating revenues:
General hospitals	$	3,912	$	2,361	$	11,576	$	7,135
Other operations		516		257		1,520		706
Net operating revenues before provision for doubtful accounts		4,428		2,618		13,096		7,841
Less provision for doubtful accounts		249		210		949		624
Net operating revenues		4,179		2,408		12,147		7,217
Operating expenses:
Salaries, wages and benefits		2,028		1,172		5,905		3,499
Supplies		665		387		1,942		1,158
Other operating expenses, net		1,032		575		3,066		1,710
Electronic health record incentives		(5)		(14)		(72)		(48)
Depreciation and amortization		207		119		609		354
Impairment and restructuring charges, and acquisition-related costs		37		20		90		45
Litigation and investigation costs		4		1		19		3
Operating income	$	211	$	148	$	588	$	496

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Net operating revenues	100.0	%	100.0	%	100.0	%	100.0	%
Operating expenses:
Salaries, wages and benefits	48.5	%	48.7	%	48.6	%	48.5	%
Supplies	15.9	%	16.1	%	16.0	%	16.0	%
Other operating expenses, net	24.7	%	24.0	%	25.3	%	23.8	%
Electronic health record incentives	(0.1)	%	(0.6)	%	(0.6)	%	(0.7)	%
Depreciation and amortization	5.0	%	4.9	%	5.0	%	4.9	%
Impairment and restructuring charges, and acquisition-related costs	0.9	%	0.8	%	0.7	%	0.6	%
Litigation and investigation costs	0.1	%	—	%	0.2	%	—	%
Operating income	5.0	%	6.1	%	4.8	%	6.9	%

Net operating revenues of our general hospitals include inpatient and outpatient revenues, as well as nonpatient revenues (rental income, management fee revenue, and income from services such as cafeterias, gift shops and parking) and other miscellaneous revenue. Net operating revenues of other operations primarily consist of revenues from (1) physician practices, (2) a long-term acute care hospital, (3) services provided by our Conifer subsidiary to third parties and (4) our health plans acquired from Vanguard. Revenues from our general hospitals represented approximately 88% and 90% of our total net operating revenues before provision for doubtful accounts for the three months ended September 30, 2014 and 2013, respectively, and approximately 88% and 91% for the nine months ended September 30, 2014 and 2013, respectively.

Net operating revenues from our other operations were $516 million and $257 million in the three months ended September 30, 2014 and 2013, respectively, and $1.520 billion and $706 million in the nine months ended September 30, 2014 and 2013, respectively. The increase in net operating revenues from other operations during 2014 primarily relates to revenue cycle services provided by our Conifer subsidiary, as well as revenues from our health plans acquired from Vanguard and additional physician practices. Equity earnings of unconsolidated affiliates included in our

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net operating revenues from other operations were $4 million and $1 million for the three months ended September 30, 2014 and 2013, respectively, and $9 million and $13 million in the nine months ended September 30, 2014 and 2013, respectively. Included in 2013 equity earnings of unconsolidated affiliates is $10 million of earnings associated with stepping up our basis in a previously held investment in an ambulatory surgery center in which we acquired a controlling interest and are now consolidating.

The following table shows certain selected operating statistics for our continuing operations on a total hospital basis, which includes the results of the 28 hospitals we acquired from Vanguard on October 1, 2013, Texas Regional Medical Center, in which we acquired a majority interest on June 3, 2014, Resolute Health Hospital, which we opened on June 24, 2014, and Emanuel Medical Center, which we acquired on August 1, 2014, in each case only for the period of time from such acquisition or opening to September 30, 2014. We believe this information is useful to investors because it reflects our current portfolio of hospitals and the significant increase in the scale of our operations as a result of these investments.

	Total Hospital
	Continuing Operations
	Three Months Ended September 30,								Nine Months Ended September 30,
							Increase								Increase
	2014				2013		(Decrease)		2014				2013		(Decrease)
Total admissions		199,914			121,569		64.4	%		588,828			368,220		59.9	%
Adjusted patient admissions(1)		345,787			196,761		75.7	%		1,007,106			589,866		70.7	%
Paying admissions (excludes charity and uninsured)		188,924			112,760		67.5	%		554,381			341,977		62.1	%
Charity and uninsured admissions		10,990			8,809		24.8	%		34,447			26,243		31.3	%
Admissions through emergency department		123,147			75,512		63.1	%		367,834			231,328		59.0	%
Emergency department visits		719,835			400,345		79.8	%		2,086,846			1,202,125		73.6	%
Total emergency department admissions and visits		842,982			475,857		77.2	%		2,454,680			1,433,453		71.2	%
Surgeries — inpatient		55,339			34,971		58.2	%		160,186			102,515		56.3	%
Surgeries — outpatient		123,100			76,084		61.8	%		354,199			218,622		62.0	%
Total surgeries		178,439			111,055		60.7	%		514,385			321,137		60.2	%
Patient days — total		921,228			569,833		61.7	%		2,757,485			1,740,508		58.4	%
Adjusted patient days(1)		1,574,346			912,483		72.5	%		4,663,406			2,762,043		68.8	%
Average length of stay (days)		4.61			4.69		(1.7)	%		4.68			4.73		(1.1)	%
Average licensed beds		20,692			13,180		57.0	%		20,439			13,180		55.1	%
Utilization of licensed beds(2)		48.4	%		47.0	%	1.4	%(3)		49.4	%		48.4	%	1.0	%(3)
Total visits		2,125,002			1,071,421		98.3	%		6,138,740			3,198,922		91.9	%
Paying visits (excludes charity and uninsured)		1,954,980			956,871		104.3	%		5,633,704			2,859,799		97.0	%
Charity and uninsured visits		170,022			114,550		48.4	%		505,036			339,123		48.9	%
Net inpatient revenues	$	2,463		$	1,502		64.0	%	$	7,296		$	4,580		59.3	%
Net outpatient revenues	$	1,441		$	845		70.5	%	$	4,235		$	2,502		69.3	%
Net inpatient revenue per admission	$	12,320		$	12,355		(0.3)	%	$	12,391		$	12,438		(0.4)	%
Net inpatient revenue per patient day	$	2,674		$	2,636		1.4	%	$	2,646		$	2,631		0.6	%
Net outpatient revenue per visit	$	678		$	789		(14.1)	%	$	690		$	782		(11.8)	%
Net patient revenue per adjusted patient admission(1)	$	11,290		$	11,928		(5.3)	%	$	11,450		$	12,006		(4.6)	%
Net patient revenue per adjusted patient day(1)	$	2,480		$	2,572		(3.6)	%	$	2,473		$	2,564		(3.5)	%

⁽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 2014 and 2013 amounts shown.

The tables below show certain selected historical operating statistics of our continuing hospitals on a same-hospital basis, where noted, excluding the results of the 28 hospitals we acquired from Vanguard on October1, 2013,

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Texas Regional Medical Center, in which we acquired a majority interest on June 3, 2014, Resolute Health Hospital, which we opened on June24, 2014, and Emanuel Medical Center, which we acquired on August 1, 2014.

	Same-Hospital
	Continuing Operations
	Three Months Ended September 30,						Nine Months Ended September 30,
					Increase						Increase
Admissions, Patient Days and Surgeries	2014		2013		(Decrease)		2014		2013		(Decrease)
Total admissions	127,118		121,569		4.6	%	376,289		368,220		2.2	%
Adjusted patient admissions(1)	208,229		196,761		5.8	%	609,721		589,866		3.4	%
Paying admissions (excludes charity and uninsured)	118,580		112,760		5.2	%	351,445		341,977		2.8	%
Charity and uninsured admissions	8,538		8,809		(3.1)	%	24,844		26,243		(5.3)	%
Admissions through emergency department	80,328		75,512		6.4	%	241,767		231,328		4.5	%
Paying admissions as a percentage of total admissions	93.3	%	92.8	%	0.5	%(2)	93.4	%	92.9	%	0.5	%(2)
Charity and uninsured admissions as a percentage of total admissions	6.7	%	7.2	%	(0.5)	%(2)	6.6	%	7.1	%	(0.5)	%(2)
Emergency department admissions as a percentage of total admissions	63.2	%	62.1	%	1.1	%(2)	64.3	%	62.8	%	1.5	%(2)
Surgeries — inpatient	35,570		34,971		1.7	%	103,468		102,515		0.9	%
Surgeries — outpatient	91,472		76,084		20.2	%	262,460		218,622		20.1	%
Total surgeries	127,042		111,055		14.4	%	365,928		321,137		13.9	%
Patient days — total	594,664		569,833		4.4	%	1,783,957		1,740,508		2.5	%
Adjusted patient days(1)	962,054		912,483		5.4	%	2,859,601		2,762,043		3.5	%
Average length of stay (days)	4.68		4.69		(0.2)	%	4.74		4.73		0.2	%
Number of acute care hospitals (at end of period)	49		49		—		49		49		—
Licensed beds (at end of period)	13,231		13,180		0.4	%	13,231		13,180		0.4	%
Average licensed beds	13,231		13,180		0.4	%	13,202		13,180		0.2	%
Utilization of licensed beds(3)	48.9	%	47.0	%	1.9	%(2)	49.5	%	48.4	%	1.1	%(2)

⁽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⁾ The change is the difference between 2014 and 2013 amounts shown.

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

	Same-Hospital
	Continuing Operations
	Three Months Ended September 30,						Nine Months Ended September 30,
					Increase						Increase
Outpatient Visits	2014		2013		(Decrease)		2014		2013		(Decrease)
Total visits	1,155,852		1,071,421		7.9	%	3,377,121		3,198,922		5.6	%
Paying visits (excludes charity and uninsured)	1,042,636		956,871		9.0	%	3,043,373		2,859,799		6.4	%
Charity and uninsured visits	113,216		114,550		(1.2)	%	333,748		339,123		(1.6)	%
Emergency department visits	433,174		400,345		8.2	%	1,280,225		1,202,125		6.5	%
Surgery visits	91,472		76,084		20.2	%	262,460		218,622		20.1	%
Paying visits as a percentage of total visits	90.2	%	89.3	%	0.9	%(1)	90.1	%	89.4	%	0.7	%(1)
Charity and uninsured visits as a percentage of total visits	9.8	%	10.7	%	(0.9)	%(1)	9.9	%	10.6	%	(0.7)	%(1)

⁽¹⁾ The change is the difference between 2014 and 2013 amounts shown.

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	Same-Hospital
	Continuing Operations
	Three Months Ended September 30,						Nine Months Ended September 30,
					Increase						Increase
Revenues	2014		2013		(Decrease)		2014		2013		(Decrease)
Net operating revenues	$	2,684	$	2,408	11.5	%	$	7,775	$	7,217	7.7	%
Revenues from the uninsured	$	150	$	167	(10.2)	%	$	467	$	502	(7.0)	%
Net inpatient revenues(1)	$	1,602	$	1,502	6.7	%	$	4,711	$	4,580	2.9	%
Net outpatient revenues(1)	$	924	$	845	9.3	%	$	2,710	$	2,502	8.3	%

⁽¹⁾ Net inpatient revenues and net outpatient revenues are components of net operating revenues. Net inpatient revenues include self-pay revenues of $56 million and $68 million for the three months ended September 30, 2014 and 2013, respectively, and $181 million and $207 million for the nine months ended September 30, 2014 and 2013, respectively. Net outpatient revenues include self-pay revenues of $94 million and $99 million for the three months ended September 30, 2014 and 2013, respectively, and $286 million and $295 million for the nine months ended September 30, 2014 and 2013, respectively.

	Same-Hospital
	Continuing Operations
	Three Months Ended September 30,						Nine Months Ended September 30,
Revenues on a Per Admission, Per Patient Day					Increase						Increase
and Per Visit Basis	2014		2013		(Decrease)		2014		2013		(Decrease)
Net inpatient revenue per admission	$	12,602	$	12,355	2.0	%	$	12,520	$	12,438	0.7	%
Net inpatient revenue per patient day	$	2,694	$	2,636	2.2	%	$	2,641	$	2,631	0.4	%
Net outpatient revenue per visit	$	799	$	789	1.3	%	$	802	$	782	2.6	%
Net patient revenue per adjusted patient admission(1)	$	12,131	$	11,928	1.7	%	$	12,171	$	12,006	1.4	%
Net patient revenue per adjusted patient day(1)	$	2,626	$	2,572	2.1	%	$	2,595	$	2,564	1.2	%

⁽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.

	Same-Hospital
	Continuing Operations
	Three Months Ended September 30,								Nine Months Ended September 30,
							Increase								Increase
Provision for Doubtful Accounts	2014			2013			(Decrease)		2014			2013			(Decrease)
Provision for doubtful accounts	$	163		$	210		(22.4)	%	$	602		$	624		(3.5)	%
Provision for doubtful accounts as a percentage of net operating revenues before provision for doubtful accounts		5.7	%		8.0	%	(2.3)	%(1)		7.2	%		8.0	%	(0.8)	%(1)
Collection rate on self-pay accounts(2)		27.5	%		28.8	%	(1.3)	%(1)		27.5	%		28.8	%	(1.3)	%(1)
Collection rate on commercial managed care accounts		98.3	%		98.3	%	—	%(1)		98.3	%		98.3	%	—	%(1)

⁽¹⁾ The change is the difference between the 2014 and 2013 amounts shown.

⁽²⁾ Self-pay accounts receivable are comprised of both uninsured and balance after insurance receivables.

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	Same-Hospital
	Continuing Operations
	Three Months Ended September 30,						Nine Months Ended September 30,
					Increase						Increase
Selected Operating Expenses	2014		2013		(Decrease)		2014		2013		(Decrease)
Hospital Operations and other
Salaries, wages and benefits	$	1,150	$	1,032	11.4	%	$	3,330	$	3,092	7.7	%
Supplies		416		387	7.5	%		1,232		1,158	6.4	%
Other operating expenses		587		526	11.6	%		1,740		1,558	11.7	%
Total	$	2,153	$	1,945	10.7	%	$	6,302	$	5,808	8.5	%
Conifer
Salaries, wages and benefits	$	182	$	140	30.0	%	$	531	$	407	30.5	%
Other operating expenses		67		49	36.7	%		196		152	28.9	%
Total	$	249	$	189	31.7	%	$	727	$	559	30.1	%
Total
Salaries, wages and benefits	$	1,332	$	1,172	13.7	%	$	3,861	$	3,499	10.3	%
Supplies		416		387	7.5	%		1,232		1,158	6.4	%
Other operating expenses		654		575	13.7	%		1,936		1,710	13.2	%
Total	$	2,402	$	2,134	12.6	%	$	7,029	$	6,367	10.4	%
Rent/lease expense(1)
Hospital Operations and other	$	37	$	41	(9.8)	%	$	105	$	118	(11.0)	%
Conifer		5		3	66.7	%		16		10	60.0	%
Total	$	42	$	44	(4.5)	%	$	121	$	128	(5.5)	%
Hospital Operations and other(2)
Salaries, wages and benefits per adjusted patient day	$	1,193	$	1,130	5.6	%	$	1,162	$	1,119	3.8	%
Supplies per adjusted patient day		432		424	1.9	%		431		419	2.9	%
Other operating expenses per adjusted patient day		593		565	5.0	%		591		561	5.3	%
Total per adjusted patient day	$	2,218	$	2,119	4.7	%	$	2,184	$	2,099	4.0	%
Salaries, wages and benefits per adjusted patient admission	$	5,513	$	5,240	5.2	%	$	5,452	$	5,240	4.0	%
Supplies per adjusted patient admission		1,998		1,967	1.6	%		2,021		1,963	3.0	%
Other operating expenses per adjusted patient admission		2,737		2,622	4.4	%		2,769		2,625	5.5	%
Total per adjusted patient admission	$	10,248	$	9,829	4.3	%	$	10,242	$	9,828	4.2	%

⁽¹⁾ Included in other operating expenses.

⁽²⁾ Adjusted patient days/admissions represents actual patient days/admissions adjusted to include outpatient services by multiplying actual patient days/admissions by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues. These metrics exclude the expenses related to the provider network based in Southern California that includes contracted independent physicians, ancillary providers and hospitals, which we acquired during the three months ended September 30, 2013.

THREE MONTHS ENDED SEPTEMBER 30, 2014COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2013

Revenues

During the three months ended September 30, 2014, same-hospital net operating revenues increased 11.5% compared to the three months ended September 30, 2013, primarily due to higher inpatient and outpatient volumes,improved terms of our managed care contracts, andincreased revenues from services provided by our Conifer subsidiary to third parties.

Our same-hospital net outpatient revenues and total outpatient visits increased 9.3% and 7.9%, respectively, during the three months ended September 30, 2014 compared to the same period in 2013. Outpatient revenues and volume growth was primarily driven by improved terms of our managed care contracts, increased outpatient volume levels and our outpatient development program. Net outpatient revenue per visit increased 1.3% primarily due to the improved terms of our managed care contracts.

Our Conifer subsidiary generated net operating revenues of $296 million and $225 million for the three months ended September 30, 2014 and 2013, respectively, a portion of which was eliminated in consolidation as described in Note 15 to the Condensed Consolidated Financial Statements. The increase in the portion that was not eliminated in consolidation is primarily due to new clients and expanded service offerings.

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Same-hospital patient days increased by 4.4% during the three months ended September 30, 2014 compared to the three months ended September 30, 2013. We believe our volumes were positively impacted by incremental market share we generated through improved physician alignment and service line expansion, insurance coverage for a greater number of individuals as a result of the Affordable Care Act, and a strengthening economy. We believe our  inpatient volume levels continue to be constrained by an increase in patients with high-deductible health insurance plans and industry trends reflecting the shift of certain clinical procedures being performed in an outpatient setting rather than an inpatient setting.

