Tenet Reports $336 Million of Adjusted EBITDA for Second Quarter

Tenet Reports $336 Million of Adjusted EBITDA for Second Quarter

16.7% Increase in Adjusted EBITDA

6.9% Increase in Net Operating Revenues

Acquisition of Vanguard Health Systems Expected to Close by Year-End

DALLAS--(BUSINESS WIRE)-- Tenet Healthcare Corporation (NYS: THC) today reported its results for the second quarter ended June 30, 2013, which included the following:

• Adjusted EBITDA of $336 million for the second quarter ended June 30, 2013, an increase of $48 million, or 16.7 percent, as compared to Adjusted EBITDA of $288 million in the second quarter of 2012.

• Income from continuing operations, excluding impairments, restructuring charges, acquisition-related costs, litigation and investigation costs, the loss on early extinguishment of debt, and other tax adjustments, was $69 million after-tax, or $0.66 per diluted share, in the second quarter of 2013. In the second quarter of 2012, income from continuing operations was $44 million after-tax, or $0.41 per diluted share, excluding litigation and investigation costs, impairments, and restructuring charges.

"Tenet drove a 16.7 percent increase in Adjusted EBITDA through outstanding cost control and revenue growth," said Trevor Fetter, president and chief executive officer. "We grew both outpatient visits and emergency department volumes in the quarter, and we doubled revenues in our Conifer services business. We are revising our Outlook for 2013 Adjusted EBITDA to growth of 4 to 8 percent reflecting softer than anticipated inpatient volumes. Planning for the integration of our Vanguard Health Systems acquisition is proceeding smoothly, and we expect to close the transaction before the end of this year."

Discussion of Results(Percentage changes compare Q2'13 to Q2'12, unless otherwise noted.)

Adjusted admissions declined 0.7 percent in the second quarter reflecting a 2.5 percent increase in outpatient visits and a 3.5 percent decline in inpatient admissions. Outpatient visit growth was 39 percent organic. Emergency department visits increased 2.9 percent, and surgeries increased by 13.9 percent.

Net operating revenues were $2.422 billion, an increase of $157 million, or 6.9 percent, compared to net operating revenues of $2.265 billion in the second quarter of 2012. Total net patient revenue per adjusted admission was $12,208, an increase of 2.7 percent. These pricing increases primarily reflect improved terms in our contracts with commercial managed care payers. Commercial managed care revenue increased 4.7 percent per admission, 6.3 percent per patient day, and 6.9 percent per outpatient visit. Net operating revenues in the second quarter of 2013 included $19 million of additional revenues from the California Provider Fee 30-month Program compared to the second quarter of 2012.

Selected operating expenses of our hospital operations, defined as the sum of salaries, wages and benefits, supplies and other operating expenses excluding the Company's Conifer services business, increased by 2.4 percent on a per adjusted admission basis. Excluding the incremental expenses related to increased physician employment, this growth was 0.9 percent. Supplies expense per adjusted admission was approximately flat, increasing by only 0.2 percent. Electronic health records incentives were $34 million in the second quarter of 2013 and were zero in the second quarter of 2012. These incentives are not a part of the definition of selected operating expenses.

Bad debt expense increased by $17 million to $207 million in the second quarter of 2013 compared to last year's second quarter. Bad debt expense as a percent of revenues was 7.9 percent, an increase of 20 basis points, compared to 7.7 percent in the second quarter of 2012. The increase in bad debt expense was primarily attributable to a $15 million increase in uninsured revenues. Our self-pay collection rate improved to 28.7 percent in the second quarter of 2013 compared to 28.5 percent in the second quarter of 2012.

Conifer reported a 12 percent increase in Adjusted EBITDA to $28 million as compared to $25 million in the second quarter of 2012. Conifer's revenues increased by $111 million to $219 million in this year's second quarter. The growth in both revenues and Adjusted EBITDA reflects the implementation of Catholic Health Initiatives ("CHI") revenue cycle operations and other new business.

Net loss attributable to common shareholders in the second quarter of 2013 was $50 million after-tax, or $0.49 per share, compared to a net loss of $6 million after-tax, or $0.06 per diluted share, in the second quarter of 2012.

Cash and cash equivalents were $90 million at June 30, 2013 compared to $95 million at March 31, 2013. The Company had a $33 million balance on its bank line at June 30, 2013. Accounts receivable days improved to 51 days, down from 52 days at March 31, 2013, and 53 days at December 31, 2012.

In the second quarter Tenet invested an additional $92 million to repurchase approximately 1.998 million shares. Under the current Board authorized repurchase program of $500 million, the Company has invested $292 million in the last three quarters to repurchase 7.859 million shares. Since 2011, Tenet has invested $984 million to repurchase almost 30 percent, or 40.893 million shares, including its convertible preferred stock, at a weighted average price of $24.06 per share.

Outlook for Adjusted EBITDA

Based on inpatient volumes in the first half of 2013, which were significantly softer than initially projected, the Company's new Outlook range for 2013 Adjusted EBITDA is $1.250 billion to $1.300 billion. The mid-point of this Outlook range represents growth of 6 percent compared to the $1.203 billion reported in 2012. This Outlook excludes the impact of the acquisition of Vanguard Health Systems ("Vanguard"), which is expected to close prior to year-end 2013.

The Outlook for the second half, exclusive of the expected contribution from Vanguard, is expected to be in a range of $640 to $690 million, representing growth of approximately 9 percent compared to Adjusted EBITDA in the first half of $610 million. The Outlook range for the Company's third quarter Adjusted EBITDA is $275 million to $325 million. The third quarter is expected to be the last quarter reported before closing the Vanguard acquisition.

Management's Webcast Discussion of Second Quarter Results

Tenet management will discuss the Company's second quarter 2013 results on a 10:00 a.m. (ET) webcast on August 6, 2013. This webcast may be accessed through Tenet's website at www.tenethealth.com/investors.

Additional information regarding Tenet's quarterly results of operations, including detailed tabular operational data, is contained in its Form 10-Q report, which will be filed with the Securities and Exchange Commission and posted on the Tenet investor relations website before the webcast. This press release includes certain non-GAAP measures, such as Adjusted EBITDA. A reconciliation of Adjusted EBITDA to net income attributable to Tenet common shareholders is included in the financial tables at the end of this release.

About Tenet

Tenet Healthcare Corporation, a leading health care services company, through its subsidiaries operates 49 hospitals, 129 outpatient centers and Conifer Health Solutions, a leader in business process solutions for health care providers serving more than 600 hospital and other clients nationwide. Tenet's hospitals and related health care facilities are committed to providing high quality care to patients in the communities they serve. For more information, please visit www.tenethealth.com.

This document contains "forward-looking statements" - that is, statements that relate to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," or "will." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include, but are not limited to, the occurrence of any event, change or other circumstances that could give rise to the termination of our merger agreement with Vanguard Health Systems, Inc. ("Vanguard"); the failure to satisfy conditions to completion of the proposed merger, including receipt of regulatory approvals; changes in the business or operating prospects of Vanguard; and the other factors disclosed under "Forward-Looking Statements" and "Risk Factors" in our Form 10-K for the year ended December 31, 2012, and in our quarterly reports on Form 10-Q, periodic reports on Form 8-K and other filings with the Securities and Exchange Commission. The information contained in this release is as of the date hereof. The Company assumes no obligation to update forward-looking statements contained in this release as a result of new information or future events or developments.

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