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, 2017~~March 31, 2021



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

Commission File Number 1-7293

TENET HEALTHCARE CORPORATION

(Exact name of Registrant as specified in its charter)



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

~~1445 Ross Avenue, Suite 1400~~14201 Dallas Parkway

Dallas, TX ~~75202~~75254

(Address of principal executive offices, including zip code)

(469) 893-2200

(Registrant’s telephone number, including area code)

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

Title of each class

Trading symbol

Name of each exchange on which registered

Common stock,

$0.05 par value

THC

New York Stock Exchange

6.875% Senior Notes due 2031

THC31

New York Stock Exchange

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

Indicate by check mark whether the Registrant has submitted electronically ~~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 ☒x No ☐¨

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

~~Large accelerated filer ☒~~

~~Accelerated filer ☐~~

~~Non-accelerated filer ☐~~

Smaller reporting company

☐

Emerging growth company

☐

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

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

At ~~October 31, 2017,~~April 23, 2021, there were ~~100,936,869~~106,790,357 shares of the Registrant’s common stock ~~$0.05 par value,~~ outstanding.

Table of Contents

TENET HEALTHCARE CORPORATION

TABLE OF CONTENTS

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Dollars in Millions

(Unaudited)


	September 30,			December 31,				March 31,		December 31,
	2017			2016				2021		2020
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	429		$	716		Cash and cash equivalents	$	2,141	$	2,446
Accounts receivable, less allowance for doubtful accounts ($934 at September 30, 2017 and $1,031 at December 31, 2016)	2,567			2,897
Accounts receivable							Accounts receivable	2,745		2,690
Inventories of supplies, at cost	297			326			Inventories of supplies, at cost	368		368
Income tax receivable	14			4

Assets held for sale	842			29			Assets held for sale	139		140
Other current assets	1,160			1,285			Other current assets	1,306		1,503
Total current assets	5,309			5,257			Total current assets	6,699		7,147
Investments and other assets	1,253			1,250			Investments and other assets	2,577		2,534
Deferred income taxes	783			871			Deferred income taxes	297		325
Property and equipment, at cost, less accumulated depreciation and amortization ($4,750 at September 30, 2017 and $4,974 at December 31, 2016)	7,077			8,053
Property and equipment, at cost, less accumulated depreciation and amortization ($6,172 at March 31, 2021 and $6,043 at December 31, 2020)							Property and equipment, at cost, less accumulated depreciation and amortization ($6,172 at March 31, 2021 and $6,043 at December 31, 2020)	6,592		6,692
Goodwill	7,022			7,425			Goodwill	8,799		8,808
Other intangible assets, at cost, less accumulated amortization ($841 at September 30, 2017 and $772 at December 31, 2016)	1,764			1,845
Other intangible assets, at cost, less accumulated amortization ($1,331 at March 31, 2021 and $1,284 at December 31, 2020)							Other intangible assets, at cost, less accumulated amortization ($1,331 at March 31, 2021 and $1,284 at December 31, 2020)	1,590		1,600
Total assets	$	23,208		$	24,701		Total assets	$	26,554	$	27,106
LIABILITIES AND EQUITY							LIABILITIES AND EQUITY
Current liabilities:							Current liabilities:
Current portion of long-term debt	$	140		$	191		Current portion of long-term debt	$	137	$	145
Accounts payable	1,100			1,329			Accounts payable	1,103		1,207
Accrued compensation and benefits	800			872			Accrued compensation and benefits	907		942
Professional and general liability reserves	210			181			Professional and general liability reserves	263		243
Accrued interest payable	336			210			Accrued interest payable	290		248
Liabilities held for sale	407			9			Liabilities held for sale	68		70
Contract liabilities							Contract liabilities	917		659
Other current liabilities	1,146			1,242			Other current liabilities	1,245		1,333
Total current liabilities	4,139			4,034			Total current liabilities	4,930		4,847
Long-term debt, net of current portion	14,741			15,064			Long-term debt, net of current portion	15,098		15,574
Professional and general liability reserves	617			613			Professional and general liability reserves	763		735
Defined benefit plan obligations	596			626			Defined benefit plan obligations	478		497
Deferred income taxes	—			279			Deferred income taxes	29		29
Contract liabilities – long-term							Contract liabilities – long-term	655		918
Other long-term liabilities	604			610			Other long-term liabilities	1,593		1,617
Total liabilities	20,697			21,226			Total liabilities	23,546		24,217
Commitments and contingencies							Commitments and contingencies	0		0
Redeemable noncontrolling interests in equity of consolidated subsidiaries	1,816			2,393			Redeemable noncontrolling interests in equity of consolidated subsidiaries	1,992		1,952
Equity:							Equity:
Shareholders’ equity:							Shareholders’ equity:
Common stock, $0.05 par value; authorized 262,500,000 shares; 149,244,229 shares issued at September 30, 2017 and 148,106,249 shares issued at December 31, 2016	7			7
Common stock, $0.05 par value; authorized 262,500,000 shares; 155,021,894 shares issued at March 31, 2021 and 154,407,524 shares issued at December 31, 2020							Common stock, $0.05 par value; authorized 262,500,000 shares; 155,021,894 shares issued at March 31, 2021 and 154,407,524 shares issued at December 31, 2020	8		7
Additional paid-in capital	4,835			4,827			Additional paid-in capital	4,841		4,844
Accumulated other comprehensive loss	(238		)	(258		)	Accumulated other comprehensive loss	(282)		(281)
Accumulated deficit	(2,161		)	(1,742		)	Accumulated deficit	(2,031)		(2,128)
Common stock in treasury, at cost, 48,413,280 shares at September 30, 2017 and 48,420,650 shares at December 31, 2016	(2,419		)	(2,417		)
Common stock in treasury, at cost, 48,334,419 shares at March 31, 2021 and 48,337,947 shares at December 31, 2020							Common stock in treasury, at cost, 48,334,419 shares at March 31, 2021 and 48,337,947 shares at December 31, 2020	(2,413)		(2,414)
Total shareholders’ equity	24			417			Total shareholders’ equity	123		28
Noncontrolling interests	671			665			Noncontrolling interests	893		909
Total equity	695			1,082			Total equity	1,016		937
Total liabilities and equity	$	23,208		$	24,701		Total liabilities and equity	$	26,554	$	27,106

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Dollars in Millions, Except Per-Share Amounts

(Unaudited)


	Three Months Ended March 31,
	2021		2020
Net operating revenues	$	4,781	$	4,520
Grant income	31		0
Equity in earnings of unconsolidated affiliates	42		28
Operating expenses:
Salaries, wages and benefits	2,201		2,187
Supplies	804		763
Other operating expenses, net	1,072		1,013
Depreciation and amortization	224		203
Impairment and restructuring charges, and acquisition-related costs	20		55
Litigation and investigation costs	13		2
Net gains on sales, consolidation and deconsolidation of facilities	0		(2)
Operating income	520		327
Interest expense	(240)		(243)
Other non-operating income, net	10		1
Loss from early extinguishment of debt	(23)		0
Income from continuing operations, before income taxes	267		85
Income tax benefit (expense)	(45)		75
Income from continuing operations, before discontinued operations	222		160
Discontinued operations:
Loss from operations	0		(1)

Loss from discontinued operations	0		(1)
Net income	222		159
Less: Net income available to noncontrolling interests	125		66
Net income available to Tenet Healthcare Corporation common shareholders	$	97	$	93
Amounts available (attributable) to Tenet Healthcare Corporation common shareholders
Income from continuing operations, net of tax	$	97	$	94
Loss from discontinued operations, net of tax	0		(1)
Net income available to Tenet Healthcare Corporation common shareholders	$	97	$	93
Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations	$	0.91	$	0.90
Discontinued operations	0		(0.01)
	$	0.91	$	0.89
Diluted
Continuing operations	$	0.90	$	0.89
Discontinued operations	0		(0.01)
	$	0.90	$	0.88
Weighted average shares and dilutive securities outstanding (in thousands):
Basic	106,309		104,353
Diluted	108,065		105,733

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 4,941
$ 5,216
$ 15,310
$ 15,856
Less: Provision for doubtful accounts 355
367
1,109
1,095
Net operating revenues
4,586
4,849
14,201
14,761
Equity in earnings of unconsolidated affiliates 38
31
95
85
Operating expenses:
Salaries, wages and benefits 2,264
2,308
6,990
7,012
Supplies 740
767
2,285
2,351
Other operating expenses, net 1,120
1,231
3,466
3,686
Electronic health record incentives (1 ) (2 ) (8 ) (23 )
Depreciation and amortization 219
205
662
632
Impairment and restructuring charges, and acquisition-related costs 329
31
403
81
Litigation and investigation costs 6
4
12
291
Gains on sales, consolidation and deconsolidation of facilities (104 ) (3 ) (142 ) (151 )
Operating income
51
339
628
967
Interest expense (257 ) (243 ) (775 ) (730 )
Other non-operating expense, net (4 ) (7 ) (14 ) (18 )
Loss from early extinguishment of debt (138 ) —
(164 ) —
Net income (loss) from continuing operations, before income taxes
(348 ) 89
(325 ) 219
Income tax benefit (expense) 60
(10 ) 105
(61 )
Net income (loss) from continuing operations, before discontinued operations
(288 ) 79
(220 ) 158
Discontinued operations:
Income (loss) from operations (1 ) 2
(1 ) (5 )
Income tax benefit (expense) —
(1 ) —
—
Net income (loss) from discontinued operations
(1 ) 1
(1 ) (5 )
Net income (loss) (289 ) 80
(221 ) 153
Less: Net income attributable to noncontrolling interests 78
88
254
266
Net loss attributable to Tenet Healthcare Corporation common
shareholders
$ (367 ) $ (8 ) $ (475 ) $ (113 )
Amounts attributable to Tenet Healthcare Corporation common shareholders
Net loss from continuing operations, net of tax $ (366 ) $ (9 ) $ (474 ) $ (108 )
Net income (loss) from discontinued operations, net of tax (1 ) 1
(1 ) (5 )
Net loss attributable to Tenet Healthcare Corporation common
shareholders
$ (367 ) $ (8 ) $ (475 ) $ (113 )
Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ (3.63 ) $ (0.09 ) $ (4.72 ) $ (1.09 )
Discontinued operations (0.01 ) 0.01
(0.01 ) (0.05 )
$ (3.64 ) $ (0.08 ) $ (4.73 ) $ (1.14 )
Diluted
Continuing operations $ (3.63 ) $ (0.09 ) $ (4.72 ) $ (1.09 )
Discontinued operations (0.01 ) 0.01
(0.01 ) (0.05 )
$ (3.64 ) $ (0.08 ) $ (4.73 ) $ (1.14 )
Weighted average shares and dilutive securities outstanding (in thousands):
Basic 100,812
99,523
100,475
99,210
Diluted 100,812
99,523
100,475
99,210

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME ~~(LOSS)~~

Dollars in Millions

(Unaudited)


	Three Months Ended March 31,
	2021		2020
Net income	$	222	$	159
Other comprehensive income:
Amortization of net actuarial loss included in other non-operating income, net	3		2
Unrealized gains on debt securities held as available-for-sale	0		1


Other comprehensive income before income taxes	3		3
Income tax expense related to items of other comprehensive income	(4)		(2)
Total other comprehensive income (loss), net of tax	(1)		1
Comprehensive net income	221		160
Less: Comprehensive income available to noncontrolling interests	125		66
Comprehensive income available to Tenet Healthcare Corporation common shareholders	$	96	$	94

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income (loss) $ (289 ) $ 80
$ (221 ) $ 153
Other comprehensive income (loss):
Amortization of net actuarial loss included in other non-operating expense, net 4
5
12
8
Unrealized gains on securities held as available-for-sale 2
2
5
3
Foreign currency translation adjustments 5
(3 ) 14
(44 )
Other comprehensive income (loss) before income taxes 11
4
31
(33 )
Income tax expense related to items of other comprehensive income (loss) (7 ) (1 ) (11 ) (3 )
Total other comprehensive income (loss), net of tax 4
3
20
(36 )
Comprehensive net income (loss) (285 ) 83
(201 ) 117
Less: Comprehensive income attributable to noncontrolling interests 78
88
254
266
Comprehensive loss attributable to Tenet Healthcare Corporation common shareholders $ (363 ) $ (5 ) $ (455 ) $ (149 )

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in Millions

(Unaudited)


								Three Months Ended March 31,
	Nine Months Ended September 30,							2021		2020
	2017			2016
Net income (loss)	$	(221	)	$	153
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net income							Net income	$	222	$	159
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	662			632			Depreciation and amortization	224		203
Provision for doubtful accounts	1,109			1,095
Deferred income tax expense (benefit)	(145		)	32			Deferred income tax expense (benefit)	24		(79)
Stock-based compensation expense	44			51			Stock-based compensation expense	14		13
Impairment and restructuring charges, and acquisition-related costs	403			81			Impairment and restructuring charges, and acquisition-related costs	20		55
Litigation and investigation costs	12			291			Litigation and investigation costs	13		2
Gains on sales, consolidation and deconsolidation of facilities	(142		)	(151		)
Net gains on sales, consolidation and deconsolidation of facilities							Net gains on sales, consolidation and deconsolidation of facilities	0		(2)
Loss from early extinguishment of debt	164			—			Loss from early extinguishment of debt	23		0
Equity in earnings of unconsolidated affiliates, net of distributions received	(4		)	2			Equity in earnings of unconsolidated affiliates, net of distributions received	28		(11)
Amortization of debt discount and debt issuance costs	33			33			Amortization of debt discount and debt issuance costs	9		10
Pre-tax loss from discontinued operations	1			5			Pre-tax loss from discontinued operations	0		1
Other items, net	(19		)	(3		)	Other items, net	(7)		2
Changes in cash from operating assets and liabilities:							Changes in cash from operating assets and liabilities:
Accounts receivable	(1,046		)	(1,156		)	Accounts receivable	(53)		14
Inventories and other current assets	97			(95		)	Inventories and other current assets	130		23
Income taxes	(14		)	(1		)	Income taxes	19		2
Accounts payable, accrued expenses and other current liabilities	(141		)	(35		)	Accounts payable, accrued expenses and other current liabilities	(87)		(144)
Other long-term liabilities	7			48			Other long-term liabilities	6		(51)
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements	(88		)	(132		)	Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements	(51)		(68)
Net cash provided by (used in) operating activities from discontinued operations, excluding income taxes	(3		)	1

Net cash provided by operating activities	709			851			Net cash provided by operating activities	534		129
Cash flows from investing activities:							Cash flows from investing activities:
Purchases of property and equipment — continuing operations	(492		)	(614		)
Purchases of property and equipment							Purchases of property and equipment	(121)		(182)
Purchases of businesses or joint venture interests, net of cash acquired	(41		)	(96		)	Purchases of businesses or joint venture interests, net of cash acquired	(25)		(55)
Proceeds from sales of facilities and other assets	826			573			Proceeds from sales of facilities and other assets	13		11

Proceeds from sales of marketable securities, long-term investments and other assets	20			36			Proceeds from sales of marketable securities, long-term investments and other assets	6		10
Purchases of equity investments	(64		)	(37		)
Purchases of marketable securities and equity investments							Purchases of marketable securities and equity investments	(11)		(4)
Other long-term assets	(16		)	(15		)	Other long-term assets	(8)		(2)
Other items, net	(6		)	3			Other items, net	1		18
Net cash provided by (used in) investing activities	227			(150		)
Net cash used in investing activities							Net cash used in investing activities	(145)		(204)
Cash flows from financing activities:							Cash flows from financing activities:
Repayments of borrowings under credit facility	(850		)	(1,195		)	Repayments of borrowings under credit facility	0		(240)
Proceeds from borrowings under credit facility	850			1,195			Proceeds from borrowings under credit facility	0		740
Repayments of other borrowings	(4,099		)	(112		)	Repayments of other borrowings	(541)		(48)
Proceeds from other borrowings	3,788			4			Proceeds from other borrowings	4		7
Debt issuance costs	(62		)	(1		)	Debt issuance costs	0		(1)
Distributions paid to noncontrolling interests	(178		)	(151		)	Distributions paid to noncontrolling interests	(119)		(76)
Proceeds from sales of noncontrolling interests	29			19
Proceeds from sale of noncontrolling interests							Proceeds from sale of noncontrolling interests	6		2
Purchases of noncontrolling interests	(722		)	(180		)	Purchases of noncontrolling interests	(2)		0
Proceeds from employee stock plan purchases	5			4
Proceeds from exercise of stock options and employee stock purchase plan							Proceeds from exercise of stock options and employee stock purchase plan	7		2
Medicare advances and grants received by unconsolidated affiliates							Medicare advances and grants received by unconsolidated affiliates	19		0
Other items, net	16			9			Other items, net	(68)		40
Net cash used in financing activities	(1,223		)	(408		)
Net cash provided by (used in) financing activities							Net cash provided by (used in) financing activities	(694)		426
Net increase (decrease) in cash and cash equivalents	(287		)	293			Net increase (decrease) in cash and cash equivalents	(305)		351
Cash and cash equivalents at beginning of period	716			356			Cash and cash equivalents at beginning of period	2,446		262
Cash and cash equivalents at end of period	$	429		$	649		Cash and cash equivalents at end of period	$	2,141	$	613
Supplemental disclosures:							Supplemental disclosures:
Interest paid, net of capitalized interest	$	(617	)	$	(596	)	Interest paid, net of capitalized interest	$	(190)	$	(172)
Income tax payments, net	$	(54	)	$	(33	)	Income tax payments, net	$	(2)	$	(3)

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

TENET HEALTHCARE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

Description of Business and Basis of Presentation

Tenet Healthcare Corporation (together with our subsidiaries, referred to herein as “Tenet,” ~~“we”~~“we,” “our” or “us”) is a diversified healthcare services ~~company. At September 30, 2017, we operated 77 hospitals, 20 surgical hospitals and over 460 outpatient centers~~company headquartered in ~~the United States, as well as nine facilities in the United Kingdom, through our subsidiaries, partnerships and joint ventures, including~~Dallas, Texas. Through an expansive care network that includes USPI Holding Company, Inc. (“~~USPI joint venture”~~USPI”)~~. Our~~, at March 31, 2021 we operated 65 hospitals and over 540 other healthcare facilities, including surgical hospitals, ambulatory surgery centers, urgent care and imaging centers, and other care sites and clinics. We also operate Conifer Health Solutions, LLC through our Conifer Holdings, Inc. (“Conifer”) subsidiary, which provides ~~healthcare business process services in the areas of hospital and physician~~ revenue cycle management and value-based care ~~solutions~~services to ~~healthcare~~hospitals, health systems, ~~as well as individual hospitals,~~ physician practices, ~~self-insured organizations, health plans~~employers and other ~~entities.~~clients.