Provision for Doubtful Accounts

The provision for doubtful accounts as a percentage of net operating revenues before provision for doubtful accounts was 5.7% for the three months ended September 30, 2014 compared to 8.0% for the three months ended September 30, 2013. The decrease in the provision for doubtful accounts as a percentage of net operating revenues before provision for doubtful accounts primarily related to the decrease in uninsured patient revenuesand the impact of favorable experience related to our estimated future recoveries in the 2014 period, partially offset by the 130 basis point decrease in our self-pay collection rate, as well as higher patient co-pays and deductibles. The table below shows the net accounts receivable and allowance for doubtful accounts by payer at September 30, 2014 and December 31, 2013:

	September 30, 2014						December 31, 2013
	Accounts						Accounts
	Receivable						Receivable
	Before						Before
	Allowance		Allowance				Allowance		Allowance
	for Doubtful		for Doubtful				for Doubtful		for Doubtful
	Accounts		Accounts		Net		Accounts		Accounts		Net
Medicare	$	358	$	—	$	358	$	301	$	—	$	301
Medicaid		153		—		153		133		—		133
Net cost report settlements payable and valuation allowances		(91)		—		(91)		(75)		—		(75)
Managed care		1,458		90		1,368		1,179		69		1,110
Self-pay uninsured		476		416		60		344		290		54
Self-pay balance after insurance		208		128		80		224		141		83
Estimated future recoveries from accounts assigned to our Conifer subsidiary		122		—		122		92		—		92
Other payers		324		138		186		278		89		189
Total continuing operations		3,008		772		2,236		2,476		589		1,887
Total discontinued operations		3		1		2		3		—		3
	$	3,011	$	773	$	2,238	$	2,479	$	589	$	1,890

We provide revenue cycle management and patient communications services, among others, through our Conifer subsidiary, which has performed systematic analyses to focus our attention on the drivers of bad debt for each hospital. While emergency department use is the primary contributor to our provision for doubtful accounts in the aggregate, this is not the case at all hospitals. As a result, we have increased our focus on targeted initiatives that concentrate on non-emergency department patients as well. These initiatives are intended to promote process efficiencies in collecting self-pay accounts, as well as co-pay and deductible amounts owed to us by patients with insurance, that we deem highly collectible. We are dedicated to modifying and refining our processes as needed, enhancing our technology, and improving staff training throughout the revenue cycle process in an effort to increase collections and reduce accounts receivable.

A significant portion of our provision for doubtful accounts relates to self-pay patients, as well as co-pays and deductibles owed to us by patients with insurance. Collection of accounts receivable has been a key area of focus, particularly over the past several years, as we have experienced adverse changes in our business mix. At September 30, 2014, our same-hospital collection rate on self-pay accounts was approximately 27.5%. Our recent same-hospital self-pay collection rates were as follows: 28.8% at March31, 2013; 28.7% at June 30, 2013; 28.8% at September30, 2013; 28.7% at December31, 2013; 28.1% at March 31, 2014; and 27.8% at June 30, 2014. These self-pay collection rates include payments made by patients, including co-pays and deductibles paid by patients with insurance. Based on our accounts receivable from self-pay patients and co-pays and deductibles owed to us by patients with insurance at September 30, 2014, a 10% decrease or increase in our self-pay collection rate, or approximately 3%,

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which we believe could be a reasonably likely change, would result in an unfavorable or favorable adjustment to provision for doubtful accounts of approximately $10 million.

Payment pressure from managed care payers also affects our provision for doubtful accounts. We typically experience ongoing managed care payment delays and disputes; however, we continue to work with these payers to obtain adequate and timely reimbursement for our services. Our estimated same-hospital collection rate from managed care payers was approximately 98.3% at bothSeptember 30, 2014 and December 31, 2013.

Conifer continues to focus on revenue cycle initiatives to improve our cash flow. These initiatives are focused on standardizing and improving patient access processes, including pre-registration, registration, verification of eligibility and benefits, liability identification and collection at point-of-service, and financial counseling. The goals of the effort are focused on reducing denials, improving service levels to patients and increasing the quality of accounts that end up in accounts receivable. Although we continue to focus on improving our methodology for evaluating the collectability of our accounts receivable, we may incur future charges if there are unfavorable changes in the trends affecting the net realizable value of our accounts receivable.

We manage our provision for doubtful accounts using hospital-specific goals and benchmarks such as (1) total cash collections, (2) point-of-service cash collections, (3) accounts receivable days outstanding (“AR Days”), and (4)accounts receivable by aging category. The following tables present the approximate aging by payer of our net accounts receivable from continuing operations of $2.327 billion and $1.962 billion at September 30, 2014 and December 31, 2013, respectively, excluding cost report settlements payable and valuation allowances of $91 million and $75 million at September 30, 2014 and December 31, 2013, respectively:

	September 30, 2014
							Indemnity,
					Managed		Self-Pay
	Medicare		Medicaid		Care		and Other		Total
0-60 days	83	%	49	%	68	%	28	%	62	%
61-120 days	7	%	20	%	14	%	18	%	14	%
121-180 days	4	%	11	%	6	%	11	%	7	%
Over 180 days	6	%	20	%	12	%	43	%	17	%
Total	100	%	100	%	100	%	100	%	100	%

	December 31, 2013
							Indemnity,
					Managed		Self-Pay
	Medicare		Medicaid		Care		and Other		Total
0-60 days	76	%	58	%	73	%	32	%	65	%
61-120 days	9	%	21	%	13	%	17	%	14	%
121-180 days	4	%	9	%	5	%	7	%	6	%
Over 180 days	11	%	12	%	9	%	44	%	15	%
Total	100	%	100	%	100	%	100	%	100	%

Our AR Days from continuing operations were 49.3 days at September 30, 2014 and 44.7 days at December 31, 2013, within our target of less than 55 days. AR Days are calculated as our accounts receivable from continuing operations on the last date in the quarter divided by our net operating revenues from continuing operations for the quarter ended on that date divided by the number of days in the quarter.

As of September 30, 2014, we had a cumulative total of patient account assignments to our Conifer subsidiary dating back at least three years or older of approximately $2.9 billion related to our continuing operations, but excluding our newly acquired hospitals. These accounts have already been written off and are not included in our receivables or in the allowance for doubtful accounts; however, an estimate of future recoveries from all the accounts assigned to our Conifer subsidiary is determined based on our historical experience and recorded in accounts receivable.

Patient advocates from Conifer’s Medicaid Eligibility Program (“MEP”) screen patients in the hospital to determine whether those patients meet eligibility requirements for financial assistance programs. They also expedite the

49

process of applying for these government programs. Receivables from patients who are potentially eligible for Medicaid are classified as Medicaid pending, under the MEP, with appropriate contractual allowances recorded. At the present time, our newly acquired facilities are beginning to implement this program. Based on recent trends, approximately 92% of all accounts in the MEP are ultimately approved for benefits under a government program, such as Medicaid. The following table shows the approximate amount of accounts receivable in the MEP still awaiting determination of eligibility under a government program at September 30, 2014 and December 31, 2013 by aging category on a same-hospital basis:

	September 30,		December 31,
	2014		2013
0-60 days	$	85	$	132
61-120 days		19		28
121-180 days		7		8
Over 180 days		17		18
Total	$	128	$	186

Salaries, Wages and Benefits

Salaries, wages and benefits expense as a percentage of net operating revenues decreased 0.2% for thethree months ended September 30, 2014 compared to the three months ended September 30, 2013. Same-hospital salaries, wages and benefits per adjusted patient admission for our hospital operations and other segment increased by approximately 5.2% in the three months ended September 30, 2014 compared to the same period in 2013. This change is primarily due to a greater number of employed physicians, annual merit increases for certain of our employees, increased incentive compensation expense, an increase in the 401(k)plan maximum matching percentage for certain employee populations and increased health benefits costs. Salaries, wages and benefits expense for the three months ended September 30, 2014 and 2013 included stock-based compensation expense of $13 million and $7 million, respectively.

Salaries, wages and benefits expense for Conifer increased by $42 million in the three months ended September 30, 2014 compared to the three months ended September 30, 2013 due to an increase in employee headcount as a result of the growth in Conifer’s business primarily attributable to the integration of the Vanguard facilities’ revenue cycle operations now managed by Conifer.

As of September 30, 2014,  approximately 20% of our employees were represented by labor unions. These employees — primarily registered nurses and service and maintenance workers — are located at 39 of our hospitals, the majority of which are in California, Florida and Michigan. We currently have five expired contracts and are negotiating renewals under extension agreements. We are also negotiating first contracts at two of our hospitals where employees selected union representation. At this time, we are unable to predict the outcome of the negotiations, but increases in salaries, wages and benefits could result from these agreements. Furthermore, there is a possibility that strikes could occur during the negotiation process, which could increase our labor costs and have an adverse effect on our patient admissions and net operating revenues. Future organizing activities by labor unions could increase our level of union representation.

Supplies

Supplies expense as a percentage of net operating revenues decreased 0.2% for the three months ended September 30, 2014 compared to the three months ended September 30, 2013. Same-hospital supplies expense per adjusted patient admission for our hospital operations and other segment increased by 1.6% in thethree months ended September 30, 2014 compared to the same period in 2013. The change in supplies expense per adjusted patient admission was primarily attributable to higher costs for pharmaceuticals and volume growth in our supply-intensive surgical services.

We strive to control supplies expense through product standardization, contract compliance, improved utilization, bulk purchases and operational improvements. The items of current cost reduction focus continue to be cardiac stents and pacemakers, orthopedics and implants, and high-cost pharmaceuticals. We also utilize group-purchasing strategies and supplies-management services in an effort to reduce costs.

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Other Operating Expenses, Net

Other operating expenses as a percentage of net operating revenues was 24.7% in the three months ended September 30, 2014 compared to 24.0% in the three months ended September 30, 2013. Same-hospital other operating expenses per adjusted patient admission for our hospital operations and other segment increased by 4.4% in the three months ended September 30, 2014 compared to the same period in 2013. The 11.6% increase in same-hospital other operating expenses in the three months ended September 30, 2014 compared to the three months ended September 30, 2013 is due to:

· increased costs of contracted services ($13 million);

· increased costs associated with funding indigent care services by certain of our Texas hospitals ($13 million) which were substantially offset by additional net patient revenues;

· higher medical fees primarily related to a greater number of employed and contracted physicians ($8 million); and

· increased malpractice expense ($11 million).

Malpractice expense in the three months ended September 30, 2014 included a favorable adjustment of approximately $1 million due to a nine basis point increase in the interest rate used to estimate the discounted present value of projected future malpractice liabilities compared to favorable adjustment of approximately $2 million as a result of a six basis point increase in the interest rate in the 2013 period.

Other operating expenses for Conifer increased by $18 million in the three months ended September 30, 2014 compared to the three months ended September 30, 2013 primarily due to higher costs related to the integration of the Vanguard facilities’ revenue cycle operations now managed by Conifer.

Impairment and Restructuring Charges, and Acquisition-Related Costs

During the three months ended September 30, 2014, we recorded impairment and restructuring charges and acquisition-related costs of $37 million, consisting of $5 million of employee severance costs, $6 million of contract and lease termination fees,$1 million of restructuring costs, and $25 million in acquisition-related costs, which include$3 million of transaction costs and $22 million of acquisition integration charges.

During the three months ended September 30, 2013, we recorded impairment and restructuring charges and acquisition-related costs of $20 million, consisting of $4 million of employee severance costs, $3 million of restructuring costs and $13 million in acquisition-related costs.

Litigation and Investigation Costs

Litigation and investigation costs for the three months ended September 30, 2014 and 2013 were $4 million and $1 million, respectively, primarily related to costs associated with various legal proceedings and governmental reviews.

Interest Expense

Interest expense for the three months ended September 30, 2014 was $186 million compared to $91 million for the three months ended September 30, 2013, primarily due to increased borrowings relating to our recent acquisitions.

Loss from Early Extinguishment of Debt

During the three months ended September 30, 2014, we recorded a loss from early extinguishment of debt of approximately $24 million, primarily related to the difference between the redemption price and the par value of the $474 million  aggregate principal amount of our 91/₄% senior notes due 2015 that we redeemed in the period, as well as the write-off of associated unamortized note discounts and issuance costs.

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Income Tax (Benefit) Expense

During the three months ended September 30, 2014, we recorded income tax benefit of $18 million compared to income tax expense of $16 millionduring the three months ended September 30, 2013.The benefit recorded in the 2014 period primarily related to the loss from early extinguishment of debt recognized in that period and the impact of income tax benefit related to tax basis adjustments for state tax purposes on our acquisition of Vanguard.

NINE MONTHS ENDED SEPTEMBER 30, 2014 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2013

Revenues

During the nine months ended September 30, 2014, same-hospital net operating revenues after provision for doubtful accounts increased 7.7% compared to the nine months ended September 30, 2013,  primarily due to higher inpatient and outpatient volumes, improved terms of our managed care contracts and an increase in our other operations revenues.

Our same-hospital net outpatient revenues and total outpatient visits increased 8.3%  and 5.6%, respectively, during the nine months ended September 30, 2014 compared to the same period in 2013. Outpatient revenues and volume growth was primarily driven by improved terms of our managed care contracts, increased outpatient volume levels and our outpatient development program. Net outpatient revenue per visit increased 2.6% primarily due to the improved terms of our managed care contracts.

Our Conifer subsidiary generated net operating revenues of $866 million and $655 million for the nine months ended September 30, 2014 and 2013, respectively, a portion of which was eliminated in consolidation as described in Note 15 to the Condensed Consolidated Financial Statements. The increase in the portion that was not eliminated in consolidation is primarily due to new clients and expanded service offerings.

Same-hospital patient days increased by 2.5% during the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013. We believe our volumes were positively impacted by incremental market share we generated through improved physician alignment and service line expansion, insurance coverage for a greater number of individuals as a result of the Affordable Care Act, and a strengthening economy. We believe our inpatient volume levels continue to be constrained by an increase in patients with high-deductible health insurance plans and industry trends reflecting the shift of certain clinical procedures being performed in an outpatient setting rather than an inpatient setting.

Provision for Doubtful Accounts

The provision for doubtful accounts as a percentage of net operating revenues before provision for doubtful accounts was 7.2% and 8.0% for the nine months ended September 30, 2014 and 2013, respectively.  The decrease in the provision for doubtful accounts as a percentage of net operating revenues before provision for doubtful accounts primarily related to the decrease in uninsured patient revenues and the impact of favorable experience related to our estimated future recoveries in the 2014 period, partially offset by the 130 basis point decrease in our self-pay collection rate, as well as higher patient co-pays and deductibles.

Salaries, Wages and Benefits

Salaries, wages and benefits expense as a percentage of net operating revenues increased 0.1% for thenine months ended September 30, 2014 compared to the nine months ended September 30, 2013. Same-hospital salaries, wages and benefits per adjusted patient admission for our hospital operations and other segment increased by approximately 4.0% in the nine months ended September 30, 2014 compared to the same period in 2013. This change is primarily due to a greater number of employed physicians, annual merit increases for certain of our employees, increased incentive compensation expense, an increase in the 401(k)plan maximum matching percentage for certain employee populations and increased health benefits costs. Salaries, wages and benefits expense for the nine months ended September 30, 2014 and 2013 included stock-based compensation expense of $38 million and $27 million, respectively.

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Salaries, wages and benefits expense for Conifer increased by $124 million in the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 due to an increase in employee headcount as a result of the growth in Conifer’s business primarily attributable to the integration of the Vanguard facilities’ revenue cycle operations now managed by Conifer.

Supplies

Supplies expense as a percentage of net operating revenues remained flat for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013. Same-hospital supplies expense per adjusted patient admission for our hospital operations and other segment increased by 3.0% in the nine months ended September 30, 2014 compared to the same period in 2013. The change in supplies expense per adjusted patient admission was primarily attributable to higher costs for pharmaceuticals and volume growth in our supply-intensive surgical services.

Other Operating Expenses, Net

Other operating expenses as a percentage of net operating revenues was 25.3% in the nine months ended September 30, 2014 compared to 23.8% in the nine months ended September 30, 2013. Same-hospital other operating expenses per adjusted patient admission for our hospital operations and other segment increased by 5.5% in the nine months ended September 30, 2014 compared to the same period in 2013. The 11.7% increase in same-hospital other operating expenses in the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 is due to:

· increased costs of contracted services ($28 million);

· higher medical fees primarily related to a greater number of employed and contracted physicians ($44 million);

· increased costs associated with funding indigent care services by certain of our Texas hospitals ($18 million), which were substantially offset by additional net patient revenues;

· increased malpractice expense ($48 million); and

· decreased rent and lease expense ($13 million).

Malpractice expense in the nine months ended September 30, 2014 included isolated unfavorable case reserve adjustments related to a small number of claims, as well as an unfavorable adjustment of approximately $2 million due to a 23 basis point decrease in the interest rate used to estimate the discounted present value of projected future malpractice liabilities compared to a  favorable adjustment of approximately $8 million as a result of an84 basis point increase in the interest rate in the 2013 period.

Other operating expenses for Conifer increased by $44 million in the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to higher costs related to the integration of the Vanguard facilities’ revenue cycle operations now managed by Conifer.

Impairment and Restructuring Charges, and Acquisition-Related Costs

During the nine months ended September 30, 2014, we recorded impairment and restructuring charges and acquisition-related costs of $90 million, consisting of $14 million of employee severance costs, $6 million of contract and lease termination fees, $19 million of restructuring costs, and $51 million in acquisition-related costs, which include $7 million of transaction costs and $44 million of acquisition integration charges.

During the nine months ended September 30, 2013, we recorded impairment and restructuring charges and acquisition-related costs of $45 million, consisting of $2 million relating to the impairment of property, $10 million of restructuring costs, $9 million of employee severance costs, $1 million in lease termination costs, and $23 million in acquisition-related costs.

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Litigation and Investigation Costs

Litigation and investigation costs for the nine months ended September 30, 2014 and 2013 were $19 million and $3 million, respectively, primarily related to costs associated with various legal proceedings and governmental reviews.

Interest Expense

Interest expense for the nine months ended September 30, 2014 was $558 million compared to $292 million for the nine months ended September 30, 2013, primarily due to increased borrowings relating to our recent acquisitions and $400 million of share repurchases during 2013.

Loss from Early Extinguishment of Debt

During the nine months ended September 30, 2014, we recorded a loss from early extinguishment of debt of approximately $24 million, primarily related to the difference between the redemption price and the par value of the $474 million  aggregate principal amount of our 91/₄% senior notes due 2015 that we redeemed in the period, as well as the write-off of associated unamortized note discounts and issuance costs.

During the nine months ended September 30, 2013, we recorded a loss from early extinguishment of debt of $348 million consisting of $177 million related to the difference between the purchase prices and the par values of the $714 million aggregate principal amount of our $10% senior secured notes due 2018 that we purchased and called during the period, as well as the write-off of associated unamortized note discounts and issuances costs, and $171 million related to the difference between the purchase prices and the par values of the $925 million aggregate principal amount of our 87/8% senior secured notes due 2019 that we purchased and called during the period, as well as the write-off of associated unamortized note discounts and issuance costs.

Income Tax (Benefit) Expense

During the nine months ended September 30, 2014, we recorded income tax benefit of $11 million compared to  $57 millionduring the nine months ended September 30,  2013.The benefit recorded in the 2014 periodrelated primarily to the loss from early extinguishment of debt recognized in that period and the impact of income tax benefit related to tax basis adjustments for state tax purposes on our acquisition of Vanguard.The benefit recorded in the 2013 period primarily related to the loss from early extinguishment of debt recognized in that period.

ADDITIONAL SUPPLEMENTAL NON-GAAP DISCLOSURES

The financial information provided throughout this report, including our Condensed Consolidated Financial Statements and the notes thereto, has been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). However, we use certain non-GAAP financial measures defined below in communications with investors, analysts, rating agencies, banks and others to assist such parties in understanding the impact of various items on our financial statements, some of which are recurring or involve cash payments. In addition, from time to time we use these measures to define certain performance targets under our compensation programs.

“Adjusted EBITDA” is a non-GAAP measure that we use in our analysis of the performance of our business, which we define as net income (loss) attributable to our common shareholders before: (1)the cumulative effect of changes in accounting principle, net of tax; (2)net loss (income) attributable to noncontrolling interests; (3)preferred stock dividends; (4) income (loss) from discontinued operations, net of tax; (5)income tax benefit (expense); (6)investment earnings (loss); (7) gain (loss) from early extinguishment of debt; (8)net gain (loss) on sales of investments; (9)interest expense; (10) litigation and investigation benefit (costs), net of insurance recoveries; (11)hurricane insurance recoveries, net of costs; (12) impairment and restructuring charges and acquisition-related costs; and (13) depreciation and amortization. As is the case with all non-GAAP measures, investors should consider the limitations associated with this metric, including the potential lack of comparability of this measure from one company to another, and should recognize that Adjusted EBITDA does not provide a complete measure of our operating performance because it excludes many items that are included in our financial statements. Accordingly, investors are encouraged to use GAAP measures when evaluating our financial performance.

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The table below shows the reconciliation of Adjusted EBITDA to net loss attributable to our common shareholders (the most comparable GAAP term) for the three and nine months ended September 30, 2014 and 2013:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders	$	9		$	28		$	(49)		$	(110)
Less: Net (income) attributable to noncontrolling interests		(9)			(8)			(44)			(20)
Loss from discontinued operations, net of tax		(1)			(5)			(22)			(4)
Income (loss) from continuing operations		19			41			17			(86)
Income tax benefit (expense)		18			(16)			11			57
Investment earnings		—			—			—			1
Loss from early extinguishment of debt		(24)			—			(24)			(348)
Interest expense		(186)			(91)			(558)			(292)
Operating income		211			148			588			496
Litigation and investigation costs		(4)			(1)			(19)			(3)
Impairment and restructuring charges, and acquisition-related costs		(37)			(20)			(90)			(45)
Depreciation and amortization		(207)			(119)			(609)			(354)
Adjusted EBITDA	$	459		$	288		$	1,306		$	898
Net operating revenues	$	4,179		$	2,408		$	12,147		$	7,217
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin)		11.0	%		12.0	%		10.8	%		12.4	%

LIQUIDITY AND CAPITAL RESOURCES

CASH REQUIREMENTS

There have been no material changes to our obligations to make future cash payments under contracts and under contingent commitments, such as standby letters of credit and minimum revenue guarantees, as disclosed in our Annual Report, except for (i)a $286 million aggregate commitment for a long-term arrangement we entered into during the three months ended June30, 2014 for future professional services to be provided to us and licensed software fees related to our health information technology initiatives and future ongoing information technology services for the 28 Vanguard hospitals we acquired in October 2013, and (ii) our recently issued senior notes discussed under the caption “Debt Instruments, Guarantees and Related Covenants” below.

As part of our long-term objective to manage our capital structure, we may from time to time seek to retire, purchase, redeem or refinance some of our outstanding debt or equity securities subject to prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. These actions are part of our strategy to manage our leverage and capital structure over time, which is dependent on our total amount of debt, our cash and our operating results. At September 30, 2014, using the last 12 months of Adjusted EBITDA, our ratio of total long-term debt, net of cash and cash equivalent balances, to Adjusted EBITDA was 6.5x. We anticipate this ratio will fluctuate from quarter to quarter based on earnings performance and other factors, including acquisitions that involve the assumption of long-term debt. We intend to manage this ratio by following our business plan, managing our cost structure and through other changes in our capital structure, including, if appropriate, the issuance of equity or convertible securities. Our ability to achieve our leverage and capital structure objectives is subject to numerous risks and uncertainties, many of which are described in the Forward-Looking Statements and Risk Factors sections in PartI of our Annual Report and the Risk Factors section in Part II of this report.

Our capital expenditures primarily relate to the expansion and renovation of existing facilities (including amounts to comply with applicable laws and regulations), equipment and information systems additions and

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replacements (including those required to achieve compliance with the HIT requirements under ARRA), introduction of new medical technologies, design and construction of new buildings, and various other capital improvements. Capital expenditures were $734 million and $398 million in the nine months ended September 30, 2014 and 2013, respectively. We anticipate that our capital expenditures for continuing operations for the year ending December 31, 2014 will total approximately $900 million to $1 billion, including $193 million that was accrued as a liability at December 31, 2013. Our budgeted 2014 capital expenditures include approximately $18 million to improve disability access at certain of our facilities pursuant to the terms of a negotiated consent decree. We expect to spend approximately $18 million more on such improvements over the next two years.

During the nine months ended September 30, 2014, we acquired a majority interest in Texas Regional Medical Center at Sunnyvale, a 70-bed hospital in Sunnyvale, Texas, a suburban community east of Dallas, and completed our acquisition of Emanuel Medical Center, a 209-bed hospital in Turlock, California, located approximately 100 miles southeast of San Francisco. We also acquired four ambulatory surgery centers, three urgent care centers, one diagnostic imaging center and various physician practice entities in the same period. The fair value of the consideration conveyed in the acquisitions was $185 million.

Interest payments, net of capitalized interest, were $487 million and $295 million in the nine months ended September 30, 2014 and 2013, respectively.

Income tax payments, net of tax refunds, were approximately $5 million in each of the nine month periods ended September 30, 2014 and 2013.

SOURCES AND USES OF CASH

Our liquidity for the nine months ended September 30, 2014 was primarily derived from net cash provided by operating activities, cash on hand, issuance of long term debt and borrowings under our revolving credit facility. We had approximately $200 million of cash and cash equivalents on hand at September 30, 2014 to fund our operations and capital expenditures, and our borrowing availability under our credit facility was $994 million based on our borrowing base calculation as of September 30, 2014.

Our primary source of operating cash is the collection of accounts receivable. As such, our operating cash flow is impacted by levels of cash collections and levels of bad debt due to shifts in payer mix and other factors.

Net cash provided by operating activities was $468 million in the nine months ended September 30, 2014 compared to $334 million in the nine months ended September 30, 2013. Key positive and negative factors contributing to the change between the 2014 and 2013 periods include the following:

· Increased income from continuing operations before income taxes of $408 million, excluding loss from early extinguishment of debt, interest expense, investment earnings, litigation and investigation costs, impairment and restructuring charges, and acquisition-related costs, and depreciation and amortization, in the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013;

· $11 million more cash used in operating activities from discontinued operations;

· An increase of $79 million in payments on reserves for restructuring charges, acquisition-related costs, and litigation costs and settlements; and

· Higher interest payments of $192 million.

We continue to seek further initiatives to increase the efficiency of our balance sheet by generating incremental cash. These initiatives may include the sale of underutilized or inefficient assets.

Capital expenditures were $734 million and $398 million in the nine months ended September 30, 2014and 2013, respectively.

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We record our investments that are available-for-sale at fair market value. As shown in Note 13 to the Condensed Consolidated Financial Statements, the majority of our investments are valued based on quoted market prices or other observable inputs. We believe we have no investments that will be negatively affected by the slow economic recovery such that they will materially impact our financial condition, results of operations or cash flows.

DEBT INSTRUMENTS, GUARANTEES AND RELATED COVENANTS

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. We are in compliance with all covenants and conditions in our Credit Agreement. At September 30, 2014, we had no cash borrowings outstanding under the revolving credit facility; however, we had approximately $6 million of standby letters of credit outstanding. Based on our eligible receivables, approximately $994 million was available for borrowing under the revolving credit facility at September 30, 2014.

Standby letters of credit are required principally by our insurers and various states to collateralize our workers’ compensation programs pursuant to statutory requirements and as security to collateralize the deductible and self-insured retentions under certain of our professional and general liability insurance programs. The amount of collateral required is primarily dependent upon the level of claims activity and our creditworthiness. The insurers require the collateral in case we are unable to meet our obligations to claimants within the deductible or self-insured retention layers. On March7,2014, 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 to the LC Facility), 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 March7, 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. At September 30, 2014, we had approximately $115 million of standby letters of credit outstanding under the LC Facility.

In September 2014, we sold $500 million aggregate principal amount of 51/₂% 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 March 1, 2015. The proceeds from the sale of the notes were used for general corporate purposes, including the repayment of indebtedness and drawings under our Credit Agreement, related transaction fees and expenses, and acquisitions.

In Juneand March2014, we sold $500 million and $600 million aggregate principal amount, respectively, of 5% senior notes, which will mature on March1, 2019. We will pay interest on the notes semi-annually in arrears on March1 and September1 of each year, which payments commenced on September1, 2014. The net proceeds from the sale of the notes in June2014 were used to redeem our 91/4% senior notes due 2015 in July2014. The net proceeds from the sale of the notes in March2014 were used for general corporate purposes, including the repayment of borrowings under our Credit Agreement. For information regarding our long-term debt and capital lease obligations, see Note 5 to our Condensed Consolidated Financial Statements.

LIQUIDITY

From time to time, we expect to engage in additional capital markets, bank credit and other financing activities depending on our needs and financing alternatives available at that time. We believe our existing debt agreements, the significant recent changes to which are described above, provide significant flexibility for future secured or unsecured borrowings.

Our cash on hand fluctuates day-to-day throughout the year based on the timing and levels of routine cash receipts and disbursements, including our book overdrafts, and required cash disbursements, such as interest and income tax payments. These fluctuations result in material intra-quarter net operating and investing uses of cash that has caused, and in the future could cause, us to use our senior secured revolving credit facility as a source of liquidity. We believe that existing cash and cash equivalents on hand, availability under our revolving credit facility, anticipated future cash provided by operating activities, and our investments in marketable securities of our captive insurance companies classified as noncurrent investments on our balance sheet should be adequate to meet our current cash needs. These

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sources of liquidity should also be adequate to finance planned capital expenditures and acquisitions, payments on the current portion of our long-term debt and other presently known operating needs.

Long-term liquidity for debt service will be dependent on improved cash provided by operating activities and, given favorable market conditions, future borrowings or refinancings. However, our cash requirements could be materially affected by the use of cash in acquisitions of businesses and repurchases of securities, and also by a deterioration in our results of operations, as well as the various uncertainties discussed in this and other sections of this report, which could require us to pursue any number of financing options, including, but not limited to, additional borrowings, debt refinancings, equity offerings, asset sales or other financing alternatives. The level, if any, of these financing sources cannot be assured.

We do not rely on commercial paper or other short-term financing arrangements nor do we enter into repurchase agreements or other short-term financing arrangements not otherwise reported in our period-end balance sheets. We do not have any significant European sovereign debt exposure.

We continue to aggressively identify and implement further actions to control costs and enhance our operating performance, including cash flow. Among the areas being addressed are volume growth, including the acquisition and development of outpatient businesses, physician recruitment and alignment strategies, expansion of our services businesses within Conifer, managed care payer contracting, procurement efficiencies, cost standardization, bad debt expense reduction initiatives, underperforming hospitals and health plans, and certain hospital and overhead costs not related to patient care. Although these initiatives may result in improved performance, our performance may remain somewhat below our hospital management peers because of geographic and other differences in hospital portfolios.

OFF-BALANCE SHEET ARRANGEMENTS

Our consolidated operating results for the nine months ended September 30, 2014and 2013 include $345 million and $715 million, respectively, of net operating revenues and $53 million and $93 million, respectively, of operating income generated from general hospitals operated by us under operating lease arrangements (two hospitals as of September 30, 2014 and four hospitals as of September 30, 2013). In accordance with GAAP, the applicable buildings and the future lease obligations under these arrangements are not recorded on our consolidated balance sheet. The current terms of these leases expire in 2027 and 2029. If we are unable to extend these leases or purchase the hospitals, we would no longer generate revenues or expenses from such hospitals.

We have no other off-balance sheet arrangements that may have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, except for $248 million of standby letters of credit outstanding and guarantees as of September 30, 2014.

CRITICAL ACCOUNTING ESTIMATES

In preparing our Condensed Consolidated Financial Statements in conformity with GAAP, we must use estimates and assumptions that affect the amounts reported in our Condensed Consolidated Financial Statements and 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.

We consider our critical accounting estimates to be those that (1) involve significant judgments and uncertainties, (2) require estimates that are more difficult for management to determine, and (3) may produce materially different outcomes under different conditions or when using different assumptions.

Our critical accounting estimates have not changed from the description provided in our Annual Report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The table below presents information about certain of our market-sensitive financial instruments as of September 30, 2014. The fair values were determined based on quoted market prices for the same or similar instruments.

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The average effective interest rates presented are based on the rate in effect at the reporting date. The effects of unamortized premiums and discounts are excluded from the table.

	Maturity Date, Years Ending December 31,
	2014			2015			2016			2017			2018			Thereafter			Total			Fair Value
	(Dollars in Millions)
Fixed rate long-term debt	$	46		$	87		$	45		$	58		$	1,051		$	10,287		$	11,574		$	11,997
Average effective interest rates		7.0	%		6.3	%		6.5	%		8.5	%		6.6	%		6.7	%		6.7	%

At September 30, 2014, we had long-term, market-sensitive investments held by our captive insurance subsidiaries. Our market risk associated with our investments in debt securities classified as non-current assets is substantially mitigated by the long-term nature and type of the investments in the portfolio.

We have no affiliation with partnerships, trusts or other entities (sometimes referred to as “special-purpose” or “variable-interest” entities) whose purpose is to facilitate off-balance sheet financial transactions or similar arrangements by us. Thus, we have no exposure to the financing, liquidity, market or credit risks associated with such entities.

We do not hold or issue derivative instruments for trading purposes and are not a party to any instruments with leverage or prepayment features.

ITEM 4. CONTROLS AND PROCEDURES

We carried out an evaluation of the effectiveness of our disclosure controls and procedures as defined by Rules 13a-15(e)and 15d-15(e)under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. The evaluation was performed under the supervision and with the participation of management, including our chief executive officer and chief financial officer. Based upon that evaluation, the chief executive officer and chief financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Securities Exchange Act reports is recorded, processed, summarized and reported in a timely manner and that such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PARTII. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Because we provide healthcare services in a highly regulated industry, we have been and expect to continue to be party to various lawsuits, claims and regulatory investigations from time to time. For information regarding material pending legal proceedings in which we are involved, see Note 10 to our Condensed Consolidated Financial Statements, which is incorporated by reference. In addition to those matters, as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013 (“Annual Report”), our Conifer Health Solutions, LLC subsidiary (“Conifer”) received a Civil Investigative Demand (“CID”) in August 2013 from the U.S. Consumer Financial Protection Bureau (“CFPB”) that required Conifer to provide to the CFPB a broad range of information regarding its debt collection activities, including its internal compliance procedures. In July 2014, the CFPB issued a second CID seeking information regarding Conifer’s compliance with certain notification and other requirements under federal consumer financial laws. Conifer is cooperating with the CFPB in providing the requested information. The CFPB has recently indicated that it currently expects to communicate its conclusions regarding the investigation sometime in the fourth quarter of 2014. If the CFPB determines that a violation of the federal consumer financial laws has occurred, it has the authority to impose fines, require operational changes or take other corrective actions. At this time, because we have not yet met with the CFPB nor has the agency communicated its conclusions regarding the investigation to us, we are unable to predict the outcome of the investigation or provide an estimate of possible range of loss.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors discussed in our Annual Report except as set forth below.

Our business and financial results could be harmed by a national or localized outbreak of a highly contagious or epidemic disease.

If an outbreak of an infectious disease such as the Ebola virus were to occur nationally or in one of the regions our hospitals serve, our business and financial results could be adversely effected. The treatment of a highly contagious disease at one of our facilities may result in a temporary shutdown or diversion of patients. In addition, unaffected individuals may decide to defer elective procedures or otherwise avoid medical treatment, resulting in reduced patient volumes and operating revenues. Furthermore, we cannot predict the costs associated with the potential treatment of an infectious disease outbreak by our hospitals or preparation for such treatment. 

.