This quarterly report supplements our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 (“Annual Report”). As permitted by the Securities and Exchange Commission for interim reporting, we have omitted certain notes and disclosures that substantially duplicate those in our Annual Report. For further information, refer to the audited Consolidated Financial Statements and notes included in our Annual Report. Unless otherwise indicated, all financial and statistical data included in these notes to our Condensed Consolidated Financial Statements relate to our continuing operations, with dollar amounts expressed in millions (except per-share amounts). In addition to the impact of the new accounting standards discussed below, certain prior-year amounts have also been reclassified to conform to the current-year presentation, primarily related to the detail of other intangible assets in Note 1 and the line items presented in the changes in shareholders’ equity table in Note 8.

Effective January 1, 2017, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-09, “Compensation—Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), which affects all entities that issue share-based payment awards to their employees. The guidance in ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Upon adoption of ASU 2016-09, we recorded previously unrecognized excess tax benefits of approximately $56 million as a deferred tax asset and a cumulative effect adjustment to retained earnings as of January 1, 2017. Prospectively, all excess tax benefits and deficiencies will be recognized as income tax benefit or expense in our consolidated statement of operations when awards vest.

Also effective January 1, 2017, we early adopted ASU 2017-07, “Compensation—Retirement Benefits (Topic 715) Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”), which the FASB issued in March 2017. The amendments in ASU 2017-07 apply to all employers that offer to their employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715 of the FASB Accounting Standards Codification. The guidance in ASU 2017-07 requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the statement of operations separately from the service cost component and outside a subtotal of income from operations. The line item or items used in the statement of operations to present the other components of net benefit cost must be disclosed. The amendments in ASU 2017-07 must be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the statement of operations. As a result of the adoption of ASU 2017-07, we reclassified approximately $20 million of net benefit cost from salaries, wages and benefits expense to other non-operating income (expense), net, in the accompanying Condensed Consolidated Statement of Operations for both of the nine month periods ended September 30, 2017 and 2016. Upon adoption of ASU 2017-07, we also reclassified approximately $8 million of net benefit cost from salaries, wages and benefits expense to other non-operating income (expense), net for the three months ended December 31, 2016, and we reclassified approximately $21 million of net benefit cost from salaries, wages and benefits expense to other non-operating income (expense), net for the year ended December 31, 2015.

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 are required to make estimates and assumptions that affect the amounts reported in our Condensed Consolidated Financial Statements and these accompanying notes. We regularly evaluate the accounting policies and estimates we use. In general, we base the estimates on historical experience and on assumptions that we believe to be reasonable given the particular circumstances in which we operate. Actual results may vary from those estimates. Financial and statistical information we

report to other regulatory agencies may be prepared on a basis other than GAAP or using different assumptions or reporting periods and, therefore, may vary from amounts presented herein. Although we make every effort to ensure that the information we report to those agencies is accurate, complete and consistent with applicable reporting guidelines, we cannot be responsible for the accuracy of the information they make available to the public.

Operating results for the ~~three and nine month periods~~three-month period ended ~~September 30, 2017~~March 31, 2021 are not necessarily indicative of the results that may be expected for the full year. Reasons for this include, but are not limited to: the impact of the COVID-19 pandemic on our operations, business, financial condition and cash flows; overall revenue and cost trends, particularly the timing and magnitude of price changes; fluctuations in contractual allowances and cost report settlements and valuation allowances; managed care contract negotiations, settlements or terminations and payer consolidations; 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;~~implicit price concessions; fluctuations in interest rates; levels of malpractice insurance expense and settlement trends; ~~the timing of when we meet the criteria to recognize electronic health record incentives;~~ impairment of long-lived assets and goodwill; restructuring charges; losses, costs and insurance recoveries related to natural disasters and other weather-related occurrences; litigation and investigation costs; acquisitions and dispositions of facilities and other assets; gains (losses) on sales, consolidation and deconsolidation of facilities; income tax rates and deferred tax asset valuation allowance activity; changes in estimates of accruals for annual incentive compensation; the timing and amounts of stock option and restricted stock unit grants to employees and directors; gains ~~or losses~~(losses) from early extinguishment of debt; and changes in occupancy levels and patient volumes. Factors that affect service mix, revenue mix, patient volumes and, thereby, the results of operations at our hospitals and related healthcare facilities include, but are not limited to: changes in federal, state and local healthcare and business regulations, including mandated closures and other operating restrictions; the business environment, economic conditions and demographics of local communities in which we operate; the number of uninsured and underinsured individuals in local communities treated at our hospitals; disease hotspots and seasonal cycles of illness; climate and weather conditions; physician recruitment, satisfaction, retention and attrition; advances in technology and treatments that reduce length of stay; local healthcare competitors; utilization pressure by managed care organizations, as well as managed care contract negotiations or terminations; ~~the number of patients with high-deductible health insurance plans;~~hospital performance data on quality measures and patient satisfaction, as well as standard charges for services; any unfavorable publicity about us, or our joint venture partners, that impacts our relationships with physicians and patients; ~~changes in healthcare regulations~~ and ~~the participation of individual states in federal programs; and~~changing consumer behavior, including with respect to the timing of elective procedures. These considerations apply to year-to-year comparisons as well.

~~Translation of Foreign Currencies~~

The accounts of European Surgical Partners Limited (“Aspen”) were measured in its local currency (the pound sterling) and then translated into U.S. dollars. All assets and liabilities were translated usingCertain prior-year amounts have been reclassified to conform to the current ~~rate~~year presentation. In the accompanying Condensed Consolidated Balance Sheets, income tax receivable has been reclassified to other current assets, as it is no longer significant enough to present separately.

Table of ~~exchange at~~Contents

COVID-19 Pandemic

During 2020, federal, state and local authorities undertook several actions designed to assist healthcare providers in providing care to COVID-19 and other patients and to mitigate the ~~balance sheet date. Results~~adverse economic impact of ~~operations were translated using~~ the ~~average rates prevailing throughout~~COVID-19 pandemic. Legislative actions taken by the ~~period~~federal government during 2020 included the Coronavirus Aid, Relief, and Economic Security Act, the Paycheck Protection Program and Health Care Enhancement Act, the Continuing Appropriations Act, 2021 and Other Extensions Act, and the Consolidated Appropriations Act, 2021 (collectively, the “COVID Acts”). Through the COVID Acts, the federal government authorized funding to be distributed through the Public Health and Social Services Emergency Fund (“Provider Relief Fund” or “PRF”). Additionally, the COVID Acts revised the Medicare accelerated payment program in an attempt to disburse payments to hospitals and other care providers more quickly and permitted employers to defer payment of ~~operations. Translation gains or losses resulting~~the 6.2% employer Social Security tax beginning March 27, 2020 through December 31, 2020. Our participation in these programs and related accounting policies are summarized below.

Grant Income. During the three months ended March 31, 2021, we received cash payments of $59 million from ~~changes in exchange rates are accumulated in shareholders’ equity.~~

~~Net Operating Revenues Before Provision for Doubtful Accounts~~

the Provider Relief Fund and state and local grant programs, including $28 million received by our unconsolidated affiliates. We recognize ~~net operating revenues before provision for doubtful accounts~~grant payments as income when there is reasonable assurance that we have complied with the conditions associated with the grant. Our estimates could change materially in the ~~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~~future 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,our operating performance or COVID-19 activities, as well as ~~certain uninsured patients under~~the government’s grant compliance guidance. Grant income recognized by our ~~Compact with Uninsured Patients~~Hospital Operations and other ~~uninsured discount~~(“Hospital Operations”) and ~~charity programs.~~Ambulatory Care segments is presented in grant income and grant income recognized through our unconsolidated affiliates is presented in equity in earnings of unconsolidated affiliates in our statement of operations. During the three months ended March 31, 2021, we recognized grant income of $24 million in our Hospital Operations segment and $7 million in our Ambulatory Care segment. We recognized an additional $6 million of Provider Relief Fund income during this period, which was classified as equity in earnings of unconsolidated affiliates in the accompanying Condensed Consolidated Statement of Operations for the three months ended March 31, 2021.

Disbursements from the Provider Relief Fund and other state and local programs began in the second quarter of 2020; therefore, no grant payments were received or grant income recognized during the three months ended March 31, 2020. At both March 31, 2021 and December 31, 2020, we had deferred grant payments remaining of $18 million, which amounts were recorded in other current liabilities in the accompanying Condensed Consolidated Balance Sheets for those periods.

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

Our Hospital Operations and Ambulatory Care segments both received advance payments from ~~continuing operations:~~the Medicare accelerated payment program during 2020. No additional advances were received in the three months ended March 31, 2021. Advances totaling $857 million and $603 million were included in contract liabilities and $639 million and $902 million were included in contract liabilities – long term in the accompanying Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020, respectively.

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Hospital Operations and other:

Net patient revenues from acute care hospitals, related outpatient facilities and physician practices
Medicare $ 809
$ 844
$ 2,563
$ 2,658
Medicaid 256
339
822
1,009
Managed care 2,524
2,729
7,867
8,031
Indemnity, self-pay and other 442
328
1,316
1,264
Net patient revenues(1)
4,031
4,240
12,568
12,962
Health plans 10
122
100
385
Revenue from other sources 171
158
480
482
Hospital Operations and other total prior to inter-segment eliminations 4,212
4,520
13,148
13,829
Ambulatory Care 477
457
1,422
1,346
Conifer 401
398
1,203
1,169
Inter-segment eliminations (149 ) (159 ) (463 ) (488 )
Net operating revenues before provision for doubtful accounts
$ 4,941
$ 5,216
$ 15,310
$ 15,856
Deferral of Employer Payroll Tax Match Payments. Social Security taxes deferred under the COVID Acts are required to be paid in equal amounts over two years, with payments due in December 2021 and December 2022. We had deferred Social Security tax payments totaling $130 million included in accrued compensation and benefits and $130 million included in other long‑term liabilities in the accompanying Condensed Consolidated Balance Sheets at both March 31, 2021 and December 31, 2020.


~~(1)~~	Net patient revenues include revenues from physician practices of $171 million and $179 million for the three months ended September 30, 2017 and 2016, respectively, and $551 million and $558 million for the nine months ended September 30, 2017 and 2016, respectively.

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 $429 million~~$2.141 billion and ~~$716 million~~$2.446 billion at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, respectively. At ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, our book overdrafts were ~~approximately $240~~$171 million and ~~$279~~$154 million, respectively, which were classified as accounts payable.

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At ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016, approximately $167~~2020, $172 million and ~~$147~~$166 million, respectively, of total cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets were intended for the operations of our captive insurance subsidiaries, and approximately $62 million and $85 million, respectively, of total cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets were intended for the operations of our health plan-related businesses.subsidiaries.

Also at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, we had ~~$89~~$42 million and ~~$179~~$93 million, respectively, of property and equipment purchases accrued for items received but not yet paid. Of these amounts, ~~$57~~$36 million and ~~$141~~$85 million, respectively, were included in accounts payable.

During the ~~nine months~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, we ~~entered into non-cancellable capital~~recorded right-of-use assets related to non‑cancellable finance leases of ~~approximately $82~~$11 million and $15 million, respectively, and ~~$110~~related to non-cancellable operating leases of $46 million ~~respectively, primarily for equipment.~~ and $54 million, respectively.

Other Intangible Assets

The following tables provide information regarding other intangible assets, which ~~are~~were included in the accompanying Condensed Consolidated Balance Sheets at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016:~~2020:


	Gross Carrying Amount		Accumulated Amortization		Net Book Value
At March 31, 2021:
Capitalized software costs	$	1,836	$	(1,125)	$	711
Trade names	102		0		102
Contracts	872		(116)		756
Other	111		(90)		21
Total	$	2,921	$	(1,331)	$	1,590

Gross
Carrying
Amount Accumulated
Amortization Net Book
Value
At September 30, 2017:
Capitalized software costs $ 1,537
$ (721 ) $ 816
Trade names 105
—
105
Contracts 855
(55 ) 800
Other 108
(65 ) 43
Total
$ 2,605
$ (841 ) $ 1,764


									Gross Carrying Amount		Accumulated Amortization		Net Book Value
	Gross Carrying Amount		Accumulated Amortization			Net Book Value
At December 31, 2016:
At December 31, 2020:								At December 31, 2020:
Capitalized software costs	$	1,572	$	(681	)	$	891	Capitalized software costs	$	1,800	$	(1,084)	$	716
Trade names	106		—			106		Trade names	102		0		102
Contracts	845		(43		)	802		Contracts	872		(111)		761
Other	94		(48		)	46		Other	110		(89)		21
Total	$	2,617	$	(772	)	$	1,845	Total	$	2,884	$	(1,284)	$	1,600

Estimated future amortization of intangibles with finite useful lives at ~~September 30, 2017~~March 31, 2021 is as follows:

Three Months
Ending Years Ending Later
Years
December 31,
Total 2017 2018 2019 2020 2021
Amortization of intangible assets $ 1,097
$ 47
$ 152
$ 135
$ 104
$ 92
$ 567


			Nine Months Ending		Years Ending								Later Years
					December 31,
	Total		2021		2022		2023		2024		2025
Amortization of intangible assets	$	907	$	128	$	125	$	112	$	102	$	87	$	353

We recognized amortization expense of ~~$125~~$47 million and ~~$111~~$41 million in the accompanying Condensed Consolidated Statements of Operations for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively.

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Investments in Unconsolidated Affiliates

We control ~~220~~291 of the facilities within our Ambulatory Care segment and, therefore, consolidate their results. We account for many of the facilities our Ambulatory Care segment operates ~~(109~~(108 of ~~329~~399 at ~~September 30, 2017) and four of the hospitals our Hospital Operations and other segment operates,~~March 31, 2021), as well as 11 additional ~~facilities~~companies in which our Hospital Operations ~~and other~~ segment holds ownership interests, under the equity method as investments in unconsolidated affiliates and report only our share of net income ~~attributable to the investee~~ as equity in earnings of unconsolidated affiliates in the accompanying Condensed Consolidated Statements of Operations. In the three months ended March 31, 2021, equity in earnings of unconsolidated affiliates included $6 million from PRF grants recognized by our Ambulatory Care segment’s unconsolidated affiliates. Summarized financial information for ~~the~~these equity method investees ~~within our Ambulatory Care segment and the four equity method investee hospitals operated by our Hospital Operations and other segment are~~is included in the following table. For investments acquired during the reported periods, amounts reflect 100% of the investee’s results beginning on the date of our acquisition of the investment.


	Three Months Ended March 31,
	2021		2020
Net operating revenues	$	634	$	566
Net income	$	165	$	109
Net income available to the investees	$	102	$	69

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net operating revenues $ 635
$ 610
$ 1,819
$ 1,803
Net income $ 143
$ 129
$ 376
$ 364
Net income attributable to the investees $ 93
$ 83
$ 242
$ 241

NOTE 2. ACCOUNTS RECEIVABLE ~~AND ALLOWANCE FOR DOUBTFUL ACCOUNTS~~

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


	March 31, 2021		December 31, 2020
Continuing operations:
Patient accounts receivable	$	2,544	$	2,499
Estimated future recoveries	156		156
Net cost reports and settlements receivable and valuation allowances	43		34
	2,743		2,689
Discontinued operations	2		1
Accounts receivable, net	$	2,745	$	2,690

September 30, 2017 December 31, 2016
Continuing operations:

Patient accounts receivable $ 3,371
$ 3,799
Allowance for doubtful accounts (934 ) (1,031 )
Estimated future recoveries 130
141
Net cost reports and settlements payable and valuation allowances (2 ) (14 )
2,565
2,895
Discontinued operations 2
2
Accounts receivable, net
$ 2,567
$ 2,897

~~At September 30, 2017~~The following table summarizes the amount and classification of assets and liabilities in the accompanying Condensed Consolidated Balance Sheets related to California’s provider fee program at March 31, 2021 and December 31, 2016, our allowance for doubtful accounts was 27.7% and 27.1%, respectively, of our patient accounts receivable. Accounts that are pursued for collection through Conifer’s 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.2020:


	March 31, 2021		December 31, 2020
Assets:
Other current assets	$	255	$	378
Investments and other assets	$	277	$	206

Liabilities:
Other current liabilities	$	122	$	110
Other long-term liabilities	$	52	$	56

We also provide charity care to patients who are 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 disproportionate share hospital (“DSH”) payments. These payments are intended to mitigate our cost of uncompensated care, as well as reduced Medicaid funding levels. The following table ~~below~~ shows our estimated costs (based on selected operating expenses, which include salaries, wages and benefits, supplies and other operating ~~expenses and which exclude the costs of our health plan businesses)~~expenses) of caring for our ~~self-pay patients~~uninsured and charity ~~care~~ patients ~~and revenues attributable to Medicaid DSH and other supplemental revenues we recognized~~ in the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016:~~2020:


	Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
	2017		2016		2017		2016			2021		2020
Estimated costs for:									Estimated costs for:
Self-pay patients	$	164	$	158	$	484	$	453
Uninsured patients									Uninsured patients	$	168	$	156
Charity care patients	29		36		92		104		Charity care patients	20		40
Total	$	193	$	194	$	576	$	557	Total	$	188	$	196
Medicaid DSH and other supplemental revenues	$	140	$	249	$	462	$	691

~~At September 30, 2017~~

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NOTE 3. CONTRACT BALANCES

Hospital Operations Segment

Amounts related to services provided to patients for which we have not billed and ~~December 31, 2016,~~that do not meet the conditions of unconditional right to payment at the end of the reporting period are contract assets. For our Hospital Operations segment, our contract assets include services that we ~~had approximately $375 million and $537 million, respectively,~~have provided to patients who are still receiving inpatient care in our facilities at the end of ~~receivables recorded~~the reporting period. Our Hospital Operations segment’s contract assets were included in other current assets in the accompanying Condensed Consolidated Balance Sheets at March 31, 2021 and ~~approximately $56 million~~December 31, 2020. Approximately 91% of our Hospital Operations segment’s contract assets meet the conditions for unconditional right to payment and ~~$139 million, respectively, of payables~~are reclassified to patient receivables within 90 days.

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

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


			Contract Liability –		Contract Liability –
			Current		Long-term
	Contract Assets		Advances from Medicare		Advances from Medicare
December 31, 2020	$	208	$	510	$	819
March 31, 2021	180		734		595
Increase (decrease)	$	(28)	$	224	$	(224)


December 31, 2019	$	170	$	0	$	0
March 31, 2020	151		0		0
Decrease	$	(19)	$	0	$	0

Ambulatory Care Segment

During the year ended December 31, 2020, our Ambulatory Care segment also received advance payments from the expanded Medicare accelerated payment program. At March 31, 2021 and December 31, 2020, contract liabilities included $66 million and $51 million, respectively, and contract liabilities – long-term included $38 million and $62 million, respectively, of Medicare advance payments received by our unconsolidated affiliates for whom we provide cash management services.

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


	Contract Liability –		Contract Liability –
	Current		Long-term
	Advances from Medicare		Advances from Medicare
December 31, 2020	$	93	$	83
March 31, 2021	123		44
Increase (decrease)	$	30	$	(39)

Our Ambulatory Care segment did not have any outstanding payments from the Medicare accelerated payment program at March 31, 2020 and December 31, 2019.

Conifer Segment

Conifer enters into contracts with customers to ~~California’s provider~~provide revenue cycle management and other services, such as value‑based care, consulting and project services. The payment terms and conditions in our customer contracts vary. In some cases, customers are invoiced in advance and (for other than fixed-price fee ~~program.~~arrangements) a true-up to the actual fee is included on a subsequent invoice. In other cases, payment is due in arrears. In addition, some contracts contain performance incentives,

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penalties and other forms of variable consideration. When the timing of Conifer’s delivery of services is different from the timing of payments made by the customers, Conifer recognizes either unbilled revenue (performance precedes contractual right to invoice the customer) or deferred revenue (customer payment precedes Conifer service performance). In the following table, customers that prepay prior to obtaining control/benefit of the service are represented by deferred contract revenue until the performance obligations are satisfied. Unbilled revenue represents arrangements in which Conifer has provided services to and the customer has obtained control/benefit of services prior to the contractual invoice date. Contracts with payment in arrears are recognized as receivables in the month the service is performed.

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


					Contract Liability –		Contract Liability –
			Contract Asset –		Current		Long-Term
	Receivables		Unbilled Revenue		Deferred Revenue		Deferred Revenue
December 31, 2020	$	56	$	20	$	56	$	16
March 31, 2021	56		14		60		16
Increase (decrease)	$	0	$	(6)	$	4	$	0

December 31, 2019	$	26	$	11	$	61	$	18
March 31, 2020	23		7		61		17
Decrease	$	(3)	$	(4)	$	0	$	(1)

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

In the three months ended March 31, 2021 and 2020, Conifer recognized $49 million and $54 million, respectively, of revenue that was included in the opening current deferred revenue liability. This revenue consists primarily of prepayments for those customers who are billed in advance, changes in estimates related to metric-based services, and up‑front integration services that are recognized over the services period.

Contract Costs

During both of the three months ended March 31, 2021 and 2020, we recognized amortization expense related to deferred contract setup costs of $1 million. At March 31, 2021 and December 31, 2020, the unamortized customer contract costs were $23 million and $24 million, respectively, and are presented as part of investments and other assets in the accompanying Condensed Consolidated Balance Sheets.

NOTE 3.4. ASSETS AND LIABILITIES HELD FOR SALE

In December 2020, we entered into a definitive agreement to sell the majority of our urgent care centers operated under the MedPost and CareSpot brands by our Hospital Operations and Ambulatory Care segments. As a result, the assets and liabilities associated with these facilities were classified as held for sale at both March 31, 2021 and December 31, 2020 in the accompanying Condensed Consolidated Balance Sheets. At March 31, 2021, assets and liabilities held for sale associated with these facilities totaled $125 million and $68 million, respectively. We completed the sale of these facilities on April 30, 2021.

In the three months ended September 30, ~~2017,~~2020, a building we ~~entered into a definitive agreement for the sale of our hospitals, physician practices and related assets in Philadelphia, Pennsylvania and the surrounding area. In accordance with the guidance~~owned in the FASB’s Accounting Standards Codification (“ASC”) 360, “Property, Plant and Equipment,” we classified $222 million of our Philadelphia-area assets as “assets held for sale” in current assets and the related liabilities of $52 million as “liabilities held for sale” in current liabilities in the accompanying Condensed Consolidated Balance Sheet at September 30, 2017. These assets and liabilities, which are in our Hospital Operations and other segment, were recorded at the lower of their carrying amount or their fair value less estimated costs to sell. We recorded impairment charges of $235 million for the write-down of assets held for sale to their estimated fair value, less estimated costs to sell, as a result of this anticipated transaction.

~~Also in the three months ended September 30, 2017, MacNeal Hospital, which is located in a suburb of Chicago, as well as other operations affiliated with the hospital,~~Philadelphia area met the criteria to be classified as held for sale. As a result, wethe building and related assets were classified ~~these assets totaling $222 million~~ as ~~“assets~~ held for ~~sale” in current assets~~sale at both March 31, 2021 and ~~the related liabilities of $33 million as “liabilities held for sale” in current liabilities~~December 31, 2020 in the accompanying Condensed Consolidated Balance Sheet at September 30, 2017. These assets and liabilities, which are in our Hospital Operations and other segment, were recorded at the lower of their carrying amount or their fair value less estimated costs to sell. There was no impairment recorded for the write-down ofSheets. At March 31, 2021, assets held for sale related to ~~their estimated fair value, less estimated costs to sell, as a result~~this building totaled $14 million. We completed the sale of the ~~planned divestiture~~building in April 2021 for $16 million.

Table of ~~these assets.~~Contents

Additionally, our nine Aspen facilities in the United Kingdom met the criteria to be classified as held for sale in the three months ended September 30, 2017. We classified $398 million of our United Kingdom assets as “assets held for sale” in current assets and the related liabilities of $322 million as “liabilities held for sale” in current liabilities in the accompanying Condensed Consolidated Balance Sheet at September 30, 2017. These assets and liabilities, which are in our Ambulatory Care segment, were recorded at the lower of their carrying amount or their fair value less estimated costs to sell. We recorded impairment charges of $59 million for the write-down of assets held for sale to their estimated fair value, less estimated costs to sell.

Assets and liabilities classified as held for sale at ~~September 30, 2017~~March 31, 2021 were comprised of the following:

Accounts receivable $ 178
Other current assets 100
Investments and other long-term assets 20
Property and equipment 456
Other intangible assets 8
Goodwill 80
Current liabilities (107 )
Long-term liabilities (300 )
Net assets held for sale $ 435

In the three months ended June 30, 2017, we entered into a definitive agreement for the sale of our hospitals, physician practices and related assets in Houston, Texas and the surrounding area, and we classified these assets and liabilities as held for sale. Effective August 1, 2017, we completed the sale for net proceeds of approximately $750 million and recognized a gain on sale of approximately $111 million.

In the three months ended September 30, 2016, certain of our health plan assets and liabilities met the criteria to be classified as held for sale. In the nine months ended September 30, 2017, we completed the sales of certain of our health plan businesses in Michigan, Arizona and Texas at transaction prices of approximately $20 million, $13 million and $12 million, respectively, and recognized gains on the sales of approximately $3 million, $13 million and $10 million, respectively.


Accounts receivable	$	14
Other current assets	6
Investments and other long-term assets	41
Property and equipment	39

Goodwill	39

Current liabilities	(31)
Long-term liabilities	(37)
Net assets held for sale	$	71

Our hospitals, physician practices and related assets in Georgia met the criteria to be classified as assets held for sale in the three months ended June 30, 2015. We completed the sale of our Georgia assets on March 31, 2016 at a transaction price of approximately $575 million and recognized a gain on sale of approximately $113 million. Because we did not sell the related accounts receivable with respect to the pre-closing period, net receivables of approximately $17 million are included in accounts receivable, less allowance for doubtful accounts, in the accompanying Condensed Consolidated Balance Sheet at September 30, 2017.

NOTE 4.5. IMPAIRMENT AND RESTRUCTURING CHARGES, AND ACQUISITION-RELATED COSTS

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, we recorded impairment and restructuring charges and ~~acquisition-related~~acquisition‑related costs of ~~$403~~$20 million, consisting of ~~approximately $294~~$16 million of restructuring charges ~~to write-down assets held for sale to their estimated fair value, less estimated costs to sell, for our Aspen~~ and ~~Philadelphia-area facilities, $29~~$4 million of ~~impairment~~acquisition-related costs. Restructuring charges consisted of ~~two equity method investments, $40~~$4 million of employee severance costs, $8$6 million related to the transition of various administrative functions to our Global Business Center (“GBC”) in the Philippines and $6 million of other restructuring costs. Acquisition‑related costs consisted of $4 million of transaction costs.

During the three months ended March 31, 2020, we recorded impairment and restructuring charges and acquisition‑related costs of $55 million, consisting of $54 million or restructuring charges and $1 million of acquisition-related costs. Restructuring charges consisted of $10 million of employee severance costs, $15 million related to the transition of various administrative functions to our GBC, $23 million of charges due to the termination of USPI’s previous management equity plan, $1 million of contract and lease termination fees, ~~$3 million to write-down intangible assets, $13~~and $5 million of other restructuring costs. Acquisition-related costs ~~and $16 million in acquisition-related costs, which include $5~~consisted of $1 million of transaction costs and $11 million of acquisition integration charges. Our impairment and restructuring charges and acquisition-related costs for the nine months ended September 30, 2017 were comprised of $319 million from our Hospital Operations and other segment, $70 million from our Ambulatory Care segment and $14 million from our Conifer segment.costs.

During the nine months ended September 30, 2016, we recorded impairment and restructuring charges and acquisition-related costs of $81 million primarily related to our Hospital Operations and other segment, consisting of approximately $26 million of employee severance costs, $4 million of contract and lease termination fees, $2 million to write-down intangible assets, $9 million of other restructuring costs, and $40 million in acquisition-related costs, which include $5 million of transaction costs and $35 million of acquisition integration charges.

Our impairment tests presume stable, improving or, in some cases, declining operating results in our facilities, which are based on programs and initiatives being implemented that are designed to achieve ~~the~~each facility’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.

At ~~September 30, 2017,~~March 31, 2021, our continuing operations consisted of ~~three~~3 reportable segments, Hospital Operations, ~~and other,~~ Ambulatory Care and Conifer. Our ~~Hospital Operations and other segment was structured as follows at September 30, 2017:~~

~~Our Eastern region included all of our segment operations in Alabama, Florida, Illinois, Massachusetts, Michigan, Missouri, Pennsylvania, South Carolina and Tennessee;~~

~~Our Texas region included all of our segment operations in New Mexico and Texas; and~~

~~Our Western region included all of our segment operations in Arizona and California.~~

~~These regions~~segments are reporting units used to perform our goodwill impairment ~~analysis and are one level below our reportable business segments. We also perform a goodwill impairment analysis for our Ambulatory Care and Conifer reporting units.~~analysis.

We periodically incur costs to implement restructuring efforts for specific operations, which are recorded in our ~~consolidated statements~~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.~~structure, such as the establishment of offshore support operations at our GBC. Certain restructuring and acquisition-related costs are based on estimates. Changes in estimates are recognized as they occur.

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NOTE 5.6. LONG-TERM DEBT ~~AND LEASE OBLIGATIONS~~

The table below shows our long-term debt at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016:~~2020:


	March 31, 2021		December 31, 2020
Senior unsecured notes:



6.750% due 2023	$	1,872	$	1,872
7.000% due 2025	0		478
6.125% due 2028	2,500		2,500
6.875% due 2031	362		362
Senior secured first lien notes:




4.625% due 2024	1,870		1,870
4.625% due 2024	600		600
7.500% due 2025	700		700
4.875% due 2026	2,100		2,100
5.125% due 2027	1,500		1,500
4.625% due 2028	600		600
Senior secured second lien notes:

5.125% due 2025	1,410		1,410
6.250% due 2027	1,500		1,500

Finance leases, mortgage and other notes	383		403
Unamortized issue costs and note discounts	(162)		(176)
Total long-term debt	15,235		15,719
Less current portion	137		145
Long-term debt, net of current portion	$	15,098	$	15,574

September 30,
2017
December 31, 2016
Senior unsecured notes:

5.000% due 2019 $ —
$ 1,100
5.500% due 2019 500
500
6.750% due 2020 300
300
8.000% due 2020 —
750
8.125% due 2022 2,800
2,800
6.750% due 2023 1,900
1,900
7.000% due 2025 500
—
6.875% due 2031 430
430
Senior secured notes:

6.250% due 2018 —
1,041
4.750% due 2020 500
500
6.000% due 2020 1,800
1,800
Floating % due 2020 —
900
4.500% due 2021 850
850
4.375% due 2021 1,050
1,050
7.500% due 2022 750
750
4.625% due 2024 1,870
—
5.125% due 2025 1,410
—
Capital leases 377
735
Mortgage notes 85
84
Unamortized issue costs, note discounts and premiums (241 ) (235 )
Total long-term debt
14,881
15,255
Less current portion 140
191
Long-term debt, net of current portion
$ 14,741
$ 15,064

~~Senior Secured and~~ Senior Unsecured Notes and Senior Secured Notes

~~On June 14, 2017,~~In March 2021, we ~~sold $830~~retired approximately $478 million aggregate principal amount of our ~~4.625%~~7.000% senior ~~secured first lien~~unsecured notes ~~which will mature on July 15, 2024 (the “2024 Secured First Lien Notes”).~~due 2025 in advance of their maturity date. We ~~will pay interest on the 2024 Secured First Lien Notes semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2018. The proceeds~~paid approximately $495 million from ~~the sale of the 2024 Secured First Lien Notes were used, after payment of fees and expenses, together with~~ cash on hand to ~~deposit with~~retire the trustee an amount sufficient to fund the redemption of all $900 million in aggregate principal amount of our floating rate senior secured notes due 2020 (the “2020 Floating Rate Notes”) on July 14, 2017, thereby fully discharging the 2020 Floating Rate Notes as of June 14, 2017.notes. In connection with the ~~redemption,~~retirement, we recorded a loss from early extinguishment of debt of ~~approximately $26~~$23 million in the three months ended ~~June 30, 2017,~~March 31, 2021, primarily related to the difference between the ~~redemption~~purchase price and the par value of the notes, as well as the write-off of associated unamortized ~~note discounts and~~ issuance costs.