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ITEM 6. EXHIBITS

(4)	Instruments Defining the Rights of Security Holders, Including Indentures
	(a)	Twenty-Fourth Supplemental Indenture, dated as of September 29, 2014, between the Registrant and The Bank of New York Mellon Trust Company, N.A., as successor trustee to The Bank of New York, relating to 51/2% Senior Notes due 2019 (Incorporated by reference to Exhibit 4.2 to Registrant’s Current Report on Form 8-K dated and filed September 29, 2014)
(10)	Material Contracts
	(a)	Exchange and Registration Rights Agreement, dated as of September 29, 2014, between the Registrant and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the initial purchasers (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated and filed September 29, 2014)
(31)	Rule 13a-14(a)/15d-14(a) Certifications
	(a)	Certification of Trevor Fetter, President and Chief Executive Officer
	(b)	Certification of Daniel J. Cancelmi, Chief Financial Officer
(32)	Section 1350 Certification of Trevor Fetter, President and Chief Executive Officer, and Daniel J. Cancelmi, Chief Financial Officer
(101 INS)	XBRL Instance Document
(101 SCH)	XBRL Taxonomy Extension Schema Document
(101 CAL)	XBRL Taxonomy Extension Calculation Linkbase Document
(101 DEF)	XBRL Taxonomy Extension Definition Linkbase Document
(101LAB)	XBRL Taxonomy Extension Label Linkbase Document
(101PRE)	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		TENET HEALTHCARE CORPORATION
		(Registrant)
Date: November 3, 2014	By:	/s/ R. SCOTT RAMSEY
		R. Scott Ramsey
		Vice President and Controller
		(Principal Accounting Officer)

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EX-31.A

Exhibit 31(a)

Rule 13a-14(a)/15d-14(a) Certification

I, Trevor Fetter, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Tenet Healthcare Corporation (the “Registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: November 3, 2014

/s/ TREVOR FETTER

Trevor Fetter

President and Chief Executive Officer

EX-31.B

Exhibit 31(b)

Rule 13a-14(a)/15d-14(a) Certification

I, Daniel J. Cancelmi, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Tenet Healthcare Corporation (the “Registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: November 3, 2014

/s/ DANIEL J. CANCELMI

Daniel J. Cancelmi

Chief Financial Officer

EX-32

Exhibit 32

Certifications Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

We, the undersigned Trevor Fetter and Daniel J. Cancelmi, being, respectively, the President and Chief Executive Officer and the Chief Financial Officer of Tenet Healthcare Corporation (the “Registrant”), do each hereby certify that (i) the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 (the “Form 10-Q”), to be filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Registrant and its subsidiaries.

Date: November 3, 2014	/s/ TREVOR FETTER
	Trevor Fetter
	President and Chief Executive Officer
Date: November 3, 2014	/s/ DANIEL J. CANCELMI
	Daniel J. Cancelmi
	Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350; it is not being filed for purposes of Section 18 of the Securities Exchange Act, and is not to be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

XML

BASIS OF PRESENTATION - Intangible Assets (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Other intangible assets
Gross Carrying Amount	$ 1,814	$ 1,621
Accumulated Amortization	(623)	(516)
Net Book Value	1,191	1,105
Capitalized software costs
Other intangible assets
Gross Carrying Amount	1,326	1,148
Accumulated Amortization	(552)	(468)
Net Book Value	774	680
Long-term debt issuance costs
Other intangible assets
Gross Carrying Amount	245	230
Accumulated Amortization	(42)	(31)
Net Book Value	203	199
Trade names
Other intangible assets
Gross Carrying Amount	106	106
Net Book Value	106	106
Contracts
Other intangible assets
Gross Carrying Amount	57	57
Accumulated Amortization	(5)	(2)
Net Book Value	52	55
Other
Other intangible assets
Gross Carrying Amount	80	80
Accumulated Amortization	(24)	(15)
Net Book Value	$ 56	$ 65

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EQUITY - Changes in Redeemable Noncontrolling Interests (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Changes in redeemable noncontrolling interests in equity of consolidated subsidiaries
Distributions paid to noncontrolling interests	$ (27)	$ (16)
Contributions from noncontrolling interests	5
Redeemable noncontrolling interests
Changes in redeemable noncontrolling interests in equity of consolidated subsidiaries
Balances at beginning of period	340	16
Net income	24	7
Distributions paid to noncontrolling interests	(3)	(2)
Contributions from noncontrolling interests	10
Sales of joint venture interests		52
Purchases of businesses	25	10
Balances at end of period	$ 396	$ 83

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GUARANTEES (Details) (Income and Revenue Collection Guarantee, USD $) In Millions, unless otherwise specified	Sep. 30, 2014
Income and Revenue Collection Guarantee
GUARANTEES
Maximum potential amount of future payments under guarantees	$ 92
Liability for the fair value of guarantees	$ 69

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PROPERTY AND PROFESSIONAL AND GENERAL LIABILITY INSURANCE (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended			12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014 Professional and General Liability Insurance	Dec. 31, 2013 Professional and General Liability Insurance
Insurance coverage
Self insurance reserve			$ 700	$ 711
Loss contingency discount rate, maturity rate period			7 years	7 years
Risk-free rate (as a percent)			2.22%	2.45%
Malpractice expense	$ 170	$ 71

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LONG-TERM DEBT AND LEASE OBLIGATIONS - Credit Agreement (Details) (USD $) In Millions, unless otherwise specified					9 Months Ended								9 Months Ended
	Sep. 30, 2014 9 1/4%, due 2015	Jun. 30, 2014 9 1/4%, due 2015	Dec. 31, 2013 9 1/4%, due 2015	Sep. 30, 2014 Credit Agreement	Sep. 30, 2014 Credit Agreement Minimum	Sep. 30, 2014 Credit Agreement Maximum	Sep. 30, 2014 Credit Agreement Base rate Minimum	Sep. 30, 2014 Credit Agreement Base rate Maximum	Sep. 30, 2014 Credit Agreement LIBOR Minimum	Sep. 30, 2014 Credit Agreement LIBOR Maximum	Sep. 30, 2014 Letter of Credit Facility	Mar. 07, 2014 Letter of Credit Facility	Sep. 30, 2014 Letter of Credit Facility Maximum
LONG-TERM DEBT AND LEASE OBLIGATIONS
Revolving credit facility, maximum borrowing capacity				$ 1,000								$ 180
Line of credit facility, subfacility maximum available capacity				300
Interest rate, stated percentage	9.25%	9.25%	9.25%
Carrying amount			474
Margin on variable rate (as a percent)							1.00%	1.50%	2.00%	2.50%	0.875%
Unused commitment fee (as a percent)					0.375%	0.50%					0.50%
Standby letters of credit outstanding				6							115
Amount available for borrowing under revolving credit facility				994
Borrowing capacity after increase subject to certain conditions												$ 200
Number of business days after notice, for reimbursement of amount drawn.													3 days
Unused commitment fee after step down													0.375%
Secured debt to EBITDA ratio											3.00
Issuance fee (percentage)											1.875%
Issuance fee, based on face amount (percentage)											0.125%

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FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2014

FAIR VALUE MEASUREMENTS

Schedule of assets and liabilities measured at fair value on a recurring basis

			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
Investments	September 30, 2014		(Level 1)		(Level 2)		(Level 3)
Marketable securities — current	$	2	$	2	$	—	$	—
Investments in Reserve Yield Plus Fund		2		—		2		—
Marketable debt securities — noncurrent		62		26		35		1
	$	66	$	28	$	37	$	1

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

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CLAIMS AND LAWSUITS - Reconciliations (Details) (Claims, lawsuits, and regulatory proceedings, USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Loss Contingencies
Litigation reserve, Balances at Beginning of Period	$ 70	$ 10
Litigation and Investigation costs	37	5
Cash Payments	(16)	(4)
Litigation reserve, Balances at End of Period	91	11
Continuing operations
Loss Contingencies
Litigation reserve, Balances at Beginning of Period	64	5
Litigation and Investigation costs	19	3
Cash Payments	(10)	(3)
Litigation reserve, Balances at End of Period	73	5
Discontinued operations
Loss Contingencies
Litigation reserve, Balances at Beginning of Period	6	5
Litigation and Investigation costs	18	2
Cash Payments	(6)	(1)
Litigation reserve, Balances at End of Period	$ 18	$ 6

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BASIS OF PRESENTATION (Tables)

9 Months Ended

Sep. 30, 2014

BASIS OF PRESENTATION

Schedule of sources of net operating revenues before provision for doubtful accounts

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
General Hospitals:
Medicare	$	838	$	501	$	2,560	$	1,543
Medicaid		340		206		1,012		630
Managed care		2,369		1,378		6,787		4,126
Indemnity, self-pay and other		357		262		1,172		783
Acute care hospitals — other revenue		8		14		45		53
Other:
Other operations		516		257		1,520		706
Net operating revenues before provision for doubtful accounts	$	4,428	$	2,618	$	13,096	$	7,841

Schedule of other intangible assets

	Gross
	Carrying		Accumulated		Net Book
	Amount		Amortization		Value
As of September 30, 2014:
Capitalized software costs	$	1,326	$	(552)	$	774
Long-term debt issuance costs		245		(42)		203
Trade names		106		—		106
Contracts		57		(5)		52
Other		80		(24)		56
Total	$	1,814	$	(623)	$	1,191

	Gross
	Carrying		Accumulated		Net Book
	Amount		Amortization		Value
As of December 31, 2013:
Capitalized software costs	$	1,148	$	(468)	$	680
Long-term debt issuance costs		230		(31)		199
Trade names		106		—		106
Contracts		57		(2)		55
Other		80		(15)		65
Total	$	1,621	$	(516)	$	1,105

Schedule of estimated future amortization of intangibles with finite useful lives

			Years Ending December 31,
	Total		2014		2015		2016		2017		2018		Later Years
Amortization of intangible assets	$	1,077	$	54	$	190	$	163	$	134	$	130	$	406

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EMPLOYEE BENEFIT PLANS - Stock Options (Details) (Stock Options, USD $) In Millions, except Share data, unless otherwise specified	9 Months Ended		12 Months Ended
	Sep. 30, 2014 item	Sep. 30, 2013	Dec. 31, 2011 item	Dec. 31, 2010 item
Stock option activity
Outstanding at the beginning of the period (in shares)	3,308,111
Granted (in shares)	0
Exercised (in shares)	(691,050)	(913,369)
Forfeited/Expired (in shares)	(624,052)
Outstanding at the end of the period (in shares)	1,993,009
Vested and expected to vest at the end of the period (in shares)	1,984,562
Exercisable at the end of the period (in shares)	1,587,878
Weighted Average Exercise Price Per Share
Outstanding at the beginning of the period (in dollars per share)	$ 30.79
Exercised (in dollars per share)	$ 33.72
Forfeited/Expired (in dollars per share)	$ 47.97
Outstanding at the end of the period (in dollars per share)	$ 24.40
Vested and expected to vest at the end of the period (in dollars per share)	$ 24.31
Exercisable at the end of the period (in dollars per share)	$ 21.90
Aggregate Intrinsic Value
Outstanding at the end of the period	$ 70
Vested and expected to vest at the end of the period	70
Exercisable at the end of the period	60
Weighted Average Remaining Life
Outstanding at the end of the period	3 years 10 months 24 days
Vested and expected to vest at the end of the period	3 years 10 months 24 days
Exercisable at the end of the period	3 years 8 months 12 days
Other Disclosures
Aggregate Intrinsic value of awards exercised	13	17
Unrecognized compensation costs	$ 2
Period for recognition of unrecognized compensation costs	1 year 1 month 6 days
Weighted average estimated fair value of awards granted (in dollars per share)		$ 14.46
Assumptions used to calculate fair value of awards granted to top eleven employees
Expected volatility (as a percent)		50.00%
Expected dividend yield (as a percent)		0.00%
Expected life		3 years 7 months 6 days
Expected forfeiture rate (as a percent)		6.00%
Risk-free interest rate (as a percent)		0.48%
Early exercise threshold gain (as a percent)		100.00%
Early exercise rate, gain (as a percent)		50.00%
Number of dates excluded from historical share-price volatility	2		1	1
2008 Stock Incentive Plan
Stock option activity
Granted (in shares)		295,639
Other Disclosures
Vesting period	3 years
Expiration period	10 years

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ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS - Allowance (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable
Allowance for doubtful accounts as a percent of patients accounts receivable			25.90%		24.00%
Total	$ 4,428	$ 2,618	$ 13,096	$ 7,841
Self-Pay Patients
Accounts, Notes, Loans and Financing Receivable
Allowance for doubtful accounts as a percent of patients accounts receivable			79.50%		75.90%
Estimated costs of caring	135	116	488	342
Managed Care Patients
Accounts, Notes, Loans and Financing Receivable
Allowance for doubtful accounts as a percent of patients accounts receivable			6.20%		5.90%
Charity Care Patients
Accounts, Notes, Loans and Financing Receivable
Estimated costs of caring	42	32	137	95
Disproportionate Share Hospital
Accounts, Notes, Loans and Financing Receivable
Total	$ 178	$ 72	$ 493	$ 257

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BASIS OF PRESENTATION - Revenues (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Supplemental payments and net operating revenues
Net operating revenues before provision for doubtful accounts	$ 4,428	$ 2,618	$ 13,096	$ 7,841
Medicare
Supplemental payments and net operating revenues
Net operating revenues before provision for doubtful accounts	838	501	2,560	1,543
Medicaid
Supplemental payments and net operating revenues
Supplemental payments receivable recorded as other current assets rather than accounts receivable	73		73
Net operating revenues before provision for doubtful accounts	340	206	1,012	630
Managed care
Supplemental payments and net operating revenues
Net operating revenues before provision for doubtful accounts	2,369	1,378	6,787	4,126
Indemnity, self-pay and other
Supplemental payments and net operating revenues
Net operating revenues before provision for doubtful accounts	357	262	1,172	783
Acute care hospitals - other revenue
Supplemental payments and net operating revenues
Net operating revenues before provision for doubtful accounts	8	14	45	53
Other operations
Supplemental payments and net operating revenues
Net operating revenues before provision for doubtful accounts	$ 516	$ 257	$ 1,520	$ 706

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EMPLOYEE BENEFIT PLANS - Restricted Stock (Details) (USD $) In Millions, except Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Restricted Stock Units
Restricted stock unit activity
Unvested at the beginning of the period (in shares)	2,707,222
Granted (in shares)	1,768,508
Vested (in shares)	(900,763)
Forfeited (in shares)	(140,468)
Unvested at the end of the period (in shares)	3,434,499
Weighted Average Grant Date Fair Value Per Unit
Unvested at the beginning of the period (in dollars per share)	$ 33.34
Granted (in dollars per share)	$ 48.41
Vested (in dollars per share)	$ 36.51
Forfeited (in dollars per share)	$ 35.23
Unvested at the end of the period (in dollars per share)	$ 41.85
Other Disclosures
Percentage of restricted stock units which will vest on the tenth anniversary of the grant date	100.00%
Unrecognized compensation costs	$ 107
Period for recognition of unrecognized compensation costs	3 years
Restricted Stock Units | Chief executive officer
Restricted stock unit activity
Granted (in shares)	212,180
Restricted Stock Units | Time-vesting
Restricted stock unit activity
Granted (in shares)	1,045,750	815,262
Other Disclosures
Restricted stock that will vest and be settled over a three-year period from the grant date (in shares)	944,249	735,129
Restricted stock that will vest and be settled on the tenth anniversary of the grant date (in shares)	23,435
Restricted stock that will vest and be settled on the fifth anniversary of the grant date (in shares)	63,623	80,133
Percentage of restricted stock units, which will vest on the fifth anniversary of the grant date	100.00%	100.00%
Restricted stock that will vest and be settled on the third anniversary of the grant date (in shares)	14,443
Percentage of restricted stock units, which will vest three years from the grant date	100.00%
Vesting period	3 years	3 years
Restricted Stock Units | Time-vesting | Chief executive officer
Restricted stock unit activity
Granted (in shares)	106,090
Restricted Stock Units | Performance-based vesting
Restricted stock unit activity
Granted (in shares)	271,815	206,058
Other Disclosures
Term for achievement of specified performance goal	1 year
Vesting period	3 years
Awards vesting (as a percent)	100.00%
Restricted Stock Units | Performance-based vesting | Minimum
Other Disclosures
Awards vesting (as a percent)	0.00%
Restricted Stock Units | Performance-based vesting | Maximum
Other Disclosures
Awards vesting (as a percent)	200.00%
Restricted Stock Units | Performance-based vesting | Chief executive officer
Restricted stock unit activity
Granted (in shares)	106,090
Other Disclosures
Additional award to be granted (in shares)	106,090
Restricted Stock Units | Performance-based - 3 year vesting | Chief executive officer
Other Disclosures
Vesting period	3 years
Awards vesting (as a percent)	50.00%
Restricted Stock Units | Performance-based - 6 year vesting | Chief executive officer
Other Disclosures
Vesting period	6 years
Awards vesting (as a percent)	50.00%
Special Retention Restricted Stock Units | Performance-based vesting
Restricted stock unit activity
Granted (in shares)	450,943
Other Disclosures
Awards vesting (as a percent)	66.70%
Special Retention Restricted Stock Units | Performance-based - 1 year vesting
Other Disclosures
Vesting period	1 year
Awards vesting (as a percent)	50.00%
Special Retention Restricted Stock Units | Performance-based - 4 year vesting
Other Disclosures
Vesting period	4 years
Awards vesting (as a percent)	50.00%
Special Retention Restricted Stock Units | Performance-based - 5 year vesting
Other Disclosures
Awards vesting (as a percent)	33.30%

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FAIR VALUE MEASUREMENTS (Details) (Recurring basis, USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Total
Fair value of assets and liabilities measured on recurring basis
Marketable securities-current	$ 2	$ 1
Investments in Reserve Yield Plus Fund	2	2
Marketable debt securities-noncurrent	62	62
Investments	66	65
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair value of assets and liabilities measured on recurring basis
Marketable securities-current	2	1
Marketable debt securities-noncurrent	26	23
Investments	28	24
Estimated fair value of the long-term debt instrument as a percentage of carrying value	103.80%	103.50%
Significant Other Observable Inputs (Level 2)
Fair value of assets and liabilities measured on recurring basis
Investments in Reserve Yield Plus Fund	2	2
Marketable debt securities-noncurrent	35	38
Investments	37	40
Significant Unobservable Inputs (Level 3)
Fair value of assets and liabilities measured on recurring basis
Marketable debt securities-noncurrent	1	1
Investments	$ 1	$ 1

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LONG-TERM DEBT AND LEASE OBLIGATIONS - Senior Notes (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	9 Months Ended														1 Months Ended
	Sep. 30, 2014	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014 5 1/2%, due 2019	Dec. 31, 2013 5 1/2%, due 2019	Sep. 30, 2014 5 1/2%, due 2019 Senior Notes	Sep. 30, 2014 5%, due 2019	Jun. 30, 2014 5%, due 2019	Mar. 31, 2014 5%, due 2019	Dec. 31, 2013 5%, due 2019	Jun. 30, 2014 5%, due 2019 Senior Notes	Mar. 31, 2014 5%, due 2019 Senior Notes	Sep. 30, 2014 9 1/4%, due 2015	Jun. 30, 2014 9 1/4%, due 2015	Dec. 31, 2013 9 1/4%, due 2015	Jul. 31, 2014 9 1/4%, due 2015 Senior Notes
LONG-TERM DEBT AND LEASE OBLIGATIONS
Aggregate principal amount of notes sold						$ 500					$ 500	$ 600
Interest rate, stated percentage				5.50%	5.50%	5.50%	5.00%	5.00%	5.00%	5.00%			9.25%	9.25%	9.25%
Loss from early extinguishment of debt	$ (24)	$ (24)	$ (348)													$ (24)

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DISCONTINUED OPERATIONS

9 Months Ended

Sep. 30, 2014

Discontinued Operation, Additional Disclosures [Abstract]

DISCONTINUED OPERATIONS

NOTE 3. DISCONTINUED OPERATIONS

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Net operating revenues	$	1	$	3	$	2	$	6
Net loss before income taxes		(2)		(10)		(35)		(7)

Net loss before income taxes from discontinued operations in the nine months ended September 30, 2014 included approximately $18 million of expense recorded in litigation and investigation costs allocable to one of our previously divested hospitals related to a class action lawsuit discussed in Note 10. In the nine months ended September 30, 2013, we recognized a $7 million gain in discontinued operations related to the sale of land.