4.625% senior secured first lien notes due 2024 (the “Escrow Secured First Lien Notes”), $1.410 billion in aggregate principal amount of 5.125% senior secured second lien notes due 2025 (the “Escrow Secured Second Lien Notes”) and $500 million in aggregate principal amount of 7.000% senior unsecured notes due 2025 (the “Escrow Unsecured Notes”).

On July 14, 2017, we (i) assumed Escrow Corp.’s obligations with respect to the Escrow Secured Second Lien Notes and (ii) effected a mandatory exchange of all outstanding Escrow Secured First Lien Notes for a like principal amount of our newly issued 2024 Secured First Lien Notes. The proceeds from the sale of the Escrow Secured Second Lien Notes and Escrow Secured First Lien Notes were released from escrow on July 14, 2017 and were used, after payment of fees and expenses, to finance our redemption on July 14, 2017 of $1.041 billion aggregate principal amount of our outstanding 6.250% senior secured notes due 2018 and $1.100 billion aggregate principal amount of our outstanding 5.000% senior unsecured notes due 2019.

On August 1, 2017, we assumed Escrow Corp.’s obligations with respect to the Escrow Unsecured Notes. The proceeds from the sale of the Escrow Unsecured Notes were released from escrow on August 1, 2017 and were used, after payment of fees and expenses, to finance our redemption on August 1, 2017 of $500 million aggregate principal amount of our 8.000% senior unsecured notes due 2020.

~~On September 11, 2017, we redeemed the remaining $250 million aggregate principal amount of our 8.000% senior unsecured notes due 2020 using cash on hand.~~

As a result of the redemption activities in the three months ended September 30, 2017 discussed above, we recorded a loss from early extinguishment of debt of approximately $138 million in the period, 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.

Credit Agreement

We have a senior secured revolving credit facility ~~(as amended, the “Credit Agreement”)~~ that provides ~~subject to borrowing availability,~~ for revolving loans in an aggregate principal amount of up to $1$1.900 billion with a ~~$300~~$200 million subfacility for standby letters of credit. ~~Obligations~~We amended our credit agreement (as amended to date, the “Credit Agreement”) in April 2020 to, among other things, (i) increase the aggregate revolving credit commitments from the previous limit of $1.500 billion to $1.900 billion (the “Increased Commitments”), subject to borrowing availability, and (ii) increase the advance rate and raise limits on certain eligible accounts receivable in the calculation of the borrowing base, in each case, for an incremental period of 364 days. In April 2021, we further amended the Credit Agreement to, among other things, extend the availability of the Increased Commitments through April 22, 2022 and reduce the interest rate margins. At March 31, 2021, we had 0 cash borrowings outstanding under the Credit Agreement, ~~which has~~and we had less than $1 million of standby letters of credit outstanding. Based on our eligible receivables, $1.900 billion was available for borrowing under the revolving credit facility at March 31, 2021.

The Credit Agreement continues to have a scheduled maturity date of ~~December 4, 2020, are~~September 12, 2024, and obligations under the Credit Agreement continue to be guaranteed by substantially all of our domestic wholly owned hospital subsidiaries and ~~are~~ secured by a first-priority lien on the eligible inventory and accounts receivable owned by us and the subsidiary ~~guarantors.~~ guarantors, including receivables for Medicaid supplemental payments.

Outstanding revolving loans accrue interest at either (i) a base rate plus a margin ranging from 0.25% to 0.75% per annum, or (ii) the London Interbank Offered Rate (“LIBOR”) plus a margin ranging from 1.25% to 1.75% per annum, in each case based on available credit. An unused commitment fee payable on the undrawn portion of the revolving loans ranges from 0.25% to 0.375% per annum based on available credit. Our borrowing availability is based on a specified percentage of eligible inventory and accounts receivable, including self-pay accounts. ~~At September 30, 2017, we had no cash borrowings outstanding under the Credit Agreement, and we had approximately $2 million~~

Table of ~~standby letters of credit outstanding. Based on our eligible receivables, approximately $998 million was available for borrowing under the Credit Agreement at September 30, 2017.~~Contents

Letter of Credit Facility

~~We have a~~In March 2020, we amended our letter of credit facility (as amended, the “LC Facility”) ~~that provides for~~to extend the ~~issuance~~scheduled maturity date of the LC Facility from March 7, 2021 to September 12, 2024 and to increase the aggregate principal amount of standby and documentary letters of credit that from time to time ~~in an aggregate principal amount of~~may be issued thereunder from $180 million to $200 million. On July 29, 2020, we further amended the LC Facility to incrementally increase the maximum secured debt covenant from 4.25 to 1.00 on a quarterly basis up to ~~$180 million (subject~~6.00 to ~~increase to up to $200 million).~~1.00 for the quarter ended March 31, 2021, which maximum ratio will step down incrementally on a quarterly basis through the quarter ending December 31, 2021. Obligations under the LC Facility are guaranteed and secured by a ~~first-priority~~first‑priority pledge of the capital stock and other ownership interests of certain of our wholly owned domestic hospital subsidiaries on an equal ranking basis with our senior secured first lien notes. On September 15, 2016, we entered into an amendment to the existing letter of credit facility agreement in order to, among other things, (i) extend the scheduled maturity date of the LC Facility to March 7, 2021, (ii) reduce the margin payable with respect to unreimbursed drawings under letters of credit and undrawn letters of credit issued under the LC Facility, and (iii) reduce the commitment fee payable with respect to the undrawn portion of the commitments under the LC Facility.

Drawings under any letter of credit issued under the LC Facility that we have not reimbursed within ~~three~~3 business days after notice thereof ~~will~~ accrue interest at a base rate plus a margin ~~equal to~~of 0.50% per annum. An unused commitment fee is payable at an initial rate of 0.25% per annum with a step up to 0.375% per annum should our secured-debt-to-EBITDA ratio equal or exceed 3.00 to 1.00 at the end of any fiscal quarter. A fee on the aggregate outstanding amount of issued but undrawn letters of credit ~~will accrue~~accrues at a rate of 1.50% 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, 2017,~~March 31, 2021, we had ~~approximately $105~~$92 million of standby letters of credit outstanding under the LC Facility.

NOTE 6.7. GUARANTEES

At ~~September 30, 2017,~~March 31, 2021, 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 ~~$172~~$122 million. We had a total liability of ~~$139~~$98 million recorded for these guarantees included in other current liabilities in the accompanying Condensed Consolidated Balance Sheet at ~~September 30, 2017.~~March 31, 2021.

At ~~September 30, 2017,~~March 31, 2021, we also had issued guarantees of the indebtedness and other obligations of our investees to third parties, the maximum potential amount of future payments under which was approximately ~~$23~~$81 million. Of the total, ~~$17~~$10 million relates to the obligations of consolidated subsidiaries, which obligations ~~are~~were recorded in the accompanying Condensed Consolidated Balance Sheet at ~~September 30, 2017.~~March 31, 2021.

NOTE 7.8. EMPLOYEE BENEFIT PLANS

In recent years, we have granted both options and restricted stock units to certain of our employees. 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. Typically, options and time-based restricted stock units vest one-third on each of the first three anniversary dates of the grant; however, certain special retention awards may have longer vesting periods. In addition, we grant performance-based restricted stock units and performance-based options that vest subject to the achievement of specified performance goals within a specified time frame. At September 30, 2017, assuming outstanding performance-based restricted stock units and options for which performance has not yet been determined will achieve target performance, approximately 5.6 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 (approximately 4.6 million shares remain available if we assume maximum performance for outstanding performance-based restricted stock units and options for which performance has not yet been determined).Share-Based Compensation Plans

~~Our~~The accompanying Condensed Consolidated Statements of Operations for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 include ~~$44~~$14 million and ~~$46~~$13 million, respectively, of pre-tax compensation costs related to our stock-based compensation arrangements.

Stock Options

The following table summarizes stock option activity during the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2021:


	Options	Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value		Weighted Average Remaining Life
				(In Millions)
Outstanding at December 31, 2020	912,531	$	22.51

Exercised	(293,581)	20.68

Outstanding at March 31, 2021	618,950	$	23.38	$	18	6.9 years
Vested and expected to vest at March 31, 2021	618,950	$	23.38	$	18	6.9 years
Exercisable at March 31, 2021	391,748	$	19.96	$	13	6.5 years

Options Weighted Average
Exercise Price
Per Share Aggregate
Intrinsic Value Weighted Average
Remaining Life
(In Millions)
Outstanding at December 31, 2016 1,435,921
$ 22.87

Granted 1,396,307
18.24

Exercised (16,525 ) 4.56

Forfeited/Expired (187,458 ) 26.07

Outstanding at September 30, 2017 2,628,245
$ 20.30
$ 2
5.1 years
Vested and expected to vest at September 30, 2017 2,628,245
$ 20.30
$ 2
5.1 years
Exercisable at September 30, 2017 1,231,938
$ 22.63
$ 2
1.7 years

There were ~~16,525~~293,581 and ~~110,715~~27,167 stock options exercised during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively, with aggregate intrinsic values of $10 million and less than $1 million, respectively. We did not grant any stock options during the months ended March 31, 2021 and ~~approximately $1 million, respectively.~~2020.

At ~~September 30, 2017,~~March 31, 2021, there were $9$1 million of total unrecognized compensation costs related to stock options. These costs are expected to be recognized over a weighted average period of ~~2.1 years.~~

In the three months ended March 31, 2017, we granted an aggregate of 987,781 stock options under our 2008 Stock Incentive Plan to certain of our senior officers. The stock options will all vest on the third anniversary of the grant date, subject to achieving a closing stock price of at least $23.74 (a 25% premium above the March 1, 2017 grant-date closing stock price of $18.99) for at least 20 consecutive trading days within three years of the grant date, and will expire on the tenth anniversary of the grant date. In the nine months ended September 30, 2016, there were no stock options granted.

The weighted average estimated fair value of stock options we granted in the three months ended March 31, 2017 was $8.52 per share. The fair values were calculated based on the grant date, using a Monte Carlo simulation with the following assumptions:less than one year.

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		~~Three Months Ended March 31, 2017~~
~~Expected volatility~~		~~49%~~
~~Expected dividend yield~~		0%
~~Expected life~~		~~6.2 years~~
~~Expected forfeiture rate~~		0%
~~Risk-free interest rate~~		~~2.15%~~

The expected volatility used in the Monte Carlo simulation incorporates historical and implied share-price volatility and is 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 (April 8, 2011 and April 11, 2011) with unusual volatility due to an unsolicited acquisition proposal. The expected life of options granted is derived from Tenet’s historical stock option exercise behavior, adjusted for the exercisable period (i.e., from the third anniversary through the tenth anniversary of the grant date). 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 time frames.

On September 29, 2017, we granted our executive chairman 408,526 performance-based stock options with a grant date fair value of $5.63. The options vest on the first anniversary of the grant date and become exercisable only if the average closing price per share of the Company’s common stock, calculated over any period of 30 sequential trading days during the four-year period following the grant date, equals or exceeds $20.53.

The following table summarizes information about our outstanding stock options at ~~September 30, 2017:~~March 31, 2021:


	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number of Options	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number of Options	Weighted Average Exercise Price
$18.99 to $20.609	391,748	6.5 years	$	19.96	391,748	$	19.96
$20.61 to $35.430	227,202	7.6 years	29.26		0	N/A
	618,950	6.9 years	$	23.38	391,748	$	19.96

Options Outstanding Options Exercisable
Range of Exercise Prices Number of
Options Weighted Average
Remaining
Contractual Life Weighted Average
Exercise Price Number of
Options Weighted Average
Exercise Price
$0.00 to $4.569 154,361
1.4 years $ 4.56
154,361
$ 4.56
$4.57 to $19.759 1,396,607
8.1 years 18.24
300
14.52
$19.76 to $32.569 822,890
2.1 years 20.87
822,890
20.87
$32.57 to $42.529 254,387
0.4 years 39.31
254,387
39.31
2,628,245
5.1 years $ 20.30
1,231,938
$ 22.63

Restricted Stock Units

The following table summarizes ~~restricted stock unit~~RSU activity during the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2021:


						Restricted Stock Units	Weighted Average Grant Date Fair Value Per Unit
	Restricted Stock Units		Weighted Average Grant Date Fair Value Per Unit
Unvested at December 31, 2016	3,174,533		$	38.75
Unvested at December 31, 2020					Unvested at December 31, 2020	2,095,206	$	25.87
Granted	643,329		18.65		Granted	708,577	54.94
Vested	(1,302,503	)	35.99		Vested	(304,688)	26.12
Forfeited	(93,618	)	37.62		Forfeited	(14,582)	27.74
Unvested at September 30, 2017	2,421,741		$	35.16
Unvested at March 31, 2021					Unvested at March 31, 2021	2,484,513	$	34.26

In the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, we granted ~~643,329~~an aggregate of 708,577 restricted stock units ~~of which 630,426~~(“RSUs”). Of these, 260,071 will vest and be settled ratably over a three-year period from the grant date, 189,215 will vest and be settled ratably over 8 quarterly periods from the grant date, and 14,192 will vest and be settled on December 31, 2021. We also granted 3,057 RSUs to a new member of our board of directors, consisting of an initial grant of 1,372 units and a pro-rata annual grant of 1,685 units. Both the initial grant and the annual grant vested immediately, however, the initial grant settles upon separation from the board, while the annual grant settles on the third anniversary of the grant date. ~~The~~In addition, we granted 241,150 performance-based RSUs, the vesting of ~~the remaining 12,903 restricted stock units~~which is contingent on our achievement of specified ~~performance~~performance goals for the years ~~2017~~2021 to ~~2019.~~2023. Provided the goals are achieved, the performance-based ~~restricted stock units~~RSUs will vest and settle on the third anniversary of the grant date. The actual number of performance-based ~~restricted stock units~~RSUs that could vest will range from 0% to 200% of the ~~12,903~~241,150 units granted, depending on our level of achievement with respect to the performance goals.

In the three months ended March 31, 2020, we granted an aggregate of 1,423,953 RSUs. Of these, 493,929 will vest and be settled ratably over a three-year period from the grant date, 104,167 will vest and be settled ratably over a four‑year period from the grant date, and 359,713 will vest and be settled ratably over 11 quarterly periods from the grant date. In addition, we granted 386,016 performance-based RSUs; the vesting of these RSUs is contingent on our achievement of specified performance goals for the years 2020 to 2022. Provided the goals are achieved, the performance‑based RSUs will vest and settle on the third anniversary of the grant date. The actual number of performance-based RSUs that could vest will range from 0% to 200% of the 386,016 units granted, depending on our level of achievement with respect to the performance goals. We also granted 80,128 performance-based RSUs to a Conifer senior officer, which were subsequently forfeited.

The fair value of an RSU is based on our share price on the grant date. For certain of the performance-based RSU grants during the three months ended March 31, 2021 and 2020, the number of units that will ultimately vest is subject to adjustment based on the achievement of a market-based condition. As noted above, the fair value of these RSUs is estimated through the use of a Monte Carlo simulation. Significant inputs used in our valuation of these RSUs included the following:


	Three Months Ended March 31,
	2021		2020
Expected volatility	71.76	%	54.74	%

Risk-free interest rate	0.22	%	1.16	%

At ~~September 30, 2017,~~March 31, 2021, there were ~~$44~~$58 million of total unrecognized compensation costs related to ~~restricted stock units.~~RSUs. These costs are expected to be recognized over a weighted average period of ~~1.8~~2.0 years.

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USPI Management Equity Plan

USPI maintains a separate management equity plan under which it grants RSUs representing a contractual right to receive one share of USPI’s non-voting common stock in the future. RSUs granted under the plan generally vest 20% in each of the first three years on the anniversary of the grant date with the remaining 40% vesting on the fourth anniversary of the grant date. Once the requisite holding period is met, during specified times the participant can sell the underlying shares to USPI at their estimated fair market value. At our sole discretion, the purchase of any non-voting common shares can be made in cash or in shares of Tenet’s common stock.

The following table summarizes RSU activity under USPI’s management equity plan during the three months ended March 31, 2021:


	Restricted Stock Units	Weighted Average Grant Date Fair Value Per Unit
Unvested at December 31, 2020	2,025,056	$	34.13

Vested	(373,499)	34.13
Forfeited	(47,112)	34.13
Unvested at March 31, 2021	1,604,445	$	34.13

Employee Retirement Plans

In ~~both of~~ the ~~nine-month periods~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, we recognized ~~(i)~~ service cost related to ~~one~~1 of our frozen ~~nonqualified~~non‑qualified defined benefit pension plans of ~~approximately~~less than $1 million for both periods in salaries, wages and benefits expense. Additionally, in the three months ended March 31, 2021 and 2020, we recognized a benefit of $1 million and expense ~~and (ii)~~of $2 million, respectively, related to other components of net periodic pension cost and net periodic postretirement benefit cost related to our frozen qualified and ~~nonqualified~~non-qualified defined benefit plans ~~of approximately $20 million~~ in other non-operating income, ~~(expense),~~ net, in the accompanying Condensed Consolidated Statements of Operations.