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

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ACQUISITIONS (Details) (USD $)	9 Months Ended		9 Months Ended						0 Months Ended	3 Months Ended		9 Months Ended
	Sep. 30, 2014 plan Institution	Dec. 31, 2013	Sep. 30, 2014 Series of individual business acquisitions	Sep. 30, 2014 Series of individual business acquisitions Texas Regional Medical Center item	Sep. 30, 2014 Series of individual business acquisitions Emanuel Medical Center item	Sep. 30, 2014 Series of individual business acquisitions Ambulatory Surgery Centers Institution	Sep. 30, 2014 Series of individual business acquisitions Urgent care centers Institution	Sep. 30, 2014 Series of individual business acquisitions Other diagnostic imaging center Institution	Oct. 01, 2013 Vanguard Institution person plan	Sep. 30, 2014 Vanguard	Sep. 30, 2013 Vanguard	Sep. 30, 2014 Vanguard	Sep. 30, 2013 Vanguard	Oct. 01, 2013 Vanguard
Business Acquisition
Business acquisition share price (in dollars per share)														$ 21
Number of hospitals	80								28
Number of hospitals under construction									1
Number of outpatient centers acquired									39
Number of health plans	6								5
Number of members covered under the health plans									140,000
Number of licensed beds				70	209
Number of ambulatory surgery centers						4
Number of urgent care centers							3
Number of diagnostic imaging centers								1
Amount paid for acquisition, including assumed debt			$ 185,000,000						$ 4,300,000,000
Assumed debt									2,500,000,000
Preliminary purchase price allocations
Current assets			19,000,000											976,000,000
Property and equipment			104,000,000											2,830,000,000
Other long-term assets														152,000,000
Other intangible assets														155,000,000
Goodwill	3,705,000,000	3,566,000,000	137,000,000											2,460,000,000
Current liabilities			(21,000,000)											(1,193,000,000)
Deferred taxes - long term														(103,000,000)
Other long-term liabilities														(3,711,000,000)
Long-term liabilities			(19,000,000)
Redeemable noncontrolling interests in equity of consolidated subsidiaries			(21,000,000)											(258,000,000)
Noncontrolling interests			(14,000,000)											(7,000,000)
Net cash paid			185,000,000											1,301,000,000
Transaction costs related to prospective and closed acquisitions			7,000,000
Pro Forma Information - Unaudited
Net operating revenues										4,179,000,000	3,748,000,000	12,147,000,000	11,574,000,000
Net income (loss) from continuing operations, before income taxes										$ 1,000,000	$ (220,000,000)	$ 6,000,000	$ (418,000,000)

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DISCONTINUED OPERATIONS (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Net operating revenues and income (loss) before income taxes
Net operating revenues	$ 1	$ 3	$ 2	$ 6
Net loss before income taxes	(2)	(10)	(35)	(7)
Litigation and investigation costs allocable to the previously divested hospitals related to a class action suit	18
Land
Net operating revenues and income (loss) before income taxes
Gain (loss) on sale of discontinued operations		$ 7

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EMPLOYEE BENEFIT PLANS (Tables)

9 Months Ended

Sep. 30, 2014

EMPLOYEE BENEFIT PLANS

Summary of stock option activity

		Weighted Average
		Exercise Price		Aggregate		Weighted Average
	Options	Per Share		Intrinsic Value		Remaining Life
					(In Millions)
Outstanding as of  December 31, 2013	3,308,111	$	30.79
Granted	—
Exercised	(691,050)		33.72
Forfeited/Expired	(624,052)		47.97
Outstanding as of  September 30, 2014	1,993,009	$	24.40	$	70	3.9	years
Vested and expected to vest at September 30, 2014	1,984,562	$	24.31	$	70	3.9	years
Exercisable as of  September 30, 2014	1,587,878	$	21.90	$	60	3.7	years

Schedule of assumptions used to determine fair value of stock options

	Nine Months Ended September 30, 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

Summary of information about stock options by range of exercise prices

	Options Outstanding					Options Exercisable
		Weighted Average
	Number of	Remaining		Weighted Average		Number of	Weighted Average
Range of Exercise Prices	Options	Contractual Life		Exercise Price		Options	Exercise Price
$0.00 to $4.569	242,753	4.4	years	$	4.56	242,753	$	4.56
$4.57 to $25.089	957,583	5.2	years		20.96	830,903		20.67
$25.09 to $32.569	402,816	1.9	years		29.32	402,816		29.32
$32.57 to $42.089	389,857	2.5	years		40.10	111,406		42.08
	1,993,009	3.9	years	$	24.40	1,587,878	$	21.90

Summary of restricted stock unit activity

	Restricted Stock	Weighted Average Grant
	Units	Date Fair Value Per Unit
Unvested as of December 31, 2013	2,707,222	$	33.34
Granted	1,768,508		48.41
Vested	(900,763)		36.51
Forfeited	(140,468)		35.23
Unvested as of September 30, 2014	3,434,499	$	41.85

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LONG-TERM DEBT AND LEASE OBLIGATIONS (Tables)

9 Months Ended

Sep. 30, 2014

LONG-TERM DEBT AND LEASE OBLIGATIONS

Summary of long-term debt

	September 30,		December 31,
	2014		2013
Senior notes:
97/8%, due 2014	$	—	$	60
91/4%, due 2015		—		474
5%, due 2019		1,100		—
51/%, due 2019		500		—
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		—		405
Capital leases and mortgage notes		453		417
Unamortized note discounts and premium		(21)		(28)
Total long-term debt		11,553		10,849
Less current portion		98		153
Long-term debt, net of current portion	$	11,455	$	10,696

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CLAIMS AND LAWSUITS (Details) (USD $)		1 Months Ended	9 Months Ended	17 Months Ended	9 Months Ended	0 Months Ended	9 Months Ended	1 Months Ended
	Sep. 30, 2014 Governmental Reviews	Jan. 31, 2013 Kyphoplasty Institution	Sep. 30, 2014 Kyphoplasty Institution	Jul. 31, 2010 Kyphoplasty Institution	Sep. 30, 2014 ICDs Institution	Jul. 23, 2014 Clinica de la Mama Investigations and Qui Tam Action defendant	Sep. 30, 2014 Clinica de la Mama Investigations and Qui Tam Action Institution	Oct. 31, 2014 Ordinary Course Matters plaintiff person	Jun. 30, 2014 Ordinary Course Matters
Loss Contingencies
Number of hospitals under governmental review				7	56		4
Settlement amount		$ 900,000,000
Number of hospitals under Medicare claims review		1
Number of hospitals for which settlement discussions to resolve matter is engaged			5
Litigation reserve	38,000,000		2,000,000						17,000,000
Number of criminal conspiracy counts against a former owner of HMM						1
Number of criminal conspiracy counts against a former employee						1
Number of persons in class action lawsuits								5,000
Number of persons identified in class certification process								8
Number of plaintiffs identified in class certification process								2
Maximum potential payment									$ 32,500,000

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IMPAIRMENT AND RESTRUCTURING CHARGES, AND ACQUISITION-RELATED COSTS (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014 segment	Sep. 30, 2013
IMPAIRMENT AND RESTRUCTURING CHARGES, AND ACQUISITION-RELATED COSTS
Impairment, restructuring charges, and acquisition-related costs	$ 90	$ 45
Employee severance costs	14	9
Lease termination costs	6	1
Restructuring costs	19	10
Acquisition costs	51	23
Acquisition-related transaction costs	7
Acquisition integration charges	44
Impairment of property		$ 2
Number of continuing operating segments	2

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EQUITY (Tables)

9 Months Ended

Sep. 30, 2014

EQUITY

Schedule Of Changes In Consolidated Equity

	Tenet Healthcare Corporation Shareholders’ Equity
	Common Stock
						Accumulated
				Additional		Other
	Shares	Issued Par		Paid-in		Comprehensive		Accumulated		Treasury		Noncontrolling
	Outstanding	Amount		Capital		Loss		Deficit		Stock		Interests		Total Equity
Balances at December 31, 2013	96,860	$	7	$	4,572	$	(24)	$	(1,422)	$	(2,378)	$	123	$	878
Net income (loss)	—		—		—		—		(49)		—		20		(29)
Distributions paid to noncontrolling interests	—		—		—		—		—		—		(27)		(27)
Contributions from noncontrolling interests	—		—		—		—		—		—		5		5
Other comprehensive income	—		—		—		4		—		—		—		4
Purchases (sales) of businesses or joint venture interests	—		—		(22)		—		—		—		10		(12)
Stock-based compensation expense and issuance of common stock	1,364		—		47		—		—		—		—		47
Balances at September 30, 2014	98,224	$	7	$	4,597	$	(20)	$	(1,471)	$	(2,378)	$	131	$	866
Balances at December 31, 2012	104,633	$	7	$	4,471	$	(68)	$	(1,288)	$	(1,979)	$	75	$	1,218
Net income (loss)	—		—		—		—		(110)		—		13		(97)
Distributions paid to noncontrolling interests	—		—		—		—		—		—		(16)		(16)
Sales of joint venture interests	—		—		53		—		—		—		—		53
Purchases of businesses or joint venture interests	—		—		—		—		—		—		23		23
Repurchase of common stock	(7,095)		—		—		—		—		(300)		—		(300)
Stock-based compensation expense and issuance of common stock	1,628		—		38		—		—		1		—		39
Balances at September 30, 2013	99,166	$	7	$	4,562	$	(68)	$	(1,398)	$	(2,278)	$	95	$	920

Schedule of changes in redeemable noncontrolling interests in equity of consolidated subsidiaries

	Nine Months Ended September 30,
	2014		2013
Balances at beginning of period	$	340	$	16
Net income		24		7
Distributions paid to noncontrolling interests		(3)		(2)
Contributions from noncontrolling interests		10		—
Sales of joint venture interests		—		52
Purchases of businesses		25		10
Balances at end of period	$	396	$	83

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CLAIMS AND LAWSUITS (Tables)

9 Months Ended

Sep. 30, 2014

CLAIMS AND LAWSUITS

Reconciliations Of Legal Settlements And Related Costs

	Balances at		Litigation and				Balances at
	Beginning		Investigation		Cash		End of
	of Period		Costs		Payments		Period
Nine Months Ended September 30, 2014
Continuing operations	$	64	$	19	$	(10)	$	73
Discontinued operations		6		18		(6)		18
	$	70	$	37	$	(16)	$	91
Nine Months Ended September 30, 2013
Continuing operations	$	5	$	3	$	(3)	$	5
Discontinued operations		5		2		(1)		6
	$	10	$	5	$	(4)	$	11

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ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

9 Months Ended

Sep. 30, 2014

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

NOTE 2. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

	September 30,		December 31,
	2014		2013
Continuing operations:
Patient accounts receivable	$	2,978	$	2,459
Allowance for doubtful accounts		(772)		(589)
Estimated future recoveries from accounts assigned to our Conifer subsidiary		122		92
Net cost reports and settlements payable and valuation allowances		(92)		(75)
		2,236		1,887
Discontinued operations		2		3
Accounts receivable, net	$	2,238	$	1,890

As of September 30, 2014 and December 31, 2013, our allowance for doubtful accounts was 25.9% and 24.0%, respectively, of our patient accounts receivable. Accounts that are pursued for collection through Conifer’s regional business offices 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 September 30, 2014 and December 31, 2013, our allowance for doubtful accounts for self-pay was 79.5% and 75.9%, respectively, of our self-pay patient accounts receivable, including co-pays and deductibles owed by patients with insurance. As of September 30, 2014 and December 31, 2013, our allowance for doubtful accounts for managed care was 6.2% and5.9%, 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 September 30, 2014 and 2013 were approximately $135 million and $116 million, respectively, and for the nine months ended September 30, 2014 and 2013 were approximately $488 million and $342 million, respectively. Our estimated costs (based on the selected operating expenses described above) of caring for charity care patients for the three months ended September 30, 2014 and 2013 were approximately $42 million and $32 million, respectively, and for the nine months ended September 30, 2014 and 2013 were approximately $137 million and $95 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 September 30, 2014 and 2013 were approximately $178 million and $72 million, respectively, and for the nine months ended September 30, 2014 and 2013 were approximately $493 million and $257 million, respectively. These payments are intended to mitigate our cost of uncompensated care, as well as reduced Medicaid funding levels.

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EARNINGS (LOSS) PER COMMON SHARE (Tables)

9 Months Ended

Sep. 30, 2014

EARNINGS (LOSS) PER COMMON SHARE

Schedule of reconciliation of numerators and denominators of our basic and diluted loss per common share

			Weighted
	Net Income		Average
	(Loss)		Shares	Per-Share
	(Numerator)		(Denominator)	Amount
Three Months Ended September 30, 2014
Net income available to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	10	98,036	$	0.10
Effect of dilutive stock options, restricted stock units and deferred compensation units		—	2,890		—
Net income available to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	10	100,926	$	0.10
Three Months Ended September 30, 2013
Net income available to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	33	100,894	$	0.33
Effect of dilutive stock options, restricted stock units and deferred compensation units		—	2,204		(0.01)
Net income available to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	33	103,098	$	0.32
Nine Months Ended September 30, 2014
Net loss attributable to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	(27)	97,625	$	(0.27)
Effect of dilutive stock options, restricted stock units and deferred compensation units		—	—		—
Net loss attributable to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	(27)	97,625	$	(0.27)
Nine Months Ended September 30, 2013
Net loss attributable to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	(106)	102,669	$	(1.03)
Effect of dilutive stock options, restricted stock units and deferred compensation units		—	—		—
Net loss attributable to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	(106)	102,669	$	(1.03)

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BASIS OF PRESENTATION - Amortization of Intangible Assets (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2014
Estimated future amortization of intangibles with finite useful lives
Net Book Value	$ 1,077
2014	54
2015	190
2016	163
2017	134
2018	130
Later Years	$ 406

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EQUITY - Changes in Shareholders' Equity (Details) (USD $) In Millions, except Share data in Thousands, unless otherwise specified	9 Months Ended									9 Months Ended					9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014 Common Stock	Sep. 30, 2013 Common Stock	Sep. 30, 2014 Additional Paid-in Capital	Sep. 30, 2013 Additional Paid-in Capital	Sep. 30, 2014 Accumulated Other Comprehensive Loss	Sep. 30, 2013 Accumulated Other Comprehensive Loss	Dec. 31, 2012 Accumulated Other Comprehensive Loss	Sep. 30, 2014 Accumulated Deficit	Sep. 30, 2013 Accumulated Deficit	Sep. 30, 2013 Treasury Stock	Sep. 30, 2014 Treasury Stock	Dec. 31, 2013 Treasury Stock	Sep. 30, 2014 Noncontrolling Interests	Sep. 30, 2013 Noncontrolling Interests
Changes in Shareholders' Equity
Balances	$ 878	$ 1,218	$ 7	$ 7	$ 4,572	$ 4,471	$ (24)	$ (68)	$ (68)	$ (1,422)	$ (1,288)	$ (1,979)	$ (2,378)	$ (2,378)	$ 123	$ 75
Balances (in shares)			96,860	104,633
Net income (loss)	(29)	(97)								(49)	(110)				20	13
Distributions paid to noncontrolling interests	(27)	(16)													(27)	(16)
Contributions from noncontrolling interests	5														5
Other comprehensive income	4						4
Purchases (sales) of business or joint venture interests	(12)				(22)										10
Sales of joint venture interests		53				53
Purchases of businesses or joint venture interests		23														23
Repurchase of common stock		(300)										(300)
Repurchase of common stock (in shares)				(7,095)
Stock-based compensation expense and issuance of common stock	47	39			47	38						1
Stock-based compensation expense and issuance of common stock (in shares)			1,364	1,628
Balances	$ 866	$ 920	$ 7	$ 7	$ 4,597	$ 4,562	$ (20)	$ (68)	$ (68)	$ (1,471)	$ (1,398)	$ (2,278)	$ (2,378)	$ (2,378)	$ 131	$ 95
Balances (in shares)			98,224	99,166

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 200	$ 113
Accounts receivable, less allowance for doubtful accounts ($773 at March 31, 2014 and $589 at December 31, 2013)	2,238	1,890
Inventories of supplies, at cost	270	260
Income tax receivable	22
Current portion of deferred income taxes	725	692
Other current assets	746	737
Total current assets	4,201	3,692
Investments and other assets	366	357
Deferred income taxes, net of current portion	100	148
Property and equipment, at cost, less accumulated depreciation and amortization ($4,347 at September 30, 2014 and $3,907 at December 31, 2013)	7,749	7,582
Goodwill	3,705	3,566
Other intangible assets, at cost, less accumulated amortization ($623 at September 30, 2014 and $549 at December 31, 2013)	1,191	1,105
Total assets	17,312	16,450
Current liabilities:
Current portion of long-term debt	98	153
Accounts payable	1,068	1,085
Accrued compensation and benefits	735	622
Professional and general liability reserves	175	156
Accrued interest payable	265	198
Other current liabilities	804	879
Total current liabilities	3,145	3,093
Long-term debt, net of current portion	11,455	10,696
Professional and general liability reserves	525	555
Defined benefit plan obligations	381	398
Other long-term liabilities	544	490
Total liabilities	16,050	15,232
Commitments and contingencies
Redeemable noncontrolling interests in equity of consolidated subsidiaries	396	340
Shareholders' equity:
Common stock, $0.05 par value; authorized 262,500,000 shares; 145,421,213 shares issued at September 30, 2014 and 144,057,351 shares issued at December 31, 2013	7	7
Additional paid-in capital	4,597	4,572
Accumulated other comprehensive loss	(20)	(24)
Accumulated deficit	(1,471)	(1,422)
Common stock in treasury, at cost, 47,196,935 shares at September 30, 2014 and 47,197,722 shares at December 31, 2013	(2,378)	(2,378)
Total shareholders' equity	735	755
Noncontrolling interests	131	123
Total equity	866	878
Total liabilities and equity	$ 17,312	$ 16,450

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LONG-TERM DEBT AND LEASE OBLIGATIONS - Schedule of Debt (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013
LONG-TERM DEBT AND LEASE OBLIGATIONS
Capital leases and mortgage notes	$ 453			$ 417
Unamortized note discounts and premium	(21)			(28)
Total long-term debt	11,553			10,849
Less current portion	98			153
Long-term debt, net of current portion	11,455			10,696
9 7/8%, due 2014
LONG-TERM DEBT AND LEASE OBLIGATIONS
Interest rate, stated percentage	9.875%			9.875%
Carrying amount				60
9 1/4%, due 2015
LONG-TERM DEBT AND LEASE OBLIGATIONS
Interest rate, stated percentage	9.25%	9.25%		9.25%
Carrying amount				474
5%, due 2019
LONG-TERM DEBT AND LEASE OBLIGATIONS
Interest rate, stated percentage	5.00%	5.00%	5.00%	5.00%
Carrying amount	1,100
5 1/2%, due 2019
LONG-TERM DEBT AND LEASE OBLIGATIONS
Interest rate, stated percentage	5.50%			5.50%
Carrying amount	500
6 3/4%, due 2020
LONG-TERM DEBT AND LEASE OBLIGATIONS
Interest rate, stated percentage	6.75%			6.75%
Carrying amount	300			300
8%, due 2020
LONG-TERM DEBT AND LEASE OBLIGATIONS
Interest rate, stated percentage	8.00%			8.00%
Carrying amount	750			750
8 1/8%, due 2022
LONG-TERM DEBT AND LEASE OBLIGATIONS
Interest rate, stated percentage	8.125%			8.125%
Carrying amount	2,800			2,800
6 7/8%, due 2031
LONG-TERM DEBT AND LEASE OBLIGATIONS
Interest rate, stated percentage	6.875%			6.875%
Carrying amount	430			430
6.25%, due 2018
LONG-TERM DEBT AND LEASE OBLIGATIONS
Interest rate, stated percentage	6.25%			6.25%
Carrying amount	1,041			1,041
4 3/4%, due 2020
LONG-TERM DEBT AND LEASE OBLIGATIONS
Interest rate, stated percentage	4.75%			4.75%
Carrying amount	500			500
6%, due 2020
LONG-TERM DEBT AND LEASE OBLIGATIONS
Interest rate, stated percentage	6.00%			6.00%
Carrying amount	1,800			1,800
4 1/2%, due 2021
LONG-TERM DEBT AND LEASE OBLIGATIONS
Interest rate, stated percentage	4.50%			4.50%
Carrying amount	850			850
4 3/8%, due 2021
LONG-TERM DEBT AND LEASE OBLIGATIONS
Interest rate, stated percentage	4.375%			4.375%
Carrying amount	1,050			1,050
Credit Facility due 2016
LONG-TERM DEBT AND LEASE OBLIGATIONS
Carrying amount				$ 405

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Net loss	$ (5)	$ (90)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	609	354
Provision for doubtful accounts	949	624
Deferred income tax benefit	(22)	(60)
Stock-based compensation expense	41	26
Impairment and restructuring charges, and acquisition-related costs	90	45
Litigation and investigation costs	19	3
Loss from early extinguishment of debt	24	348
Amortization of debt discount and debt issuance costs	21	12
Pre-tax loss from discontinued operations	35	7
Other items, net	(16)	(19)
Changes in cash from operating assets and liabilities:
Accounts receivable	(1,309)	(662)
Inventories and other current assets	12	(159)
Income taxes	(7)	(5)
Accounts payable, accrued expenses and other current liabilities	120	(44)
Other long-term liabilities	38	(5)
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements	(115)	(36)
Net cash used in operating activities from discontinued operations, excluding income taxes	(16)	(5)
Net cash provided by operating activities	468	334
Cash flows from investing activities:
Purchases of property and equipment - continuing operations	(734)	(398)
Purchases of businesses or joint venture interests, net of cash acquired	(185)	(142)
Proceeds from sales of facilities and other assets - discontinued operations	4	11
Proceeds from sales of marketable securities, long-term investments and other assets	2	6
Other long-term assets	4	(11)
Other items, net	3	3
Net cash used in investing activities	(914)	(509)
Cash flows from financing activities:
Repayments of borrowings under credit facility	(1,965)	(1,001)
Proceeds from borrowings under credit facility	1,560	1,211
Repayments of other borrowings	(655)	(1,987)
Proceeds from other borrowings	1,608	1,907
Repurchases of common stock		(300)
Deferred debt issuance costs	(26)	(31)
Distributions paid to noncontrolling interests	(30)	(18)
Contributions from noncontrolling interests	15	98
Proceeds from exercise of stock options	23	22
Other items, net	3	(8)
Net cash provided by (used in) financing activities	533	(107)
Net increase (decrease) in cash and cash equivalents	87	(282)
Cash and cash equivalents at beginning of period	113	364
Cash and cash equivalents at end of period	200	82
Supplemental disclosures:
Interest paid, net of capitalized interest	(487)	(295)
Income tax payments, net	$ (5)	$ (5)

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EARNINGS (LOSS) PER COMMON SHARE (Details) (USD $) In Millions, except Share data in Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Net Income (Loss) (Numerator)
Net loss attributable to Tenet Healthcare Corporation common shareholders for basic earnings per share	$ 10	$ 33	$ (27)	$ (106)
Net loss attributable to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$ 10	$ 33	$ (27)	$ (106)
Weighted Average Shares (Denominator)
Net loss attributable to Tenet Healthcare Corporation common shareholders for basic earnings per share (in Weighted Average Shares)	98,036	100,894	97,625	102,669
Effect of dilutive stock options, restricted stock units and deferred compensation units on the diluted shares (in weighted average shares)	2,890	2,204
Net loss attributable to Tenet Healthcare Corporation common shareholders for diluted earnings per share (in Weighted Average Shares)	100,926	103,098	97,625	102,669
Per-Share Amount
Net loss attributable to Tenet Healthcare Corporation common shareholders for basic earnings, Per-Share Amount (in dollars per share)	$ 0.10	$ 0.33	$ (0.27)	$ (1.03)
Effect of dilutive stock options and restricted stock units (Per-Share)		$ (0.01)
Net loss attributable to Tenet Healthcare Corporation common shareholders for diluted earnings per share, Per-Share Amount (in dollars per share)	$ 0.10	$ 0.32	$ (0.27)	$ (1.03)

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SEGMENT INFORMATION (Tables)

9 Months Ended

Sep. 30, 2014

SEGMENT INFORMATION

Reconciliation of assets by reportable segment to consolidated assets

	September 30,		December 31,
	2014		2013
Assets:
Hospital operations and other	$	16,988	$	16,194
Conifer		324		256
Total	$	17,312	$	16,450

Reconciliation of other significant reconciling items from segments to consolidated

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Capital expenditures:
Hospital operations and other	$	207	$	139	$	717	$	387
Conifer		4		3		17		11
Total	$	211	$	142	$	734	$	398
Net operating revenues:
Hospital operations and other	$	4,031	$	2,275	$	11,707	$	6,840
Conifer
Tenet		148		92		426		278
Other customers		148		133		440		377
		4,327		2,500		12,573		7,495
Intercompany eliminations		(148)		(92)		(426)		(278)
Total	$	4,179	$	2,408	$	12,147	$	7,217
Adjusted EBITDA:
Hospital operations and other	$	412	$	252	$	1,167	$	802
Conifer		47		36		139		96
Total	$	459	$	288	$	1,306	$	898
Depreciation and amortization:
Hospital operations and other	$	202	$	114	$	594	$	339
Conifer		5		5		15		15
Total	$	207	$	119	$	609	$	354
Adjusted EBITDA	$	459	$	288	$	1,306	$	898
Depreciation and amortization		(207)		(119)		(609)		(354)
Impairment and restructuring charges, and acquisition-related costs		(37)		(20)		(90)		(45)
Litigation and investigation costs		(4)		(1)		(19)		(3)
Interest expense		(186)		(91)		(558)		(292)
Loss from early extinguishment of debt		(24)		—		(24)		(348)
Investment earnings		—		—		—		1
Net income (loss) from continuing operations before income taxes	$	1	$	57	$	6	$	(143)

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SUBSEQUENT EVENTS (Details) (Subsequent event, Conifer, SPi Healthcare, USD $) In Millions, unless otherwise specified	1 Months Ended
	Oct. 31, 2014
Subsequent event | Conifer | SPi Healthcare
Subsequent event
Base purchase price	$ 235

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RECENTLY ISSUED ACCOUNTING STANDARDS

9 Months Ended

Sep. 30, 2014

RECENTLY ISSUED ACCOUNTING STANDARDS

RECENTLY ISSUED ACCOUNTING STANDARDS

NOTE 16. RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”). ASU 2014-08 changes the requirements for reporting discontinued operations in FASB Accounting Standards Codification Subtopic 205-20, such that a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. ASU 2014-08 requires an entity to present, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of financial position, as well as additional disclosures about discontinued operations. Additionally, ASU 2014-08 requires disclosures about a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements and expands the disclosures about an entity’s significant continuing involvement with a discontinued operation. We are currently evaluating the potential impact of this guidance, which will be effective for us beginning in 2015.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principle of the guidance in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We are currently evaluating the potential impact of this guidance, which will be effective for us beginning in 2017.

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BASIS OF PRESENTATION (Details) (USD $)	9 Months Ended	0 Months Ended
	Sep. 30, 2014 plan Institution	Oct. 01, 2013 Vanguard plan person Institution	Oct. 01, 2013 Vanguard
Business Acquisition
Business acquisition share price (in dollars per share)			$ 21
Number of hospitals	80	28
Number of hospitals under construction		1
Number of outpatient centers	198
Number of outpatient centers acquired		39
Number of health plans	6	5
Number of members covered under the health plans		140,000
Amount paid for acquisition, including assumed debt		$ 4,300,000,000
Assumed debt		$ 2,500,000,000

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BASIS OF PRESENTATION (Policies)

9 Months Ended

Sep. 30, 2014

BASIS OF PRESENTATION

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 a national, diversified healthcare services company. As of September 30, 2014, we operated 80 hospitals,  198 outpatientcenters, six health plans and Conifer Health Solutions, LLC (“Conifer”), which provides healthcare business process services in the areas of revenue cycle management, value-based care and patient communications.

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, which was recently completed), 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 $4.3billion 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). The accompanying Condensed Consolidated Balance Sheet as ofDecember 31, 2013was derived from the audited consolidatedfinancial statements included in our Annual Report, but has been revised to reflect the impact of completing the purchase price allocation for the acquisition of Vanguard, as described in Note 14. Additionally, 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 and nine months ended September 30, 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 and other supplemental 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.

Net Operating Revenues before Provision for Doubtful Accounts

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.

Cash and Cash Equivalents

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 $200 million and $113 million at September 30, 2014 and December 31, 2013, respectively. As of September 30, 2014 and December 31, 2013, our book overdrafts were approximately $194 million and $245 million, respectively, which were classified as accounts payable.

At September 30, 2014 and December 31, 2013, approximately $98 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 September 30, 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, $62 million and $138 million, respectively, were included in accounts payable.

During the nine months ended September 30, 2014 and 2013, we entered into non-cancellable capital leases of approximately $112 million and $99 million, respectively, primarily for buildings and equipment.

Other Intangible Assets

Other Intangible Assets

The following tables provide information regarding other intangible assets, which are included in the accompanying Condensed Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013:

	Gross
	Carrying		Accumulated		Net Book
	Amount		Amortization		Value
As of September 30, 2014:
Capitalized software costs	$	1,326	$	(552)	$	774
Long-term debt issuance costs		245		(42)		203
Trade names		106		—		106
Contracts		57		(5)		52
Other		80		(24)		56
Total	$	1,814	$	(623)	$	1,191

	Gross
	Carrying		Accumulated		Net Book
	Amount		Amortization		Value
As of December 31, 2013:
Capitalized software costs	$	1,148	$	(468)	$	680
Long-term debt issuance costs		230		(31)		199
Trade names		106		—		106
Contracts		57		(2)		55
Other		80		(15)		65
Total	$	1,621	$	(516)	$	1,105

Estimated future amortization of intangibles with finite useful lives as of September 30, 2014 is as follows:

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BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2014

BASIS OF PRESENTATION

BASIS OF PRESENTATION

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 a national, diversified healthcare services company. As of September 30, 2014, we operated 80 hospitals,  198 outpatientcenters, six health plans and Conifer Health Solutions, LLC (“Conifer”), which provides healthcare business process services in the areas of revenue cycle management, value-based care and patient communications.

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, which was recently completed), 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 $4.3billion 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). The accompanying Condensed Consolidated Balance Sheet as ofDecember 31, 2013was derived from the audited consolidatedfinancial statements included in our Annual Report, but has been revised to reflect the impact of completing the purchase price allocation for the acquisition of Vanguard, as described in Note 14. Additionally, 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 and nine months ended September 30, 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 and other supplemental 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.

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				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
General Hospitals:
Medicare	$	838	$	501	$	2,560	$	1,543
Medicaid		340		206		1,012		630
Managed care		2,369		1,378		6,787		4,126
Indemnity, self-pay and other		357		262		1,172		783
Acute care hospitals — other revenue		8		14		45		53
Other:
Other operations		516		257		1,520		706
Net operating revenues before provision for doubtful accounts	$	4,428	$	2,618	$	13,096	$	7,841

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 $200 million and $113 million at September 30, 2014 and December 31, 2013, respectively. As of September 30, 2014 and December 31, 2013, our book overdrafts were approximately $194 million and $245 million, respectively, which were classified as accounts payable.

At September 30, 2014 and December 31, 2013, approximately $98 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 September 30, 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, $62 million and $138 million, respectively, were included in accounts payable.

During the nine months ended September 30, 2014 and 2013, we entered into non-cancellable capital leases of approximately $112 million and $99 million, respectively, primarily for buildings and equipment.

Other Intangible Assets

The following tables provide information regarding other intangible assets, which are included in the accompanying Condensed Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013:

	Gross
	Carrying		Accumulated		Net Book
	Amount		Amortization		Value
As of September 30, 2014:
Capitalized software costs	$	1,326	$	(552)	$	774
Long-term debt issuance costs		245		(42)		203
Trade names		106		—		106
Contracts		57		(5)		52
Other		80		(24)		56
Total	$	1,814	$	(623)	$	1,191

	Gross
	Carrying		Accumulated		Net Book
	Amount		Amortization		Value
As of December 31, 2013:
Capitalized software costs	$	1,148	$	(468)	$	680
Long-term debt issuance costs		230		(31)		199
Trade names		106		—		106
Contracts		57		(2)		55
Other		80		(15)		65
Total	$	1,621	$	(516)	$	1,105

Estimated future amortization of intangibles with finite useful lives as of September 30, 2014 is as follows:

			Years Ending December 31,
	Total		2014		2015		2016		2017		2018		Later Years
Amortization of intangible assets	$	1,077	$	54	$	190	$	163	$	134	$	130	$	406

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
CONDENSED CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 773	$ 589
Property and equipment, accumulated depreciation and amortization (in dollars)	4,347	3,907
Other intangible assets, accumulated amortization (in dollars)	$ 623	$ 516
Common stock, par value (in dollars per share)	$ 0.05	$ 0.05
Common stock, authorized shares	262,500,000	262,500,000
Common stock, shares issued	145,421,213	144,057,351
Common stock in treasury, shares	47,196,935	47,197,722

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INCOME TAXES

9 Months Ended

Sep. 30, 2014

INCOME TAXES

INCOME TAXES

NOTE 11. INCOME TAXES

During the nine months ended September 30, 2014, we recorded a net income tax benefit of $11 million, which includes, among other things: (1) $3 million of income tax expense to increase our valuation allowance for deferred tax assets; (2) $7 million of income tax benefit related to tax basis adjustments for state tax purposes on the Vanguard acquisition; (3) $4 million of income tax benefit related to certain amended state tax returns; and (4) $4 million of income tax benefit related to other tax adjustments. The increase in the valuation allowance relates to an estimated decrease in the future utilization of certain state net operating loss carryovers.

During the nine months ended September 30, 2014, we reduced our estimated liabilities for uncertain tax positions by $3 million, net of related deferred tax assets. The total amount of unrecognized tax benefits as of September 30, 2014 was $40 million, of which $31 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 September 30, 2014 were $5 million, all of which related to continuing operations.

As of September 30, 2014, approximately $2 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.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Oct. 31, 2014
Document and Entity Information
Entity Registrant Name	TENET HEALTHCARE CORP
Entity Central Index Key	0000070318
Document Type	10-Q
Document Period End Date	Sep. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		98,280,152
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3

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EARNINGS (LOSS) PER COMMON SHARE

9 Months Ended

Sep. 30, 2014

EARNINGS (LOSS) PER COMMON SHARE

EARNINGS (LOSS) PER COMMON SHARE

NOTE 12. EARNINGS (LOSS) PER COMMON SHARE

The table below is a reconciliation of the numerators and denominators of our basic and diluted earnings (loss) per common share calculations for net income (loss) from continuing operations for the three and nine months ended September 30, 2014 and 2013. Net income (loss) is expressed in millions and weighted average shares are expressed in thousands.