NOTE 8.9. EQUITY

Changes in Shareholders’ Equity

The following ~~table shows~~tables show the changes in consolidated equity during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 (dollars in millions, share amounts in thousands):


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock		Noncontrolling Interests		Total Equity
	Shares Outstanding	Issued Par Amount
Balances at December 31, 2020	106,070	$	7	$	4,844	$	(281)	$	(2,128)	$	(2,414)	$	909	$	937
Net income	—	—		—		—		97		—		44		141
Distributions paid to noncontrolling interests	—	—		—		—		—		—		(61)		(61)
Other comprehensive loss	—	—		—		(1)		—		—		—		(1)
Accretion of redeemable noncontrolling interests	—	—		(3)		—		—		—		—		(3)
Purchases (sales) of businesses and noncontrolling interests, net	—	—		(10)		—		—		—		1		(9)

Stock-based compensation expense and issuance of common stock	617	1		10		—		—		1		—		12
Balances at March 31, 2021	106,687	$	8	$	4,841	$	(282)	$	(2,031)	$	(2,413)	$	893	$	1,016

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Tenet Healthcare Corporation Shareholders’ Equity
Common Stock Additional
Paid-In
Capital Accumulated
Other
Comprehensive
Loss Accumulated
Deficit Treasury
Stock Noncontrolling
Interests Total Equity
Shares
Outstanding Issued Par
Amount
Balances at December 31, 2016 99,686
$ 7
$ 4,827
$ (258 ) $ (1,742 ) $ (2,417 ) $ 665
$ 1,082
Net income (loss) —
—
—
—
(475 ) —
99
(376 )
Distributions paid to noncontrolling interests —
—
—
—
—
—
(93 ) (93 )
Other comprehensive income —
—
—
20
—
—
—
20
Accretion of redeemable noncontrolling interests —
—
(32 ) —
—
—
—
(32 )
Purchases (sales) of businesses and noncontrolling interests —
—
(4 ) —
—
—
—
(4 )
Cumulative effect of accounting change —
—
—
—
56
—
—
56
Stock-based compensation expense, tax benefit and issuance of common stock 1,145
—
44
—
—
(2 ) —
42
Balances at September 30, 2017 100,831
$ 7
$ 4,835
$ (238 ) $ (2,161 ) $ (2,419 ) $ 671
$ 695

Balances at December 31, 2015 98,495
$ 7
$ 4,815
$ (164 ) $ (1,550 ) $ (2,417 ) $ 267
$ 958
Net income (loss) —
—
—
—
(113 ) —
96
(17 )
Distributions paid to noncontrolling interests —
—
—
—
—
—
(82 ) (82 )
Other comprehensive loss —
—
—
(36 ) —
—
—
(36 )
Purchases (sales) of businesses and noncontrolling interests —
—
(43 ) —
—
—
119
76
Purchase accounting adjustments —
—
—
—
—
—
237
237
Stock-based compensation expense and issuance of common stock 1,033
—
29
—
—
—
—
29
Balances at September 30, 2016 99,528
$ 7
$ 4,801
$ (200 ) $ (1,663 ) $ (2,417 ) $ 637
$ 1,165


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock		Noncontrolling Interests		Total Equity
	Shares Outstanding	Issued Par Amount
Balances at December 31, 2019	104,197	$	7	$	4,760	$	(257)	$	(2,513)	$	(2,414)	$	854	$	437
Net income	—	—		—		—		93		—		32		125
Distributions paid to noncontrolling interests	—	—		—		—		—		—		(40)		(40)
Other comprehensive income	—	—		—		1		—		—		—		1
Accretion of redeemable noncontrolling interests	—	—		(1)		—		—		—		—		(1)
Purchases (sales) of businesses and noncontrolling interests, net	—	—		(30)		—		—		—		15		(15)
Cumulative effect of accounting change	—	—		—		—		(14)		—		—		(14)
Stock-based compensation expense and issuance of common stock	331	—		10		—		—		—		—		10
Balances at March 31, 2020	104,528	$	7	$	4,739	$	(256)	$	(2,434)	$	(2,414)	$	861	$	503

Our noncontrolling interests balances at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 were comprised of ~~$70~~$113 million and ~~$89~~$116 million, respectively, from our Hospital Operations ~~and other~~ segment, and ~~$601~~$780 million and ~~$576~~$793 million, respectively, from our Ambulatory Care segment. Our net income ~~attributable~~available to noncontrolling interests for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 in the table above were comprised of $9$4 million and $8$2 million, respectively, from our Hospital Operations ~~and other~~ segment, and ~~$90~~$40 million and ~~$88~~$30 million, respectively, from our Ambulatory Care segment.

NOTE 10. NET OPERATING REVENUES

Net operating revenues for our Hospital Operations and Ambulatory Care segments primarily consist of net patient service revenues, 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 and other uninsured discount and charity programs. Net operating revenues for our Conifer segment primarily consist of revenues from providing revenue cycle management services to health systems, as well as individual hospitals, physician practices, self-insured organizations, health plans and other entities.

The table below shows our sources of net operating revenues less implicit price concessions from continuing operations:


	Three Months Ended March 31,
	2021		2020
Hospital Operations:
Net patient service revenues from hospitals and related outpatient facilities:
Medicare	$	688	$	705
Medicaid	259		281
Managed care	2,480		2,321
Uninsured	47		40
Indemnity and other	176		193
Total	3,650		3,540
Other revenues(1)	297		294
Hospital Operations total prior to inter-segment eliminations	3,947		3,834
Ambulatory Care	646		490
Conifer	310		332
Inter-segment eliminations	(122)		(136)
Net operating revenues	$	4,781	$	4,520



(1)			Primarily physician practices revenues.

Adjustments for prior-year cost reports and related valuation allowances, principally related to Medicare and Medicaid, increased revenues in the three months ended March 31, 2021 and 2020 by $5 million and $4 million, respectively. Estimated cost report settlements and valuation allowances were included in accounts receivable in the accompanying

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Condensed Consolidated Balance Sheets (see Note 2). We believe that we have made adequate provision for any adjustments that may result from final determination of amounts earned under all the above arrangements with Medicare and Medicaid.

The table below shows the composition of net operating revenues for our Ambulatory Care segment:


	Three Months Ended March 31,
	2021		2020
Net patient service revenues	$	619	$	464
Management fees	22		21
Revenue from other sources	5		5
Net operating revenues	$	646	$	490

The table below shows the composition of net operating revenues for our Conifer segment:


	Three Months Ended March 31,
	2021		2020
Revenue cycle services – Tenet	$	118	$	134
Revenue cycle services – other customers	169		176
Other services – Tenet	4		2
Other services – other customers	19		20
Net operating revenues	$	310	$	332

Other services represent approximately 7% of Conifer’s revenue for both of the three months ended March 31, 2021 and 2020 and include value-based care services, consulting services and other client-defined projects.

Performance Obligations

The following table includes Conifer’s revenue that is expected to be recognized in the future related to performance obligations that are unsatisfied, or partially unsatisfied, at the end of the reporting period. The amounts in the table primarily consist of revenue cycle management fixed fees, which are typically recognized ratably as the performance obligation is satisfied. The estimated revenue does not include volume- or contingency-based contracts, performance incentives, penalties or other variable consideration that is considered constrained. Conifer’s contract with Catholic Health Initiatives (“CHI”), a minority interest owner of Conifer Health Solutions, LLC, represents the majority of the fixed-fee revenue related to remaining performance obligations. Conifer’s contract term with CHI ends December 31, 2032.


			Nine Months Ending		Years Ending								Later Years
					December 31,
	Total		2021		2022		2023		2024		2025
Performance obligations	$	6,602	$	454	$	603	$	603	$	549	$	549	$	3,844

NOTE 9.11. 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. For both of the policy ~~period~~periods April 1, ~~2017~~2020 through March 31, ~~2018,~~2021 and April 1, 2021 through March 31, 2022, we have coverage totaling $850 million per occurrence, after deductibles and exclusions, with annual aggregate sub-limits of $100 million for floods, $200 million for earthquakes and a per-occurrence sub-limit of $200 million for named windstorms with no annual aggregate. With respect to fires and other perils, excluding floods, earthquakes and named windstorms, the total $850 million limit of coverage per occurrence applies. Deductibles are 5% of insured values up to a maximum of ~~$25~~$40 million for California earthquakes, $25 million for floods and ~~wind-related claims,~~named windstorms, and 2% of insured values for New Madrid fault earthquakes, with a maximum per claim deductible of $25 million. Floods and certain other covered losses, including fires and other perils, have a minimum deductible of $1 million.

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Professional and General Liability Reserves

We are self-insured for the majority of our professional and general liability claims and purchase insurance from third‑parties to cover catastrophic claims. At ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, the aggregate current and long-term professional and general liability reserves in ~~our~~the accompanying Condensed Consolidated Balance Sheets were ~~approximately $827 million~~$1.026 billion and ~~$794~~$978 million, respectively. These reserves include the reserves recorded by our captive insurance subsidiaries and our ~~self-insured~~self‑insured retention reserves recorded based on modeled 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 2.16% at September 30, 2017 and 2.25% at December 31, 2016.

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~~Malpractice expense of $91 million and $73 million was included in other operating expenses, net, in the accompanying Condensed Consolidated Statements of Operations ~~is malpractice expense of $225 million and $233 million~~ for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively.

NOTE ~~10.~~12. CLAIMS AND LAWSUITS

We operate in a highly regulated and litigious industry. 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. We and our subsidiaries have received inquiries in recent years from government agencies, and we may receive similar inquiries in future periods. We are also subject to class action lawsuits, employment-related claims and other legal actions in the ordinary course of business. Some of these actions may involve large demands, as well as substantial defense costs. We cannot predict the outcome of current or future legal actions against us or the effect that judgments or settlements in such matters may have on us.

We are also subject to a non-prosecution agreement, as described in our Annual Report. If we fail to comply with this agreement, we could be subject to criminal prosecution, substantial penalties and exclusion from participation in federal healthcare programs, any of which could adversely impact our business, financial condition, results of operations or cash flows.

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. Significant judgment is required in both the determination of the probability of a loss and the determination as to whether a loss is reasonably estimable. These determinations are updated at least quarterly and are adjusted to reflect the effects of negotiations, settlements, rulings, advice of legal counsel and technical experts, and other information and events pertaining to a particular ~~matter.~~matter, but are subject to significant uncertainty regarding numerous factors that could affect the ultimate loss levels. 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. Given the inherent uncertainties associated with these matters, especially those involving governmental agencies, and the indeterminate damages sought in some cases, there is significant uncertainty as to the ultimate liability we may incur from these matters, and an adverse outcome in one or more of these matters could be material to our results of operations or cash flows for any particular reporting period.

~~Securities Litigation~~Government Investigation of Detroit Medical Center

~~In February~~Detroit Medical Center (“DMC”) is subject to an ongoing investigation commenced in October 2017 by the U.S. ~~District Court~~Attorney’s Office for the ~~Northern~~Eastern District of ~~Texas consolidated two previously disclosed lawsuits filed by purported shareholders~~Michigan and the Civil Division of the ~~Company’s common stock against the Company and several current and former executive officers into a single matter captioned~~ ~~In re Tenet Healthcare Corporation Securities Litigation. In April 2017, the~~

~~four court-appointed lead plaintiffs filed a consolidated amended class action complaint asserting~~DOJ for potential violations of the Stark law, the Medicare and Medicaid anti-kickback and anti-fraud and abuse amendments codified under Section 1128B(b) of the Social Security Act, and the federal ~~securities laws. The plaintiffs~~False Claims Act related to DMC’s employment of nurse practitioners and physician assistants (“Mid-Level Practitioners”) from 2006 through 2017. As previously disclosed, a media report was published in August 2017 alleging that 14 Mid-Level Practitioners were terminated by DMC earlier in 2017 due to compliance concerns. We are ~~seeking class certification on behalf~~cooperating with the investigation; however, we are unable to determine the potential exposure, if any, at this time.

Other Matters

In July 2019, certain of ~~all persons who acquired~~ the ~~Company’s common stock between February 28, 2012~~entities that purchased from us the operations of Hahnemann University Hospital and ~~August~~St. Christopher’s Hospital for Children in Philadelphia commenced Chapter 11 bankruptcy proceedings. As previously disclosed in our Form 8-K filed September 1, ~~2016. The complaint alleges that false or misleading statements or omissions concerning~~2017, the ~~Company’s financial performance~~purchasers assumed our funding obligations under the Pension Fund for Hospital and ~~compliance policies, specifically~~ Health Care Employees of Philadelphia and Vicinity (the “Fund”), a pension plan related to the operations at Hahnemann University Hospital. Pursuant to rules under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), under certain circumstances we could become liable for withdrawal liability in the event a withdrawal is triggered

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with respect to the previously disclosed civil qui tam litigation and parallel criminal investigation of the Company and certain of its subsidiaries (together, the “Clinica de la Mama matters”), caused the price of the Company’s common stock to be artificially inflated.Fund. In addition, pursuant to applicable ERISA rules, we could become secondarily liable if the ~~plaintiffs claim that the defendants violated GAAP by failing~~purchasers fail to ~~disclose an estimate of the possible loss or a range of loss related~~satisfy their obligations to the Clinica de la Mama matters. The Company’s motion to dismiss the consolidated complaint on behalf of all defendants is pending with the court. The Company intends to continue to vigorously defend against the allegations in the purported shareholder class action.Fund.

~~Shareholder Derivative Litigation~~

In January 2017, the Dallas County District Court consolidated two previously disclosed shareholder derivative lawsuits filed by purported shareholders of the Company’s common stock on behalf of the Company against current and former officers and directors into a single matter captioned ~~In re Tenet Healthcare Corporation Shareholder Derivative Litigation. The plaintiffs filed a consolidated shareholder derivative petition in February 2017. A separate shareholder derivative lawsuit, captioned~~ ~~Horwitz, derivatively on behalf of Tenet Healthcare Corporation, was filed in January 2017 in the U.S. District Court for the Northern District of Texas. The consolidated shareholder derivative petition and the~~ ~~Horowitz~~ complaint generally track the allegations in the securities class action complaint described above and claim that the plaintiffs did not make demand on the Board of Directors to bring the lawsuits because such a demand would have been futile. Both shareholder derivative matters were stayed in the second quarter of 2017 pending the final resolution of the motion to dismiss in the consolidated securities litigation. The Company intends to vigorously defend against the allegations in the purported shareholder derivative lawsuits.

~~Antitrust Class Action Lawsuit Filed by Registered Nurses in San Antonio~~

In ~~Maderazo, et al. v. VHS San Antonio Partners, L.P. d/b/a Baptist Health Systems, et al.~~, filed in June 2006 in the U.S. District Court for the Western District of Texas, a purported class of registered nurses employed by three unaffiliated San Antonio-area hospital systems allege those hospital systems, including Baptist Health System, and other unidentified San Antonio regional hospitals violated Section §1 of the federal Sherman Act by conspiring to depress nurses’ compensation and exchanging compensation-related information among themselves in a manner that reduced competition and suppressed the wages paid to such nurses. The suit seeks unspecified damages (subject to trebling under federal law), interest, costs and attorneys’ fees. The case was stayed from 2008 through mid-2015. At this time, we are awaiting the court’s ruling on class certification and will continue to vigorously defend ourselves against the plaintiffs’ allegations. It remains impossible at this time to predict the outcome of these proceedings with any certainty; however, we believe that the ultimate resolution of this matter will not have a material effect on our business, financial condition or results of operations.

~~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 or financial condition.

New claims or inquiries may be initiated against us from time to ~~time.~~time, including lawsuits from patients, employees and others exposed to COVID-19 at our facilities. 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 following table ~~below~~ presents reconciliations of the beginning and ending liability balances in connection with legal settlements and related costs recorded in continuing operations during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016:~~ 2020.


	Balances at Beginning of Period		Litigation and Investigation Costs		Cash Payments		Balances at End of Period
Three Months Ended March 31, 2021	$	26	$	13	$	(15)	$	24
Three Months Ended March 31, 2020	$	86	$	2	$	(2)	$	86

Balances at
Beginning
of Period

Litigation and
Investigation
Costs

Cash
Payments

Balances at
End of
Period
Nine Months Ended September 30, 2017
Continuing operations $ 12
$ 12
$ (14 ) $ 10
Discontinued operations —
—
—
—
$ 12
$ 12
$ (14 ) $ 10
Nine Months Ended September 30, 2016
Continuing operations $ 299
$ 291
$ (59 ) $ 531
Discontinued operations —
—
—
—
$ 299
$ 291
$ (59 ) $ 531

For the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, we recorded costs of ~~$12~~$13 million and ~~$291~~$2 million, respectively, in continuing operations in connection with significant legal proceedings and governmental investigations.