			Weighted
	Net Income		Average
	(Loss)		Shares	Per-Share
	(Numerator)		(Denominator)	Amount
Three Months Ended September 30, 2014
Net income available to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	10	98,036	$	0.10
Effect of dilutive stock options, restricted stock units and deferred compensation units		—	2,890		—
Net income available to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	10	100,926	$	0.10
Three Months Ended September 30, 2013
Net income available to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	33	100,894	$	0.33
Effect of dilutive stock options, restricted stock units and deferred compensation units		—	2,204		(0.01)
Net income available to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	33	103,098	$	0.32
Nine Months Ended September 30, 2014
Net loss attributable to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	(27)	97,625	$	(0.27)
Effect of dilutive stock options, restricted stock units and deferred compensation units		—	—		—
Net loss attributable to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	(27)	97,625	$	(0.27)
Nine Months Ended September 30, 2013
Net loss attributable to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	(106)	102,669	$	(1.03)
Effect of dilutive stock options, restricted stock units and deferred compensation units		—	—		—
Net loss attributable to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	(106)	102,669	$	(1.03)

All potentially dilutive securities were excluded from the calculation of diluted loss per share for the nine months ended September 30, 2014 and 2013 because we did not report income from continuing operations available to shareholders in those periods. In circumstances where we do not have income from continuing operations available to shareholders, the effect of stock options and other potentially dilutive securities is anti-dilutive, that is, a loss from continuing operations available to shareholders has the effect of making the diluted loss per share less than the basic loss per share. Had we generated income from continuing operations available to shareholders 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  2,332 for the nine months ended September 30, 2014 and 827 for the nine months ended September 30, 2013.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Millions, except Share data in Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Net operating revenues:
Net operating revenues before provision for doubtful accounts	$ 4,428	$ 2,618	$ 13,096	$ 7,841
Less: Provision for doubtful accounts	249	210	949	624
Net operating revenues	4,179	2,408	12,147	7,217
Operating expenses:
Salaries, wages and benefits	2,028	1,172	5,905	3,499
Supplies	665	387	1,942	1,158
Other operating expenses, net	1,032	575	3,066	1,710
Electronic health record incentives	(5)	(14)	(72)	(48)
Depreciation and amortization	207	119	609	354
Impairment and restructuring charges, and acquisition-related costs	37	20	90	45
Litigation and investigation costs	4	1	19	3
Operating income	211	148	588	496
Interest expense	(186)	(91)	(558)	(292)
Loss from early extinguishment of debt	(24)		(24)	(348)
Investment earnings				1
Net income (loss) from continuing operations, before income taxes	1	57	6	(143)
Income tax benefit (expense)	18	(16)	11	57
Net income (loss) from continuing operations, before discontinued operations	19	41	17	(86)
Discontinued operations:
Loss from operations	(2)	(8)	(17)	(5)
Litigation and investigation costs		(2)	(18)	(2)
Income tax benefit	1	5	13	3
Net loss from discontinued operations	(1)	(5)	(22)	(4)
Net income (loss)	18	36	(5)	(90)
Less: Net income attributable to noncontrolling interests	9	8	44	20
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders	9	28	(49)	(110)
Amounts attributable to Tenet Healthcare Corporation common shareholders
Net income (loss) from continuing operations, net of tax	10	33	(27)	(106)
Net loss from discontinued operations, net of tax	(1)	(5)	(22)	(4)
Net income (loss) attributable to Tenet Healthcare Corporation common shareholders	$ 9	$ 28	$ (49)	$ (110)
Basic
Continuing operations (in dollars per share)	$ 0.10	$ 0.33	$ (0.27)	$ (1.03)
Discontinued operations (in dollars per share)	$ (0.01)	$ (0.05)	$ (0.23)	$ (0.04)
Total loss per share, Basic (in dollars per share)	$ 0.09	$ 0.28	$ (0.50)	$ (1.07)
Diluted
Continuing operations (in dollars per share)	$ 0.10	$ 0.32	$ (0.27)	$ (1.03)
Discontinued operations (in dollars per share)	$ (0.01)	$ (0.05)	$ (0.23)	$ (0.04)
Total loss per share, Diluted (in dollars per share)	$ 0.09	$ 0.27	$ (0.50)	$ (1.07)
Weighted average shares and dilutive securities outstanding (in thousands):
Basic (in shares)	98,036	100,894	97,625	102,669
Diluted (in shares)	100,926	103,098	97,625	102,669

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GUARANTEES

9 Months Ended

Sep. 30, 2014

GUARANTEES

GUARANTEES

NOTE 6. GUARANTEES

At September 30, 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 $92 million. We had a liability of $69 million recorded for these guarantees included in other current liabilities at September 30, 2014.

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LONG-TERM DEBT AND LEASE OBLIGATIONS

9 Months Ended

Sep. 30, 2014

LONG-TERM DEBT AND LEASE OBLIGATIONS

LONG-TERM DEBT AND LEASE OBLIGATIONS

NOTE 5. LONG-TERM DEBT AND LEASE OBLIGATIONS

The table below shows our long-term debt as of September 30, 2014 andDecember 31, 2013:

	September 30,		December 31,
	2014		2013
Senior notes:
97/8%, due 2014	$	—	$	60
91/4%, due 2015		—		474
5%, due 2019		1,100		—
51/%, due 2019		500		—
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		—		405
Capital leases and mortgage notes		453		417
Unamortized note discounts and premium		(21)		(28)
Total long-term debt		11,553		10,849
Less current portion		98		153
Long-term debt, net of current portion	$	11,455	$	10,696

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, which has a scheduled maturity date of November 29, 2016, 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 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 September 30, 2014, we had no cash borrowings outstanding under the revolving credit facility; however, we had approximately $6 million of standby letters of credit outstanding. Based on our eligible receivables, approximately $994 million was available for borrowing under the revolving credit facility at September 30, 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 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 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 September 30, 2014, we had approximately $115 million of standby letters of credit outstanding under the LC Facility.

Senior Notes

In September 2014, we sold $500 million aggregate principal amount of 51/₂% 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 March 1, 2015. The proceeds from the sale of the notes were used for general corporate purposes, including the repayment of indebtedness and drawings under our Credit Agreement, related transaction fees and expenses, and acquisitions.

In June and March 2014, we sold $500 million and $600 million aggregate principal amount, respectively, 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, which payments commenced on September 1, 2014. The net proceeds from the sale of the notes in June 2014 were used to redeem our 91/4% senior notes due 2015 in July 2014. In connection with the redemption, we recorded a loss from early extinguishment of debt of approximately $24 million, primarily related to the difference between the redemption price and the par value of the notes, as well as the write-off of associated unamortized note discounts and issuance costs. The net proceedsfrom the sale of the notes in March 2014 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.

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2014

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE 17. SUBSEQUENT EVENTS

Acquisition of Revenue Cycle Services for Physician Practices—In October 2014, Conifer acquired SPi Healthcare, a provider of revenue cycle management, health information management and software solutions for independent and provider-owned physician practices. The base purchase price was $235 million. We have not yet finalized the analysis required to complete the purchase price allocation for this acquisition and the related disclosures.

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FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2014

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

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 September 30, 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.

			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
Investments	September 30, 2014		(Level 1)		(Level 2)		(Level 3)
Marketable securities — current	$	2	$	2	$	—	$	—
Investments in Reserve Yield Plus Fund		2		—		2		—
Marketable debt securities — noncurrent		62		26		35		1
	$	66	$	28	$	37	$	1

			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
Investments	December 31, 2013		(Level 1)		(Level 2)		(Level 3)
Marketable securities — current	$	1	$	1	$	—	$	—
Investments in Reserve Yield Plus Fund		2		—		2		—
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 September 30, 2014 and December 31, 2013, the estimated fair value of our long-term debt was approximately103.8%and 103.5%, respectively, of the carrying value of the debt.

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PROPERTY AND PROFESSIONAL AND GENERAL LIABILITY INSURANCE

9 Months Ended

Sep. 30, 2014

PROPERTY AND PROFESSIONAL AND GENERAL LIABILITY INSURANCE

PROPERTY AND PROFESSIONAL AND GENERAL LIABILITY INSURANCE

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 September 30, 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 $700 million and $711 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 2.22% at September 30, 2014 and 2.45% at December 31, 2013.

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 $170 million and $71 million for the nine months ended September 30, 2014 and 2013, respectively.

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EARNINGS (LOSS) PER COMMON SHARE - Antidilutive securities (Details) (Employee stock options, restricted stock units and deferred compensation units) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Employee stock options, restricted stock units and deferred compensation units
Antidilutive securities
Anti-dilutive securities excluded from computation of earnings per share	2,332	827

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EMPLOYEE BENEFIT PLANS

9 Months Ended

Sep. 30, 2014

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS

NOTE 7. EMPLOYEE BENEFIT PLANS

At September 30, 2014, approximately  5.2 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 vestone-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 nine months ended September 30, 2014 and 2013 includes $38million and $29 million, respectively, of pre-tax compensation costs related to our stock-based compensation arrangements recorded in salaries, wages and benefits in the accompanying Condensed Consolidated Statements of Operations.

Stock Options

The following table summarizes stock option activity during the nine months ended September 30, 2014:   

		Weighted Average
		Exercise Price		Aggregate		Weighted Average
	Options	Per Share		Intrinsic Value		Remaining Life
					(In Millions)
Outstanding as of  December 31, 2013	3,308,111	$	30.79
Granted	—
Exercised	(691,050)		33.72
Forfeited/Expired	(624,052)		47.97
Outstanding as of  September 30, 2014	1,993,009	$	24.40	$	70	3.9	years
Vested and expected to vest at September 30, 2014	1,984,562	$	24.31	$	70	3.9	years
Exercisable as of  September 30, 2014	1,587,878	$	21.90	$	60	3.7	years

There were 691,050 stock options exercised during the nine months ended September 30, 2014 with a $13 million aggregate intrinsic value, and 913,369 stock options exercised during the same period in 2013 with a $17 million aggregate intrinsic value.

As of September 30, 2014, there were $2 million of total unrecognized compensation costs related to stock options. These costs are expected to be recognized over a weighted average period of 1.1 years.

There were no stock options granted in the nine months ended September 30, 2014. In the nine months ended September 30, 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 nine months ended September 30, 2013 was $14.46 per share. This fair value was calculated based on the grant date, using a binomial lattice model with the following assumptions:

	Nine Months Ended September 30, 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 September 30, 2014:

	Options Outstanding					Options Exercisable
		Weighted Average
	Number of	Remaining		Weighted Average		Number of	Weighted Average
Range of Exercise Prices	Options	Contractual Life		Exercise Price		Options	Exercise Price
$0.00 to $4.569	242,753	4.4	years	$	4.56	242,753	$	4.56
$4.57 to $25.089	957,583	5.2	years		20.96	830,903		20.67
$25.09 to $32.569	402,816	1.9	years		29.32	402,816		29.32
$32.57 to $42.089	389,857	2.5	years		40.10	111,406		42.08
	1,993,009	3.9	years	$	24.40	1,587,878	$	21.90

Restricted Stock Units

The following table summarizes restricted stock unit activity during the nine months ended September 30, 2014:

	Restricted Stock	Weighted Average Grant
	Units	Date Fair Value Per Unit
Unvested as of December 31, 2013	2,707,222	$	33.34
Granted	1,768,508		48.41
Vested	(900,763)		36.51
Forfeited	(140,468)		35.23
Unvested as of September 30, 2014	3,434,499	$	41.85

In the nine months ended September 30, 2014, we granted  1,045,750 restricted stock units subject to time-vesting of which  944,249 will vest and be settled ratably over a three-year period from the date of the grant, 23,435 will vest 100% on the tenth anniversary of the grant date, 63,623 will vest 100% on the fifth anniversary of the grant date and  14,443 will vest 100% on the third anniversary of the grant date. In addition, we granted  271,815 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. The actual number of performance-based restricted stock units that could vest will range from 0% to 200% of the  271,815 units granted, depending on our level of achievement with respect to the performance goal.We also granted 450,943 special retention restricted stock units to a select group of officers; two-thirds of the award will vest contingent on our achievement of a performance goal of which one-half will vest based on performance over a one-year period ending in December 2015 and the remaining one-half will vest based on performance over a four-year period ending in December 2018.  The remaining one-third of this special retention award will vest in full on the fifth anniversary of the grant date.

In the nine months ended September 30, 2013, we granted 815,262 restricted stock units subject to time-vesting, of which 735,129 will vest and be settled ratably over a three-year period from the grant date 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. We also awarded a grant of 212,180 restricted stock units to our chief executive officer, of which 106,090 are subject to time-vesting and 106,090 are performance-based. If target conditions are met, 50% of this grant will vest three years from the grant date and the remaining 50% will vest six years from the grant date. The award also allows for an additional 106,090 shares to be issued if higher performance criteria are met.

As of September 30, 2014, there were $107 million of total unrecognized compensation costs related to restricted stock units. These costs are expected to be recognized over a weighted average period of  3.0 years.

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EQUITY

9 Months Ended

Sep. 30, 2014

EQUITY

EQUITY

NOTE 8. EQUITY

Changes in Shareholders’ Equity

The following table shows the changes in consolidated equity during the nine months ended September 30,2014 and 2013 (dollars in millions, share amounts in thousands):

	Tenet Healthcare Corporation Shareholders’ Equity
	Common Stock
						Accumulated
				Additional		Other
	Shares	Issued Par		Paid-in		Comprehensive		Accumulated		Treasury		Noncontrolling
	Outstanding	Amount		Capital		Loss		Deficit		Stock		Interests		Total Equity
Balances at December 31, 2013	96,860	$	7	$	4,572	$	(24)	$	(1,422)	$	(2,378)	$	123	$	878
Net income (loss)	—		—		—		—		(49)		—		20		(29)
Distributions paid to noncontrolling interests	—		—		—		—		—		—		(27)		(27)
Contributions from noncontrolling interests	—		—		—		—		—		—		5		5
Other comprehensive income	—		—		—		4		—		—		—		4
Purchases (sales) of businesses or joint venture interests	—		—		(22)		—		—		—		10		(12)
Stock-based compensation expense and issuance of common stock	1,364		—		47		—		—		—		—		47
Balances at September 30, 2014	98,224	$	7	$	4,597	$	(20)	$	(1,471)	$	(2,378)	$	131	$	866
Balances at December 31, 2012	104,633	$	7	$	4,471	$	(68)	$	(1,288)	$	(1,979)	$	75	$	1,218
Net income (loss)	—		—		—		—		(110)		—		13		(97)
Distributions paid to noncontrolling interests	—		—		—		—		—		—		(16)		(16)
Sales of joint venture interests	—		—		53		—		—		—		—		53
Purchases of businesses or joint venture interests	—		—		—		—		—		—		23		23
Repurchase of common stock	(7,095)		—		—		—		—		(300)		—		(300)
Stock-based compensation expense and issuance of common stock	1,628		—		38		—		—		1		—		39
Balances at September 30, 2013	99,166	$	7	$	4,562	$	(68)	$	(1,398)	$	(2,278)	$	95	$	920

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 nine months ended September 30, 2014 and 2013:

	Nine Months Ended September 30,
	2014		2013
Balances at beginning of period	$	340	$	16
Net income		24		7
Distributions paid to noncontrolling interests		(3)		(2)
Contributions from noncontrolling interests		10		—
Sales of joint venture interests		—		52
Purchases of businesses		25		10
Balances at end of period	$	396	$	83

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CLAIMS AND LAWSUITS

9 Months Ended

Sep. 30, 2014

CLAIMS AND LAWSUITS

CLAIMS AND LAWSUITS

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. 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. In September 2014, subject to negotiation of final settlement terms, we reached a verbal financial agreement with the government to settle this matter with respect to the remaining five hospitals for approximately $2 million, which has been fully reserved as of September 30, 2014.

· Implantable Cardioverter Defibrillators (“ICDs”)—We are engaged in potential settlement discussions with the DOJ to resolve an investigation to determine whether ICD procedures performed at 56 of our hospitals from 2002 to 2010 complied with Medicare coverage requirements. It is impossible at this time to predict with any certainty the outcome of those discussions or the amount of any potential resolution. However, 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 for all of the hospitals under review as part of the government’s examination, which commenced in March 2010.

· 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. Both the Georgia Attorney General’s Office, on behalf of the State of Georgia, and the U.S. Attorney’s Office, on behalf of the United States, have intervened in the qui tam action. We submitted answers to the complaints filed by the relator, the State of Georgia and the United States on July 15, 2014 following the court’s denial of our motions to dismiss in June 2014. The parties have agreed to stay discovery in the case until March 31, 2015.

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. In a Bill of Information filed on July 23, 2014 with the U.S. District Court for the Northern District of Georgia, Atlanta Division, the U.S. Attorney for that District asserted charges of one count of criminal conspiracy against a former owner of HMM (a non-employee of Tenet) related to the agreements between HMM and the Tenet hospitals described above. In a separate Bill of Information also filed with the court on July 23, 2014, the U.S. Attorney asserted charges of one count of criminal conspiracy against a former employee of a Tenet hospital, but such charges relate to an unaffiliated entity. It is impossible at this time to predict with any certainty the amount and terms of any potential resolution of these matters; however, we believe the amount of the reserve established continues to reflect our current estimate of probable liability. 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. Management has established reserves of approximately $38 million in the aggregate for our potential obligations with respect to all of the 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, in October 2014, we received court approval of a final agreement to settle a previously disclosed class action lawsuit captioned Doe, et al. v. Jo Ellen Smith Medical Foundation, which was filed in the Civil District Court for the Parish of Orleans in Louisiana in March 1997. The plaintiffs pursued a claim for tortious invasion of privacy due to the fact that in April 1996 patient identifying records from a psychiatric hospital we closed in 1995 were temporarily placed in an unsecure location while the hospital was undergoing renovations. The court certified a class 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. In an effort to avoid protracted litigation, the parties settled this matter in June 2014 for a maximum potential payment of $32.5 million, subject to the number and type of claims asserted by the class members between January 15 and March 31, 2015. The settlement will be funded in amounts and on a schedule to be agreed to by the parties. In the three months ended June 30, 2014, we established a reserve of $17 million, recorded in discontinued operations, to reflect our current estimate of probable liability for this matter based on anticipated levels of class member participation.

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 nine months ended September 30, 2014 and 2013:

	Balances at		Litigation and				Balances at
	Beginning		Investigation		Cash		End of
	of Period		Costs		Payments		Period
Nine Months Ended September 30, 2014
Continuing operations	$	64	$	19	$	(10)	$	73
Discontinued operations		6		18		(6)		18
	$	70	$	37	$	(16)	$	91
Nine Months Ended September 30, 2013
Continuing operations	$	5	$	3	$	(3)	$	5
Discontinued operations		5		2		(1)		6
	$	10	$	5	$	(4)	$	11

For the nine months ended September 30, 2014 and 2013, we recorded costs of $37 million and $5 million, respectively, primarily related to costs associated with various legal proceedings and governmental reviews.

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SEGMENT INFORMATION - Reconciling Items (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
SEGMENT INFORMATION
Assets	$ 17,312		$ 17,312		$ 16,450
Capital expenditures:	211	142	734	398
Net operating revenues	4,179	2,408	12,147	7,217
Adjusted EBITDA	459	288	1,306	898
Depreciation and amortization	207	119	609	354
Adjusted EBITDA and other reconciling items
Adjusted EBITDA	459	288	1,306	898
Depreciation and amortization	(207)	(119)	(609)	(354)
Impairment and restructuring charges, and acquisition-related costs	(37)	(20)	(90)	(45)
Litigation and investigation costs	(4)	(1)	(19)	(3)
Interest expense	(186)	(91)	(558)	(292)
Loss from early extinguishment of debt	(24)		(24)	(348)
Investment earnings				1
Net income (loss) from continuing operations, before income taxes	1	57	6	(143)
Hospital operations and other
SEGMENT INFORMATION
Assets	16,988		16,988		16,194
Conifer
SEGMENT INFORMATION
Assets	324		324		256
Operating segments
SEGMENT INFORMATION
Net operating revenues	4,327	2,500	12,573	7,495
Operating segments | Hospital operations and other
SEGMENT INFORMATION
Capital expenditures:	207	139	717	387
Net operating revenues	4,031	2,275	11,707	6,840
Adjusted EBITDA	412	252	1,167	802
Depreciation and amortization	202	114	594	339
Adjusted EBITDA and other reconciling items
Adjusted EBITDA	412	252	1,167	802
Depreciation and amortization	(202)	(114)	(594)	(339)
Operating segments | Conifer
SEGMENT INFORMATION
Capital expenditures:	4	3	17	11
Adjusted EBITDA	47	36	139	96
Depreciation and amortization	5	5	15	15
Adjusted EBITDA and other reconciling items
Adjusted EBITDA	47	36	139	96
Depreciation and amortization	(5)	(5)	(15)	(15)
Operating segments | Conifer | Tenet
SEGMENT INFORMATION
Net operating revenues	148	92	426	278
Operating segments | Conifer | Other customers
SEGMENT INFORMATION
Net operating revenues	148	133	440	377
Intercompany eliminations
SEGMENT INFORMATION
Net operating revenues	$ (148)	$ (92)	$ (426)	$ (278)

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SEGMENT INFORMATION - General Information and Customer Concentration (Details)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
SEGMENT INFORMATION
Number of hospitals owned by subsidiaries	80
Number of licensed beds in hospitals operated by subsidiaries	20,762
Number of provider-based outpatient centers operated by subsidiaries	198
Number of health plans	6
Tenet and Catholic Health Initiatives | Conifer
SEGMENT INFORMATION
Number of customers	2
Tenet and Catholic Health Initiatives | Revenue | Customer | Conifer
SEGMENT INFORMATION
Percentage of concentration risk	82.00%	78.00%
Minimum | Conifer
SEGMENT INFORMATION
Number of Tenet and non-Tenet Hospitals and other health care organizations to which Conifer provided revenue cycle services	700

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ACQUISITIONS (Tables)

9 Months Ended

Sep. 30, 2014

Vanguard

Business Acquisition

Schedule of Preliminary purchase price allocation

Current assets	$	976
Property and equipment		2,830
Other long term assets		152
Other intangible assets		155
Goodwill		2,460
Current liabilities		(1,193)
Deferred taxes-long term		(103)
Other long-term liabilities		(3,711)
Redeemable noncontrolling interests in equity of consolidated subsidiaries		(258)
Noncontrolling interests		(7)
Net cash paid	$	1,301

Schedule of pro forma financial information as if the Vanguard Health Systems acquisition had occurred at the beginning of the year

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Net operating revenues	$	4,179	$	3,748	$	12,147	$	11,574
Net income (loss) from continuing operations, before income taxes	$	1	$	(220)	$	6	$	(418)

Series of individual business acquisitions

Business Acquisition

Schedule of Preliminary purchase price allocation

Current assets	$	19
Property and equipment		104
Goodwill		137
Current liabilities		(21)
Long-term liabilities		(19)
Redeemable noncontrolling interests		(21)
Noncontrolling interests		(14)
Net cash paid	$	185

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EMPLOYEE BENEFIT PLANS - Range of Exercise Prices (Details) (USD $)	9 Months Ended
	Sep. 30, 2014
Options Exercisable
Weighted Average Remaining Contractual life	3 years 10 months 24 days
Range of Exercise Prices, $0.00 to $4.569
Options Exercisable
Weighted Average Remaining Contractual life	4 years 4 months 24 days
Range of Exercise Prices, $4.57 to $25.089
Options Exercisable
Weighted Average Remaining Contractual life	5 years 2 months 12 days
Range of Exercise Prices, $25.09 to $32.569
Options Exercisable
Weighted Average Remaining Contractual life	1 year 10 months 24 days
Range of Exercise Prices, $32.57 to $42.089
Options Exercisable
Weighted Average Remaining Contractual life	2 years 6 months
Stock Options
Options Exercisable
Number of Options Outstanding (in shares)	1,993,009
Number of Options Exercisable (in shares)	1,587,878
Weighted Average Exercise Price Outstanding (in dollars per share)	$ 24.40
Weighted Average Exercise Price (in dollars per share)	$ 21.90
Stock Options | Range of Exercise Prices, $0.00 to $4.569
Summary information about outstanding stock options
Exercise price per share, low end of the range (in dollars per share)	$ 0.00
Exercise price per share, high end of the range (in dollars per share)	$ 4.569
Options Exercisable
Number of Options Outstanding (in shares)	242,753
Number of Options Exercisable (in shares)	242,753
Weighted Average Exercise Price Outstanding (in dollars per share)	$ 4.56
Weighted Average Exercise Price (in dollars per share)	$ 4.56
Stock Options | Range of Exercise Prices, $4.57 to $25.089
Summary information about outstanding stock options
Exercise price per share, low end of the range (in dollars per share)	$ 4.57
Exercise price per share, high end of the range (in dollars per share)	$ 25.089
Options Exercisable
Number of Options Outstanding (in shares)	957,583
Number of Options Exercisable (in shares)	830,903
Weighted Average Exercise Price Outstanding (in dollars per share)	$ 20.96
Weighted Average Exercise Price (in dollars per share)	$ 20.67
Stock Options | Range of Exercise Prices, $25.09 to $32.569
Summary information about outstanding stock options
Exercise price per share, low end of the range (in dollars per share)	$ 25.09
Exercise price per share, high end of the range (in dollars per share)	$ 32.569
Options Exercisable
Number of Options Outstanding (in shares)	402,816
Number of Options Exercisable (in shares)	402,816
Weighted Average Exercise Price Outstanding (in dollars per share)	$ 29.32
Weighted Average Exercise Price (in dollars per share)	$ 29.32
Stock Options | Range of Exercise Prices, $32.57 to $42.089
Summary information about outstanding stock options
Exercise price per share, low end of the range (in dollars per share)	$ 32.57
Exercise price per share, high end of the range (in dollars per share)	$ 42.089
Options Exercisable
Number of Options Outstanding (in shares)	389,857
Number of Options Exercisable (in shares)	111,406
Weighted Average Exercise Price Outstanding (in dollars per share)	$ 40.10
Weighted Average Exercise Price (in dollars per share)	$ 42.08

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SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2014

SEGMENT INFORMATION

SEGMENT INFORMATION

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 September 30, 2014, our subsidiaries operated 80 hospitals, with a total of 20,762 licensed beds, primarily serving urban and suburban communities, as well as 198 outpatient centers and six health plans.

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 September 30, 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 82% and 78% of Conifer’s net operating revenues for the nine months ended September 30, 2014 and 2013, respectively.

The following tables include 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:

	September 30,		December 31,
	2014		2013
Assets:
Hospital operations and other	$	16,988	$	16,194
Conifer		324		256
Total	$	17,312	$	16,450

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Capital expenditures:
Hospital operations and other	$	207	$	139	$	717	$	387
Conifer		4		3		17		11
Total	$	211	$	142	$	734	$	398
Net operating revenues:
Hospital operations and other	$	4,031	$	2,275	$	11,707	$	6,840
Conifer
Tenet		148		92		426		278
Other customers		148		133		440		377
		4,327		2,500		12,573		7,495
Intercompany eliminations		(148)		(92)		(426)		(278)
Total	$	4,179	$	2,408	$	12,147	$	7,217
Adjusted EBITDA:
Hospital operations and other	$	412	$	252	$	1,167	$	802
Conifer		47		36		139		96
Total	$	459	$	288	$	1,306	$	898
Depreciation and amortization:
Hospital operations and other	$	202	$	114	$	594	$	339
Conifer		5		5		15		15
Total	$	207	$	119	$	609	$	354
Adjusted EBITDA	$	459	$	288	$	1,306	$	898
Depreciation and amortization		(207)		(119)		(609)		(354)
Impairment and restructuring charges, and acquisition-related costs		(37)		(20)		(90)		(45)
Litigation and investigation costs		(4)		(1)		(19)		(3)
Interest expense		(186)		(91)		(558)		(292)
Loss from early extinguishment of debt		(24)		—		(24)		(348)
Investment earnings		—		—		—		1
Net income (loss) from continuing operations before income taxes	$	1	$	57	$	6	$	(143)

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ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS (Tables)

9 Months Ended

Sep. 30, 2014

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

Schedule Of Components Of Accounts Receivable

	September 30,		December 31,
	2014		2013
Continuing operations:
Patient accounts receivable	$	2,978	$	2,459
Allowance for doubtful accounts		(772)		(589)
Estimated future recoveries from accounts assigned to our Conifer subsidiary		122		92
Net cost reports and settlements payable and valuation allowances		(92)		(75)
		2,236		1,887
Discontinued operations		2		3
Accounts receivable, net	$	2,238	$	1,890

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EMPLOYEE BENEFIT PLANS (Details) (USD $) In Millions, except Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
EMPLOYEE BENEFIT PLANS
Stock-based compensation costs, pretax	$ 38	$ 29
2008 Stock Incentive Plan
EMPLOYEE BENEFIT PLANS
Shares available for issuance under the plan	5,200,000
2008 Stock Incentive Plan | Stock Options
EMPLOYEE BENEFIT PLANS
Expiration period from the date of grant	10 years
Portion of awards vesting on each of the first three anniversary dates of the grant (as a percent)	33.30%
Vesting period	3 years
2008 Stock Incentive Plan | Restricted Stock Units
EMPLOYEE BENEFIT PLANS
Contractual right to receive shares of common stock for a stock based award	1
Portion of awards vesting on each of the first three anniversary dates of the grant (as a percent)	33.30%
Vesting period	3 years

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ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS - Components (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable
Accounts receivable, net	$ 2,238	$ 1,890
Continuing operations
Accounts, Notes, Loans and Financing Receivable
Patient accounts receivable	2,978	2,459
Allowance for doubtful accounts	(772)	(589)
Estimated future recoveries from accounts assigned to our collection agency subsidiary	122	92
Net cost reports and settlements receivable (payable) and valuation allowances	(92)	(75)
Accounts receivable, net	2,236	1,887
Discontinued operations
Accounts, Notes, Loans and Financing Receivable
Accounts receivable, net	$ 2	$ 3

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CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME
Net income (loss)	$ 18	$ 36	$ (5)	$ (90)
Other comprehensive income:
Amortization of prior-year service costs included in net periodic benefit costs	1		4
Unrealized gains (losses) on securities held as available-for-sale	(1)		2
Other comprehensive income before income taxes			6
Income tax expense related to items of other comprehensive income			(2)
Total other comprehensive income, net of tax			4
Comprehensive net income (loss)	18	36	(1)	(90)
Less: Comprehensive income attributable to noncontrolling interests	9	8	44	20
Comprehensive net income (loss) attributable to Tenet Healthcare Corporation common shareholders	$ 9	$ 28	$ (45)	$ (110)

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IMPAIRMENT AND RESTRUCTURING CHARGES, AND ACQUISITION-RELATED COSTS

9 Months Ended

Sep. 30, 2014

IMPAIRMENT AND RESTRUCTURING CHARGES, AND ACQUISITION-RELATED COSTS

IMPAIRMENT AND RESTRUCTURING CHARGES, AND ACQUISITION-RELATED COSTS

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

During the nine months ended September 30, 2014, we recorded impairment and restructuring charges and acquisition-related costs of $90 million, consisting of$14 million of employee severance costs,$6 million of contract and lease termination fees, $19million of restructuring costs,and $51 million in acquisition-related costs, which include $7million of transaction costs and $44 million of acquisition integration charges.

During the nine months ended September 30, 2013, we recorded impairment and restructuring charges and acquisition-related costs of $45 million, consisting of $2 million relating to the impairment of property, $10 million of restructuring costs, $9 million of employee severance costs, $1 million in lease termination fees, and $23 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 September 30, 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 Resolute Health, 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 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 Resolute Health market includes our hospital and other operations in the New Braunfels, Texas 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.

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INCOME TAXES - Reconciliation (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Income Taxes
Income tax benefit (expense)	$ 18	$ (16)	$ 11	$ 57
Income tax expense related to increase in the valuation allowance for deferred tax assets			3
Tax basis adjustments for state tax purposes related to acquisition			7
Tax benefit, amended state tax returns			4
Tax benefit, other adjustments			4
Reduction in estimated liabilities for uncertain tax positions			3
Unrecognized tax benefits	40		40
Unrecognized tax benefits which, if recognized, would impact effective tax rate	31		31
Unrecognized federal and state tax benefits and reserves for interest and penalties, which may decrease in the next 12 months	2		2
Continuing operations
Income Taxes
Interest and penalties related to accrued liabilities for uncertain tax positions, recognized			$ 5

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DISCONTINUED OPERATIONS (Tables)

9 Months Ended

Sep. 30, 2014

Discontinued Operation, Additional Disclosures [Abstract]

Schedule of net operating revenues and net loss before income taxes

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Net operating revenues	$	1	$	3	$	2	$	6
Net loss before income taxes		(2)		(10)		(35)		(7)

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BASIS OF PRESENTATION - Cash and Cash Equivalents (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013	Dec. 31, 2012
Cash and Cash Equivalents
Cash and cash equivalents	$ 200	$ 82	$ 113	$ 364
Accrued property and equipment purchases for items received but not yet paid	113		193
Non-cancellable capital leases primarily for buildings and equipment	112	99
Accounts payable
Cash and Cash Equivalents
Book overdrafts classified as accounts payable	194		245
Accrued property and equipment purchases for items received but not yet paid	62		138
Captive insurance subsidiaries
Cash and Cash Equivalents
Cash and cash equivalents	$ 98		$ 62

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ACQUISITIONS

9 Months Ended

Sep. 30, 2014

ACQUISITIONS

ACQUISITIONS

NOTE 14. ACQUISITIONS

During the nine months ended September 30, 2014, we acquired a majority interest in Texas Regional Medical Center at Sunnyvale, a 70-bed hospital in Sunnyvale, Texas, a suburban community east of Dallas, and completed our acquisition of Emanuel Medical Center, a 209-bed hospital in Turlock, California, located approximately 100 miles southeast of San Francisco. We also acquired four ambulatory surgery centers, three urgent care centers, one diagnostic imaging center and various physician practice entities in the same period. The fair value of the consideration conveyed in the acquisitions (the “purchase price”) was $185 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.

Preliminary purchase price allocations for the acquisitions made during the nine months ended September 30, 2014 are as follows:

Current assets	$	19
Property and equipment		104
Goodwill		137
Current liabilities		(21)
Long-term liabilities		(19)
Redeemable noncontrolling interests		(21)
Noncontrolling interests		(14)
Net cash paid	$	185

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 $7 million in transaction costs related to prospective and closed acquisitions were expensed during the nine months ended September 30, 2014, and are included in impairment and restructuring charges, and acquisition-related costs in the accompanying Condensed Consolidated Statement of Operations.

Acquisition of Vanguard

Effective October 1, 2013, we acquired the common stock of Vanguard for $21 per share in an all cash transaction. Vanguard owned and operated 28 hospitals (plus one more under construction, which was recently completed), 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. We have completed the analysis required to finalize the purchase price allocation for this acquisition and related disclosures. We have revised our Condensed Consolidated Balance Sheet as of December 31, 2013 to reflect the impact of these adjustments.

The purchase price allocation for our Vanguard acquisition is as follows:

Current assets	$	976
Property and equipment		2,830
Other long term assets		152
Other intangible assets		155
Goodwill		2,460
Current liabilities		(1,193)
Deferred taxes-long term		(103)
Other long-term liabilities		(3,711)
Redeemable noncontrolling interests in equity of consolidated subsidiaries		(258)
Noncontrolling interests		(7)
Net cash paid	$	1,301

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 September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Net operating revenues	$	4,179	$	3,748	$	12,147	$	11,574
Net income (loss) from continuing operations, before income taxes	$	1	$	(220)	$	6	$	(418)