NOTE ~~11.~~13. REDEEMABLE NONCONTROLLING INTERESTS IN EQUITY OF CONSOLIDATED SUBSIDIARIES

~~As previously disclosed, as part of the formation of our USPI joint venture in 2015, we entered into~~We have a ~~put/~~put call agreement (the ~~“Put/~~“Baylor Put/Call Agreement”) with Baylor University Medical Center (“Baylor”) that contains put and call options with respect to the ~~equity interests~~5% ownership interest Baylor holds in USPI. Each year starting in 2021, Baylor may put up to one-third of their total shares in USPI held as of April 1, 2017 by delivering notice by the ~~joint venture held by our joint venture partners.~~end of January of such year. In ~~January 2016, Welsh, Carson, Anderson & Stowe (“Welsh Carson”), on behalf~~each year that Baylor does not put the full 33.3% of ~~our joint venture partners, delivered a~~USPI’s shares allowable, we may call the difference between the number of shares Baylor put ~~notice for~~and the ~~minimum~~maximum number of shares they ~~were required~~could have put that year. In addition, the Baylor Put/Call Agreement contains a call option pursuant to ~~put~~which we have the ability to ~~us in 2016 according to the Put/Call Agreement. In April 2016, we paid approximately $127 million to purchase those shares, which increased our~~acquire all of Baylor’s ownership interest in the USPI joint venture to approximately 56.3%. On May 1, 2017, we amended and restated the Put/Call Agreement to provide for, among other things, the acceleration of our acquisition of certain shares of our USPI joint venture. Under the terms of the amendment, we agreed to pay Welsh Carson, on or before July 3, 2017, approximately $711 million to buy 23.7% of our USPI joint venture, which amount will be subject to adjustment for actual 2017 financial results in accordance with the terms of the Put/Call Agreement. On July 3, 2017, we paid approximately $716 million for the purchase of these shares, which increased our ownership interest in the USPI joint venture to 80.0%, as well as the final adjustment to the 2016 purchase price.

~~The amended and restated Put/Call Agreement also provides that the remaining 15% ownership interest in our USPI joint venture held~~ by our Welsh Carson joint venture partners will be subject to put and call options in equal shares in each of 2018 and 2019. In the event our Welsh Carson joint venture partners do not exercise these put options, we will have the option, but not the obligation, to buy 7.5% of our USPI joint venture from them in 2018 and another 7.5% in 2019. In connection with such puts or calls, we will2024. We have the ability to choose whether to settle the purchase price for the Baylor put/call, which is mutually agreed-upon fair market value, in cash or shares of our common stock. Baylor did not deliver a put notice to us in January 2021. In February 2021, we notified Baylor of our intention to exercise our call option to purchase 33.3% of the USPI shares held by Baylor as of April 1, 2017. Based on the nature of the Baylor Put/Call Agreement, Baylor’s minority interest in USPI was classified as a redeemable noncontrolling interest in the accompanying Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020.

The following table shows the changes in redeemable noncontrolling interests in equity of consolidated subsidiaries during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016:~~2020:


	Three Months Ended March 31,
	2021		2020
Balances at beginning of period	$	1,952	$	1,506
Net income	81		34
Distributions paid to noncontrolling interests	(58)		(36)
Accretion of redeemable noncontrolling interests	3		1
Purchases and sales of businesses and noncontrolling interests, net	14		21
Balances at end of period	$	1,992	$	1,526

Nine Months Ended
September 30,
2017 2016
Balances at beginning of period
$ 2,393
$ 2,266
Net income 155
170
Distributions paid to noncontrolling interests (85 ) (69 )
Purchase accounting adjustments —
(47 )
Accretion of redeemable noncontrolling interests 32
—
Purchases and sales of businesses and noncontrolling interests, net (679 ) (13 )
Balances at end of period
$ 1,816
$ 2,307

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The following tables show the composition by segment of our redeemable noncontrolling interests balances at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, as well as our net income ~~attributable~~available to redeemable noncontrolling interests for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016:~~2020:


	March 31, 2021		December 31, 2020
Hospital Operations	$	280	$	267
Ambulatory Care	1,284		1,273
Conifer	428		412
Redeemable noncontrolling interests	$	1,992	$	1,952


	Three Months Ended March 31,
	2021		2020
Hospital Operations	$	13	$	(9)
Ambulatory Care	52		27
Conifer	16		16
Net income available to redeemable noncontrolling interests	$	81	$	34

September 30, 2017 December 31, 2016
Hospital Operations and other $ 529
$ 520
Ambulatory Care 1,090
1,715
Conifer 197
158
Redeemable noncontrolling interests $ 1,816
$ 2,393

Nine Months Ended
September 30,
2017 2016
Hospital Operations and other $ 14
$ 16
Ambulatory Care 103
116
Conifer 38
38
Net income attributable to redeemable noncontrolling interests $ 155
$ 170

NOTE ~~12.~~14. INCOME TAXES

During the three months ended ~~September 30, 2017,~~March 31, 2021, we recorded income tax expense of $45 million in continuing operations on a pre-tax income of $267 million compared to an income tax benefit of ~~$60 million in continuing operations on pre-tax loss of $348 million compared to income tax expense of $10~~$75 million on pre-tax income of ~~$89~~$85 million during the three months ended ~~September 30, 2016. During~~March 31, 2020. For the ~~nine~~three months ended September 30, 2017, we recorded an income tax benefit of $105 million in continuing operations on pre-tax loss of $325 million compared to income tax expense of $61 million on pre-tax income of $219 million duringMarch 31, 2021, the ~~nine months ended September 30, 2016. Our~~ provision for income taxes ~~during interim reporting periods has historically been~~was calculated by applying an estimate of the annual effective tax rate for the full year to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. ~~However,~~In calculating “ordinary” income, non‑taxable income or loss attributable to noncontrolling interests was deducted from pre-tax income or loss in the determination of the annualized effective tax rate used to calculate income taxes for the quarter. For the three months ended March 31, 2020, we utilized the discrete effective tax rate method, as allowed by the Financial Accounting Standards Board Accounting Standards Codification 740-270-30-18, “Income Taxes–Interim Reporting,” to calculate the interim ~~period~~income tax ~~provision for the three and nine month periods ended September 30, 2017. We determined that, because minor fluctuations in estimated “ordinary” income would result in significant changes in~~provision. The discrete method is applied when application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the ~~historical~~annual effective tax rate. The discrete method ~~would not provide a reliable estimate for~~treats the ~~three~~year-to-date period as if it were the annual period and ~~nine month periods ended September 30, 2017. Due to Aspen being classified as held for sale, we have reversed our indefinite reinvestment assertion with respect to this investment outside~~determines the ~~United States as of September 30, 2017, which resulted in an~~ income tax expense or benefit on that basis. We believe that the use of ~~$30 million~~this discrete method in 2020 was more appropriate than the ~~three months ended September 30, 2017.~~annual effective tax rate method as the estimated annual effective tax rate method was not reliable due to the high degree of uncertainty in estimating annual pre-tax income due to the impact of the COVID-19 pandemic and the evolving guidance by the government on utilization of grant funds. The reconciliation between the amount of recorded income tax expense (benefit) and the amount calculated at the statutory federal tax rate is shown in the following table:


														Three Months Ended March 31,
	Three Months Ended September 30,						Nine Months Ended September 30,							2021		2020
	2017			2016			2017			2016
Tax expense (benefit) at statutory federal rate of 35%	$	(122	)	$	31		$	(114	)	$	77
Tax expense at statutory federal rate of 21%													Tax expense at statutory federal rate of 21%	$	56	$	18
State income taxes, net of federal income tax benefit	8			3			13			10			State income taxes, net of federal income tax benefit	13		5
Tax benefit attributable to noncontrolling interests	(25		)	(28		)	(79		)	(75		)	Tax benefit attributable to noncontrolling interests	(25)		(14)
Nondeductible goodwill	104			—			104			29

Nontaxable gains	—			(1		)	—			(18		)	Nontaxable gains	0		3
Nondeductible litigation	—			4			—			37
Change in tax contingency reserves, including interest	(1		)	(1		)	(3		)	(4		)

Stock-based compensation	—			—			9			—			Stock-based compensation	(1)		0
Change in indefinite reinvestment assertion	(30		)	—			(30		)	—
Change in valuation allowance	(5		)	—			(5		)	—			Change in valuation allowance	0		(90)

Other items	11			2			—			5			Other items	2		3
	$	(60	)	$	10		$	(105	)	$	61
Income tax expense (benefit)													Income tax expense (benefit)	$	45	$	(75)

As a result of the change in the business interest expense disallowance rules under the COVID Acts, we recorded an income tax benefit of $91 million in the three months ended March 31, 2020 to decrease the valuation allowance for interest expense carryforwards due to the additional deduction of interest expense.

During the ~~nine~~three months ended ~~September 30, 2017, we increased~~March 31, 2021, there were 0 adjustments to our estimated liabilities for uncertain tax ~~positions by $33 million, net of related deferred tax assets.~~positions. The total amount of unrecognized tax benefits at ~~September 30, 2017~~March 31, 2021 was ~~$68~~$31 million, of which ~~$65~~$29 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~~statement of operations. ~~Total~~There were 0 accrued interest and penalties on unrecognized tax benefits at ~~September 30, 2017 were $4 million, all of which related to continuing operations.~~March 31, 2021.

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At ~~September 30, 2017, approximately $2 million of~~March 31, 2021, 0 significant changes in unrecognized federal and state tax benefits ~~as well as reserves for interest and penalties, may decrease~~were expected 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 ~~13. LOSS~~15. EARNINGS PER COMMON SHARE

The following table is a reconciliation of the numerators and denominators of our basic and diluted ~~loss~~earnings per common share calculations for our continuing operations for three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016. Loss attributable~~2020. Net income available to our common shareholders is expressed in millions and weighted average shares are expressed in thousands.


	Net Income Available to Common Shareholders (Numerator)		Weighted Average Shares (Denominator)	Per-Share Amount
Three Months Ended March 31, 2021
Net income available to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	97	106,309	$	0.91
Effect of dilutive stock options, restricted stock units and deferred compensation units	—		1,756	(0.01)
Net income available to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	97	108,065	$	0.90

Three Months Ended March 31, 2020
Net income available to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	94	104,353	$	0.90
Effect of dilutive stock options, restricted stock units and deferred compensation units	—		1,380	(0.01)
Net income available to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	94	105,733	$	0.89

Loss Attributable
to Common
Shareholders
(Numerator) Weighted
Average Shares
(Denominator) Per-Share
Amount
Three Months Ended September 30, 2017

Net loss attributable to Tenet Healthcare Corporation common shareholders
for basic loss per share $ (366 ) 100,812
$ (3.63 )
Effect of dilutive stock options, restricted stock units and deferred compensation units —
—
—
Net loss attributable to Tenet Healthcare Corporation common shareholders for diluted loss per share $ (366 ) 100,812
$ (3.63 )

Three Months Ended September 30, 2016

Net loss attributable to Tenet Healthcare Corporation common shareholders
for basic loss per share $ (9 ) 99,523
$ (0.09 )
Effect of dilutive stock options, restricted stock units and deferred compensation units —
—
—
Net loss attributable to Tenet Healthcare Corporation common shareholders for diluted loss per share $ (9 ) 99,523
$ (0.09 )

Nine Months Ended September 30, 2017
Net loss attributable to Tenet Healthcare Corporation common shareholders
for basic loss per share $ (474 ) 100,475
$ (4.72 )
Effect of dilutive stock options, restricted stock units and deferred compensation units —
—
—
Net loss attributable to Tenet Healthcare Corporation common shareholders for diluted loss per share $ (474 ) 100,475
$ (4.72 )

Nine Months Ended September 30, 2016

Net loss attributable to Tenet Healthcare Corporation common shareholders
for basic loss per share $ (108 ) 99,210
$ (1.09 )
Effect of dilutive stock options, restricted stock units and deferred compensation units —
—
—
Net loss attributable to Tenet Healthcare Corporation common shareholders for diluted loss per share $ (108 ) 99,210
$ (1.09 )

All potentially dilutive securities were excluded from the calculation of diluted loss per share for the three and nine months ended September 30, 2017 and 2016 because we did not report income from continuing operations available to common shareholders in those periods. In circumstances where we do not have income from continuing operations available to common shareholders, the effect of stock options and other potentially dilutive securities is anti-dilutive, that is, a loss from continuing operations attributable to common 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 common shareholders in the three and nine months ended September 30, 2017 and 2016, 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 711 and 1,455 for the three months ended September 30, 2017 and 2016, respectively, and 747 and 1,470 for the nine months ended September 30, 2017 and 2016, respectively.

NOTE ~~14.~~16. 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. 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 atFair Value Measurements

least weekly to have an active market. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

Investments September 30, 2017
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Marketable debt securities — noncurrent $ 54
$ 40
$ 14
$ —
$ 54
$ 40
$ 14
$ —

Investments December 31, 2016 Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Marketable debt securities — noncurrent $ 49
$ 23
$ 26
$ —
$ 49
$ 23
$ 26
$ —

Our non-financial assets and liabilities not permitted or required to be measured at fair value on a recurring basis typically relate to long-lived assets held and used, long-lived assets held for sale and goodwill. We are required to provide additional disclosures about fair value measurements as part of our financial statements for each major category of assets and liabilities measured at fair ~~value on a non-recurring basis. The following table presents this information and indicates the fair value hierarchy of the valuation techniques we utilized to determine such fair values.~~value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities, which generally are not applicable to non-financial assets and liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as definitive sales agreements, appraisals or established market values of comparable assets. 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, such as internal estimates of future cash flows.

September 30, 2017
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Long-lived assets held for sale $ 399
$ —
$ 399
$ —
Other than temporarily impaired equity method investments 112
—
112
—
$ 511
$ —
$ 511
$ —

December 31, 2016 Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Long-lived assets held and used $ 163
$ —
$ 163
$ —
Other than temporarily impaired equity method investments 27
—
27
—
$ 190
$ —
$ 190
$ —

~~As described in Note 4, in the nine months ended September 30, 2017, we recorded $294 million of impairment charges~~Our non-financial assets and liabilities not permitted or required to ~~write-down~~be measured at fair value on a recurring basis typically relate to long-lived assets held and used, long-lived assets held for sale ~~to their estimated~~and goodwill. The following tables present information about assets measured at fair value ~~less estimated costs~~at March 31, 2021 and December 31, 2020 and indicate the fair value hierarchy of the valuation techniques we utilized to ~~sell, for our Aspen and Philadelphia-area facilities, and a $29 million impairment charge related to certain~~determine such fair values:


	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At March 31, 2021:
Long-lived assets held for sale	$	139	$	0	$	139	$	0



At December 31, 2020:
Long-lived assets held for sale	$	140	$	0	$	140	$	0
Long-lived assets held and used	483		0		483		0
	$	623	$	0	$	623	$	0

Table of ~~our equity method investments.~~Contents

Financial Instruments

The fair value of our long-term debt (except for borrowings under the Credit Agreement) is based on quoted market prices (Level 1). The inputs used to establish the fair value of the borrowings outstanding under the Credit Agreement are considered to be Level 2 inputs, which include inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly. At ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, the estimated fair value of our long-term debt was approximately ~~100.6% and 93.9%~~104.4% and 104.5%, respectively, of the carrying value of the debt.

NOTE ~~15.~~17. ACQUISITIONS

Preliminary purchase price allocations (representing the fair value of the consideration conveyed) for all acquisitions made during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 are as follows:


	Three Months Ended March 31,
	2021		2020
Current assets	$	0	$	6
Property and equipment	18		8
Other intangible assets	0		8
Goodwill	25		83
Other long-term assets, including previously held equity method investments	4		5
Current liabilities	(7)		(8)
Long-term liabilities	(2)		(6)
Redeemable noncontrolling interests in equity of consolidated subsidiaries	(11)		(30)
Noncontrolling interests	(2)		(11)
Cash paid, net of cash acquired	(25)		(55)
Gains on consolidations	$	0	$	0

Nine Months Ended
September 30,
2017 2016
Current assets $ 4
$ 42
Property and equipment 5
33
Other intangible assets 5
7
Goodwill 65
316
Other long-term assets 1
6
Current liabilities (4 ) (25 )
Long-term liabilities (1 ) (14 )
Redeemable noncontrolling interests (18 ) (114 )
Noncontrolling interests (13 ) (122 )
Cash paid, net of cash acquired (41 ) (96 )
Gains on consolidations $ 3
$ 33

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 growth strategies. The goodwill total of ~~$65~~$25 million from acquisitions completed during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 was recorded in our Ambulatory Care segment. Approximately $5$4 million and $1 million in transaction costs related to prospective and closed acquisitions were expensed during ~~both of~~ the ~~nine month~~three-month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively, and ~~are~~were included in impairment and restructuring charges, and acquisition-related costs in the accompanying Condensed Consolidated ~~Statement~~Statements of Operations.

We are required to allocate the purchase prices of 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~~allocated over those fair values is recorded as goodwill. We are in process of ~~finalizing the purchase price allocations, including~~assessing working capital balances as well as obtaining and evaluating valuations of the acquired property and equipment, management contracts and other intangible assets, and noncontrolling interests for some of our ~~2016 acquisitions; therefore,~~2021 and 2020 acquisitions. Therefore, those purchase price allocations, including goodwill, recorded in the accompanying Condensed Consolidated Financial Statements are subject to adjustment once the ~~valuations~~assessments and valuation work are ~~completed.~~completed and evaluated. Such adjustments are recorded as soon as practical within the measurement period as defined by the accounting literature.

During the nine months ended September 30, 2017 and 2016, we recognized gains totaling $3 million and $33 million, respectively, associated with stepping up our ownership interests in previously held equity investments, which we began consolidating after we acquired controlling interests.

NOTE ~~16.~~18. SEGMENT INFORMATION

Our business consists of our Hospital Operations ~~and other~~ segment, our Ambulatory Care segment and our Conifer segment. The factors for determining the reportable segments include the manner in which management evaluates operating performance combined with the nature of the individual business activities.

Our Hospital Operations ~~and other~~ segment is comprised of ~~our~~ acute care and specialty hospitals, ancillary outpatient facilities, micro-hospitals, imaging centers, physician practices and urgent care centers. At March 31, 2021, our subsidiaries operated 65 hospitals serving primarily urban and suburban communities in 9 states. Most of the urgent care centers ~~microhospitals~~in our Hospital Operations segment were classified as held for sale at March 31, 2021 and ~~physician practices. We also own various related healthcare businesses.~~December 31, 2020.

Our Ambulatory Care segment is comprised of the operations of ~~our~~USPI. At March 31, 2021, USPI ~~joint venture and our nine Aspen facilities in the United Kingdom. At September 30, 2017, our USPI joint venture~~ had interests in ~~244~~312 ambulatory surgery centers 34and 24 surgical hospitals in 30 states. At March 31, 2021, our Ambulatory Care segment also included 24 imaging centers, which were transferred to our Hospital Operations segment effective April 1, 2021. The total assets associated with the imaging centers transferred to our Hospital Operations segment constituted less than 1% of our consolidated total assets at March 31, 2021. Additionally, our Ambulatory Care segment included 39 urgent care centers at

22 ~~imaging centers~~

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March 31, 2021, which were classified as held for sale at March 31, 2021 and ~~20 surgical hospitals in 27 states.~~December 31, 2020. At ~~September 30, 2017,~~March 31, 2021, we owned ~~80.0%~~95% of ~~our USPI joint venture.~~USPI.

Our Conifer segment provides ~~healthcare business process services in the areas of hospital and physician~~ revenue cycle management and value-based care ~~solutions~~services to ~~healthcare~~hospitals, health systems, ~~as well as individual hospitals,~~ physician practices, ~~self-insured organizations, health plans~~employers and other ~~entities.~~clients. At ~~September 30, 2017,~~March 31, 2021, Conifer provided services to ~~more than 800~~approximately 640 Tenet and non-Tenet hospitals and other clients nationwide. In 2012, we entered into ~~agreements~~an agreement documenting the terms and conditions of various services Conifer provides to Tenet hospitals (“RCM Agreement”), as well as an agreement documenting certain administrative services our Hospital Operations ~~and other~~ segment provides to Conifer. ~~The~~In March 2021, we entered into a month-to-month agreement amending the RCM Agreement effective January 1, 2021 (“Amended RCM Agreement”) to update certain terms and conditions related to the revenue cycle management services Conifer provides to Tenet hospitals. We believe the pricing terms for the services provided ~~by each party to~~under the ~~other under these contracts were based on~~Amended RCM Agreement are commercially reasonable and consistent with estimated third-party ~~pricing terms in effect at the time the agreements were signed.~~terms. At ~~September 30, 2017,~~March 31, 2021, we owned ~~76.2%~~76% of Conifer Health Solutions, LLC, which is ~~the~~Conifer’s principal ~~subsidiary of Conifer Holdings, Inc.~~

subsidiary.

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:~~Operations, as applicable:


	March 31, 2021		December 31, 2020
Assets:
Hospital Operations	$	17,555	$	18,048
Ambulatory Care	8,027		8,048
Conifer	972		1,010
Total	$	26,554	$	27,106


	Three Months Ended March 31,
	2021		2020
Capital expenditures:
Hospital Operations	$	110	$	167
Ambulatory Care	8		11
Conifer	3		4
Total	$	121	$	182

Net operating revenues:
Hospital Operations total prior to inter-segment eliminations	$	3,947	$	3,834
Ambulatory Care	646		490
Conifer
Tenet	122		136
Other clients	188		196
Total Conifer revenues	310		332
Inter-segment eliminations	(122)		(136)
Total	$	4,781	$	4,520

Equity in earnings of unconsolidated affiliates:
Hospital Operations	$	4	$	2
Ambulatory Care	38		26
Total	$	42	$	28

Adjusted EBITDA:
Hospital Operations	$	434	$	342
Ambulatory Care	257		156
Conifer	86		87
Total	$	777	$	585

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						Three Months Ended March 31,
	September 30, 2017		December 31, 2016			2021		2020
Assets:
Hospital Operations and other	$	16,249	$	17,871

Depreciation and amortization:					Depreciation and amortization:
Hospital Operations					Hospital Operations	$	190	$	175
Ambulatory Care	5,847		5,722		Ambulatory Care	25		19
Conifer	1,112		1,108		Conifer	9		9
Total	$	23,208	$	24,701	Total	$	224	$	203

Adjusted EBITDA					Adjusted EBITDA	$	777	$	585

Depreciation and amortization					Depreciation and amortization	(224)		(203)
Impairment and restructuring charges, and acquisition-related costs					Impairment and restructuring charges, and acquisition-related costs	(20)		(55)
Litigation and investigation costs					Litigation and investigation costs	(13)		(2)
Interest expense					Interest expense	(240)		(243)
Loss from early extinguishment of debt					Loss from early extinguishment of debt	(23)		0
Other non-operating income, net					Other non-operating income, net	10		1
Net gains on sales, consolidation and deconsolidation of facilities					Net gains on sales, consolidation and deconsolidation of facilities	0		2
Income from continuing operations, before income taxes					Income from continuing operations, before income taxes	$	267	$	85

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Capital expenditures:

Hospital Operations and other $ 122
$ 182
$ 441
$ 557
Ambulatory Care 16
14
37
42
Conifer 6
5
14
15
Total
$ 144
$ 201
$ 492
$ 614

Net operating revenues:

Hospital Operations and other total prior to inter-segment eliminations(1)
$ 3,866
$ 4,162
$ 12,066
$ 12,761
Ambulatory Care 468
448
1,395
1,319
Conifer

Tenet 149
159
463
488
Other customers 252
239
740
681
Total Conifer 401
398
1,203
1,169
Inter-segment eliminations (149 ) (159 ) (463 ) (488 )
Total
$ 4,586
$ 4,849
$ 14,201
$ 14,761

Equity in earnings of unconsolidated affiliates:

Hospital Operations and other $ 4
$ 3
$ 4
$ 6
Ambulatory Care 34
28
91
79
Total
$ 38
$ 31
$ 95
$ 85

Adjusted EBITDA:

Hospital Operations and other(2)
$ 269
$ 346
$ 924
$ 1,191
Ambulatory Care 159
157
476
432
Conifer 79
79
204
205
Total
$ 507
$ 582
$ 1,604
$ 1,828

Depreciation and amortization:

Hospital Operations and other $ 185
$ 170
$ 560
$ 525
Ambulatory Care 22
22
66
69
Conifer 12
13
36
38
Total
$ 219
$ 205
$ 662
$ 632

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Adjusted EBITDA
$ 507
$ 582
$ 1,604
$ 1,828
Loss from divested and closed businesses
(i.e., the Company’s health plan businesses) (6 ) (6 ) (41 ) (8 )
Depreciation and amortization (219 ) (205 ) (662 ) (632 )
Impairment and restructuring charges, and acquisition-related costs (329 ) (31 ) (403 ) (81 )
Litigation and investigation costs (6 ) (4 ) (12 ) (291 )
Interest expense (257 ) (243 ) (775 ) (730 )
Loss from early extinguishment of debt (138 ) —
(164 ) —
Other non-operating expense, net (4 ) (7 ) (14 ) (18 )
Gains on sales, consolidation and deconsolidation of facilities 104
3
142
151
Net income (loss) from continuing operations
before income taxes $ (348 ) $ 89
$ (325 ) $ 219


~~(1)~~	Hospital Operations and other revenues includes health plan revenues of $10 million and $100 million for the three and nine months ended September 30, 2017, respectively, and $122 million and $385 million for the three and nine months ended September 30, 2016, respectively.


~~(2)~~	Hospital Operations and other Adjusted EBITDA excludes health plan EBITDA of $(6) million and $(41) million for the three and nine months ended September 30, 2017, respectively, and $(6) million and $(8) million for the three and nine months ended September 30, 2016, respectively.

NOTE ~~17. RECENT ACCOUNTING STANDARDS~~19. SUBSEQUENT EVENTS

Amended Credit Facility

As discussed in Note 6, on April 19, 2021, we amended our Credit Agreement to, among other things, extend the temporary increase of the aggregate revolving credit commitments from the previous limit of $1.500 billion to $1.900 billion through April 22, 2022. In ~~May 2014,~~addition, the ~~FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”~~

~~(“ASU 2014-09”). In August 2015,~~amendment decreased the ~~FASB~~margins applied to the credit facility’s borrowing rates. As amended, the ~~guidance~~margin applicable to ~~defer~~base rate loans ranges from 0.25% to 0.75% per annum and the ~~effective date~~margin applicable to LIBOR loans ranges from 1.25% to 1.75% per annum.

Sale of ~~this standard by one year. ASU 2014-09 affects any entity that either enters into contracts with customers~~Urgent Care Centers

On April 30, 2021, we completed the sale of the majority of our urgent care centers operated under the MedPost and CareSpot brands to ~~transfer goods or services or enters into contracts~~an unaffiliated independent urgent care provider. We received net cash proceeds of approximately $80 million 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 have substantially completed our evaluation of the requirements of the new standard to insure that we have processes, systems and internal controls in place to collect the necessary information to implement the standard, which will be effective for us beginning in 2018. It is our current intention to use a modified retrospective method of application to adopt ASU 2014-09. For our Hospital Operations and other and Ambulatory Care segments, we will use a portfolio approach to apply the new model to classes of payers with similar characteristics and will analyze cash collection trends over an appropriate collection look-back period of 18 to 36 months depending on the payer. Adoption of ASU 2014-09 will result in changes to our presentation for and disclosure of revenue related to uninsured or underinsured patients. Currently, 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, in our Hospital Operations and other segment. Under ASU 2014-09, the estimated uncollectable amounts due from these patients will generally be considered a direct reduction to net operating revenues and, correspondingly, will result in a material reduction in the amounts presented separately as provision for doubtful accounts. We have also substantially completed our process of assessing the impact of the new standard on various reimbursement programs that represent variable consideration. These include supplemental state Medicaid programs, disproportionate share payments and settlements with third party payers. The payment mechanisms for these types of programs often vary by state. During July 2017, industry guidance surrounding these programs was issued by the American Institute of Certified Public Accountants’ Financial Reporting Executive Committee. Our implementation team reviewed the guidance and concluded it was substantially consistent with our existing accounting processes. For our Conifer segment, we expect the adoption of ASU 2014-09 will result in changes to our presentation and disclosure of customer contract assets and liabilities and variable consideration. While the adoption of ASU 2014-09 will have a material effect on the presentation of net operating revenues in our consolidated statements of operations and on certain of our disclosures, we do not expect it to materially impact our financial position, results of operations or cash flows. We believe that the cumulative effect of the change in accounting principle effective January 1, 2018, if any, will be immaterial.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which affects any entity that enters into a lease (as that term is defined in ASU 2016-02), with some specified scope exceptions. The main difference between the guidance in ASU 2016-02 and current GAAP is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under current GAAP. Recognitionsale of these assets and liabilities will have a material impact to our consolidated balance sheets upon adoption. Under ASU 2016-02, lessees and lessors are required to recognize and measure leases at the beginningfacilities.

Table of the earliest period presented using a modified retrospective approach, which includes a number of optional practical expedients. We are currently evaluating the potential impact of this guidance, which will be effective for us beginning in 2019, including performing an assessment of the quantity of and contractual provisions in variousContents

~~leasing arrangements to guide our implementation plan related to processes, systems and internal controls and the conclusion on the use of the optional practical expedients.~~

In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350)” (“ASU 2017-04”), which affects public business and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendments in ASU 2017-04 modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Because these amendments eliminate Step 2 from the goodwill impairment test, they should reduce the cost and complexity of evaluating goodwill for impairment. It is our intention to early adopt ASU 2017-04 for our annual goodwill impairment tests for the year ending December 31, 2017. As of September 30, 2017, we do not expect the adoption of this guidance to materially impact our financial position, results of operations or cash flows.

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 Hospital Operations and other segment is comprised of our acute care hospitals, ancillary outpatient facilities, urgent care centers, microhospitals and physician practices. Our Ambulatory Care segment is comprised of the operations of our USPI Holding Company, Inc. (“USPI joint venture” or “USPI”), in which we own a majority interest, and European Surgical Partners Limited (“Aspen”) facilities. At September 30, 2017, our USPI joint venture had interests in 244 ambulatory surgery centers, 34 urgent care centers, 22 imaging centers and 20 surgical hospitals in 27 states, and Aspen operated nine private hospitals and clinics in the United Kingdom. Our Conifer segment provides healthcare business process services in the areas of hospital and physician revenue cycle management and value-based care solutions to healthcare systems, as well as individual hospitals, physician practices, self-insured organizations, health plans and other entities, through our Conifer Holdings, Inc. (“Conifer”) subsidiary. MD&A, which should be read in conjunction with the accompanying Condensed Consolidated Financial Statements, includes the following sections:

•Management Overview

•Forward-Looking Statements

~~Hospital Operations and Other Segment~~ •Sources of Revenue for Our Hospital Operations Segment

•Results of Operations

•Liquidity and Capital Resources

•Off-Balance Sheet Arrangements

•Critical Accounting Estimates

Our business consists of our Hospital Operations and other (“Hospital Operations”) segment, our Ambulatory Care segment and our Conifer segment. Our Hospital Operations segment is comprised of acute care and specialty hospitals, ancillary outpatient facilities, micro-hospitals, imaging centers, physician practices and urgent care centers. At March 31, 2021, our subsidiaries operated 65 hospitals serving primarily urban and suburban communities in nine states. Our Ambulatory Care segment is comprised of the operations of USPI Holding Company, Inc. (“USPI”), in which we own a 95% interest. At March 31, 2021, USPI had interests in 312 ambulatory surgery centers, 39 urgent care centers, 24 imaging centers and 24 surgical hospitals in 30 states. Effective April 1, 2021, we transferred the Ambulatory Care segment’s imaging centers to our Hospital Operations segment. As described in Note 4 to the accompanying Condensed Consolidated Financial Statements, certain of the facilities in our Hospital Operations and Ambulatory Care segments were classified as held for sale at March 31, 2021 and December 31, 2020. Our Conifer segment provides revenue cycle management and value-based care services to hospitals, health systems, physician practices, employers and other clients, through our Conifer Holdings, Inc. (“Conifer”) subsidiary. At March 31, 2021, Conifer provided services to approximately 640 Tenet and non-Tenet hospitals and other clients nationwide. At March 31, 2021, we owned 76% of Conifer Health Solutions, LLC, which is Conifer’s principal subsidiary.

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~~adjusted patient admission ~~per adjusted admission, per patient day,~~and per adjusted patient day ~~per visit and per case~~ amounts). Continuing operations information includes the results of ~~(i)~~ our same 7265 hospitals operated throughout the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and 2016, (ii) five Georgia hospitals, which we divested effective April 1, 2016, (iii) The Hospitals of Providence (“THOP”) Transmountain Campus, a new teaching hospital we opened in January 2017 in El Paso, and (iv) three Houston-area hospitals, which we divested effective August 1, 2017.2020. Continuing operations information excludes the results of our hospitals and other businesses that have been classified as discontinued operations for accounting purposes.

MANAGEMENT OVERVIEW

RECENT DEVELOPMENTS

~~Adoption~~Multi-Year Agreement with UnitedHealthcare—In April 2021, we signed a new multi-year contract with UnitedHealthcare four months prior to the scheduled renewal date. The contract will provide many UnitedHealthcare

members with continued in-network access to our hospitals, physician clinics and outpatient centers, including USPI’s surgical facilities.

Sale of ~~Shareholder Rights Plan To Protect Net Operating Loss Carryforwards—Effective August 31, 2017, our Board~~Urgent Care Centers—We completed the sale of Directors approved a short-term rights plan intended to protect shareholder interests, including our net operating loss carryforwards, while certain leadership and governance changes are executed. The rights plan is scheduled to expire following the ~~conclusion~~majority of our ~~2018 annual meeting~~urgent care centers operated under the MedPost and CareSpot brands to an unaffiliated independent urgent care provider on April 30, 2021. We received net cash proceeds of ~~shareholders.~~

~~Definitive Agreement To Sell Two Acute Care Hospitals and Related Operations in Philadelphia—On September 1, 2017, we announced a definitive agreement~~approximately $80 million for the sale of ~~our hospitals, physician practices~~these facilities and ~~related assets in Philadelphia, Pennsylvania and~~will recognize a gain on the ~~surrounding area. As a result of this anticipated transaction, we recorded impairment charges of $235 million~~sale in the three months ~~ended September~~ending June 30, ~~2017. This sale, which is subject to customary closing conditions, including regulatory approvals, is expected to be completed~~2021.

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IMPACT OF THE COVID-19 PANDEMIC

The spread of COVID-19 and the ensuing response of federal, state and local authorities beginning in March 2020 resulted in a material reduction in our patient volumes and also adversely affected our net operating revenues in the ~~first quarter~~year ended December 31, 2020. Restrictive measures, including travel bans, social distancing, quarantines and shelter‑in‑place orders, reduced the number of ~~2018. For additional details, see Note 3~~procedures performed at our facilities, as well as the volume of emergency room and physician office visits. We began experiencing gradual and continued improvement in patient volumes in May 2020 as various states eased stay‑at‑home restrictions and our facilities were permitted to resume elective surgeries and other procedures; however, the COVID-19 pandemic continues to impact all three segments of our business, as well as our patients, communities and employees. Broad economic factors resulting from the pandemic, including increased unemployment rates and reduced consumer spending, continue to impact our patient volumes, service mix and revenue mix. The pandemic has also continued to have an adverse effect on our operating expenses to varying degrees in 2021. In some of our markets, we have been required to utilize higher-cost temporary labor and pay premiums above standard compensation for essential workers. In addition, we have experienced significant price increases in medical supplies, particularly for personal protective equipment (“PPE”), and we have encountered supply chain disruptions, including shortages and delays.

As described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in Part II of our Annual Report on Form 10-K for the year ended December 31, 2020 (“Annual Report”) and below under “Sources of Revenue for Our Hospital Operations Segment,” various legislative actions have mitigated some of the economic disruption caused by the COVID-19 pandemic on our business. Additional funding for the Public Health and Social Services Emergency Fund (“Provider Relief Fund” or “PRF”) was among the provisions of the COVID-19 relief legislation. In the three months ended March 31, 2021, we received cash payments of $59 million, and we recognized approximately $31 million and $6 million as grant income and in equity in earnings of unconsolidated affiliates, respectively, in our accompanying Condensed Consolidated ~~Financial Statements.~~Statements of Operations due to grants from the Provider Relief Fund and other state and local grant programs.

~~Definitive Agreement To Sell MacNeal Hospital~~Throughout MD&A, we have provided additional information on the impact of the COVID-19 pandemic on our results of operations and ~~Related Operations—On October 11, 2017,~~the steps we ~~announced~~have taken, and are continuing to take, in response. The ultimate extent and scope of the pandemic remains unknown. For information about risks and uncertainties around COVID-19 that could affect our results of operations, financial condition and cash flows, see the Risk Factors section in Part I of our Annual Report.

TRENDS AND STRATEGIES

As described above and throughout MD&A, we experienced a ~~definitive agreement~~significant disruption to our business in 2020 due to the COVID-19 pandemic. Although we have seen gradual and continued improvement in our patient volumes, we continue to experience negative impacts of the pandemic on our business in varying degrees, the length and extent of which are currently unknown. While demand for the sale of MacNeal Hospital, which is located in a suburb of Chicago, as well as other operations affiliated with the hospital. This sale, which is subject to customary closing conditions, including regulatory approvals,our services is expected to ~~be completed~~further rebound in the future, we have taken, and continue to take, various actions to increase our liquidity and mitigate the impact of reductions in our patient volumes and operating revenues from the pandemic. Since the COVID-19 pandemic began to disrupt our business in March 2020, we have sold new senior notes and senior secured first ~~quarter~~lien notes, redeemed existing senior notes, including those with the highest interest rate and nearest maturity date of ~~2018.~~all of our long-term debt, and amended our revolving credit facility. We also decreased our employee headcount throughout the organization, and we deferred certain operating expenses that were not expected to impact our response to the COVID-19 pandemic. In addition, we reduced certain variable costs across the enterprise. We believe these actions, together with government relief packages, to the extent available to us, will help us to continue operating during the uncertainty caused by the COVID-19 pandemic. For ~~additional details,~~further information on our liquidity, see ~~Note 3 to our accompanying Condensed Consolidated Financial Statements.~~“Liquidity and Capital Resources” below.

~~TRENDS AND STRATEGIES~~

~~The~~In recent years, the healthcare industry, in general, and the acute care hospital business, in particular, ~~are experiencing~~have experienced significant regulatory uncertainty based, in large part, on administrative, legislative and ~~administrative~~judicial efforts to significantly modify or repeal and potentially replace the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (“Affordable Care Act” or “ACA”). ~~Although it~~It is difficult to predict the full impact of ~~this~~ regulatory uncertainty on our future revenues and ~~operations,~~operations. In addition, we believe that ~~our strategies will help us to address the following~~several key trends ~~shaping~~have shaped the demand for healthcare ~~services: (i)~~services in recent years: (1) consumers, employers and insurers are actively seeking lower-cost solutions and better value as they focus more on healthcare spending; ~~(ii)~~(2) patient volumes are shifting from inpatient to outpatient settings due to technological advancements and demand for care that is more convenient, affordable and accessible; ~~(iii)~~(3) the ~~industry is migrating to value-based payment models with government~~growing aging population requires greater chronic disease management and ~~private payers shifting risk to providers;~~higher-acuity treatment; and ~~(iv)~~(4) consolidation continues across the entire healthcare ~~sector through traditional acquisition and divestiture activities.~~sector.

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Driving Growth in Our Hospital ~~Systems~~—Systems—We are committed to better positioning our hospital systems and competing more effectively in the ~~evolving~~ever-evolving healthcare ~~environment. We are focused~~environment by focusing on ~~improving~~driving performance through operational effectiveness, increasing capital efficiency and margins, investing in our physician enterprise, particularly our specialist network, enhancing patient and physician satisfaction, growing our higher-demand and higher-acuity ~~inpatient~~clinical service lines (including outpatient lines), expanding patient and physician access, ~~points,~~ and ~~exiting~~optimizing our portfolio of assets. Over the past several years, we have undertaken enterprise-wide cost-reduction initiatives, comprised primarily of workforce reductions (including streamlining corporate overhead and centralized support functions), the renegotiation of contracts with suppliers and vendors, and the consolidation of office locations. Moreover, we established offshore support operations in the Philippines. In conjunction with these initiatives and our cost-saving efforts in response to the COVID-19 pandemic, we incurred restructuring charges related to employee severance payments of $4 million in the three months ended March 31, 2021, and we expect to incur additional such restructuring charges throughout 2021.

We also continue to exit service lines, businesses and markets that we believe are no longer ~~strategic to~~a core part of our ~~long-term growth. We recently announced an enterprise-wide cost reduction initiative – comprised primarily of workforce reductions and~~long‑term growth strategy. In April 2021, we completed the renegotiation of contracts with suppliers and vendors – which is intended to lower annual operating expenses by $150 million. We anticipate achieving the full annualized run-rate savings by the end of 2018. Approximately 75%sale of the ~~savings are expected to be achieved through actions within~~majority of our urgent care centers operated under the MedPost and CareSpot brands by our Hospital Operations and Ambulatory Care segments. We intend to continue to further refine our portfolio of hospitals and other ~~segment,~~healthcare facilities when we believe such refinements will help us improve profitability, allocate capital more effectively in areas where we have a stronger presence, deploy proceeds on higher-return investments across our business, enhance cash flow generation, reduce our debt and lower our ratio of debt‑to‑Adjusted EBITDA.

Improving the Customer Care Experience—As consumers continue to become more engaged in managing their health, we recognize that understanding what matters most to them and earning their loyalty is imperative to our success. As such, we have enhanced our focus on treating our patients as traditional customers by: (1) establishing networks of physicians and facilities that provide convenient access to services across the care continuum; (2) expanding service lines aligned with growing community demand, including ~~eliminating~~ a ~~regional management layer~~focus on aging and ~~streamlining corporate overhead~~chronic disease patients; (3) offering greater affordability and ~~centralized support functions. In conjunction with this initiative,~~predictability, including simplified registration and discharge procedures, particularly in our outpatient centers; (4) improving our culture of service; and (5) creating health and benefit programs, patient education and health literacy materials that are customized to the needs of the communities we ~~expect~~serve. Through these efforts, we intend to ~~incur restructuring charges~~improve the customer care experience in every part of ~~approximately $40 million in the fourth quarter of 2017, substantially all of which relate to employee severance payments.~~our operations.

Expansion of Our Ambulatory Care ~~Segment~~—Segment—We ~~remain focused~~continue to focus on opportunities to expand our Ambulatory Care segment through organic growth, building new outpatient centers, corporate development activities and strategic partnerships. In December 2020, we acquired controlling ownership interests in 45 ambulatory surgery centers from SurgCenter Development (the “SCD Centers”), which significantly increased USPI’s presence in the musculoskeletal surgery market, a high-demand clinical service line, particularly for an aging population. In the three months ended March 31, 2021, we acquired controlling ownership interests in three ambulatory surgery centers located in Maryland and one in Florida. We believe USPI’s surgery centers and surgical hospitals offer many advantages to patients and physicians, including greater affordability, predictability, flexibility and convenience. Moreover, due in part to advancements in medical technology, and due to the lower cost structure and greater efficiencies that are attainable at a specialized outpatient site, we believe the volume and complexity of surgical cases performed in an outpatient setting will continue to ~~steadily increase. In addition, we have continued to grow our imaging and urgent care businesses through USPI to reflect our broader strategies to (1) offer more services to patients, (2) broaden~~increase following the ~~capabilities we offer to healthcare systems and physicians, and (3) expand into faster-growing, less capital intensive, higher-margin businesses.~~containment of the COVID-19 pandemic. Historically, our outpatient services have generated significantly higher margins for us than inpatient services.

Driving Conifer’s Growth— While Pursuing a Tax-Free Spin-Off—We ~~are focused on driving growth at~~previously announced a number of actions to support our goals of improving financial performance and enhancing shareholder value, including the exploration of strategic alternatives for Conifer. In July 2019, we announced our intention to pursue a tax-free spin-off of Conifer ~~by continuing~~as a separate, independent, publicly traded company. Completion of the proposed spin-off is subject to ~~market~~a number of conditions, including, among others, assurance that the separation will be tax-free for U.S. federal income tax purposes, finalization of Conifer’s capital structure, the effectiveness of appropriate filings with the Securities and ~~expand its~~Exchange Commission (“SEC”), and final approval from our board of directors. Although in March 2021 we entered into a month-to-month agreement amending and updating certain terms and conditions related to the revenue cycle management services Conifer provides to Tenet hospitals (“Amended RCM Agreement”), the execution of a comprehensive amendment to and ~~value-based care~~restatement of the master services ~~businesses~~agreement between Conifer and ~~diversifying its customer base.~~ Tenet remains an additional prerequisite to the spin-off of Conifer. Although we are continuing to pursue the Conifer spin-off, there can be no assurance regarding the timeframe for completion, the allocation of assets and liabilities between Tenet and Conifer, that the other conditions of the spin-off will be met, or that it will be completed at all.

Conifer serves ~~more than 800~~approximately 640 Tenet and non-Tenet hospital and other clients nationwide. In addition to providing revenue cycle management services to ~~both healthcare~~health systems and physicians, Conifer provides support to both providers and ~~self-insured~~self‑insured employers seeking assistance with clinical integration, financial risk management and population health management.

~~Improving Profitability—We are~~ Conifer remains focused on ~~improving~~driving growth by continuing to market and expand its revenue cycle management

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and value-based care solutions businesses. We believe that our success in growing Conifer and increasing its profitability bydepends in part on our success in executing the following strategies: (1) attracting hospitals and other healthcare providers that currently handle their revenue cycle management processes internally as new clients; (2) generating new client relationships through opportunities from USPI and Tenet’s acute care hospital acquisition and divestiture activities; (3) expanding revenue cycle management and value-based care service offerings through organic development and small acquisitions; and (4) leveraging data from tens of millions of patient interactions for continued enhancement of the value-based care environment to drive competitive differentiation.

Improving Profitability—As we return to more normal operations, we will continue to focus on growing patient volumes and effective cost ~~management.~~management as a means to improve profitability. We believe our ~~patient volumes~~inpatient admissions have been constrained in recent years (prior to the COVID-19 pandemic) by increased competition, utilization pressure by managed care organizations, new delivery models that are designed to lower the utilization of acute care hospital services, the effects of higher patient co-pays, co-insurance amounts and deductibles, changing consumer behavior, and ~~depressed~~adverse economic conditions and demographic trends in certain of our markets. However, we also believe that ~~targeted capital spending on growth opportunities for our hospitals,~~ emphasis on higher-demand clinical service lines (including outpatient services), focus on expanding our ambulatory care business, cultivation of our culture of service, participation in Medicare Advantage health plans that have been experiencing higher growth rates than traditional Medicare, and contracting strategies that create shared value with payers should help us grow our patient ~~volumes.~~volumes over time. We are also continuing to explore new opportunities to enhance efficiency, including further integration of enterprise-wide centralized support functions, outsourcing additional functions unrelated to direct patient care, and reducing clinical and vendor contract variation.

Reducing Our Leverage~~—As~~ Over Time—All of ~~September 30, 2017, all of~~ our outstanding long-term debt has a fixed rate of interest, except for outstanding borrowings under our revolving credit facility, and the maturity dates of our notes are staggered from ~~2019~~2023 through 2031. ~~Although we~~We believe that our capital structure minimizes the near-term impact of increased interest rates, and the staggered maturities of our debt ~~reduce any near-term liquidity needs, it~~allow us to refinance our debt over time. It is ~~nonetheless~~ our ~~long-term~~long‑term objective to reduce our debt and lower our ratio of debt-to-Adjusted EBITDA, primarily through more efficient capital allocation and Adjusted EBITDA growth, which should lower our refinancing ~~risk and increase the potential for us to continue to use lower rate secured debt to refinance portions~~risk. In March 2021, we retired approximately $478 million aggregate principal amount of our ~~higher rate~~7.000% senior unsecured ~~debt.~~notes due 2025 (the “2025 Senior Notes”), which reduces future annual cash interest expense payments by approximately $33 million.

Our ability to execute on our strategies and ~~manage~~respond to the aforementioned trends is subject to the extent and scope of the impact on our operations of the COVID-19 pandemic, as well as a number of other risks and uncertainties, ~~that~~all of which may cause actual results to be materially different from expectations. For information about risks and

uncertainties that could affect our results of operations, see the Forward-Looking Statements section in this report, as well as the Forward-Looking Statements and Risk Factors sections in Part I of our Annual ~~Report on Form 10-K for the year ended December 31, 2016 (“Annual Report”).~~Report.

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RESULTS OF OPERATIONS—OVERVIEW

~~The following tables show~~We have provided below certain selected operating statistics for ~~our~~the three months ended March 31, 2021 and 2020 on a continuing operations ~~which includes the results of (i)~~basis. The following tables also show information about facilities in our ~~same 72 hospitals operated throughout the nine months ended September 30, 2017~~Ambulatory Care segment that we control and, 2016, (ii) five Georgia hospitals, which we divested effective April 1, 2016, (iii) our new THOP Transmountain Campus teaching hospital, which we opened in January 2017 in El Paso, and (iv) three Houston-area hospitals, which we divested effective August 1, 2017.therefore, consolidate. We believe this information is useful to investors because it reflects our current portfolio of operations and the recent trends we are experiencing with respect to volumes, revenues and expenses. We present certain metrics on a per adjusted patient admission basis to show trends other than volume.

Continuing Operations
Three Months Ended September 30,
Selected Operating Statistics 2017 2016 Increase
(Decrease)
Hospital Operations and other – acute care hospitals and related outpatient facilities
Number of hospitals (at end of period) 73
75
(2 ) (1)
Total admissions 185,389
194,342
(4.6 )%
Adjusted patient admissions(2)
332,035
345,207
(3.8 )%
Paying admissions (excludes charity and uninsured) 174,803
183,042
(4.5 )%
Charity and uninsured admissions 10,586
11,300
(6.3 )%
Emergency department visits 685,096
707,713
(3.2 )%
Total surgeries 118,260
127,346
(7.1 )%
Patient days — total 853,059
894,323
(4.6 )%
Adjusted patient days(2)
1,502,831
1,567,894
(4.1 )%
Average length of stay (days) 4.60
4.60
— %
Average licensed beds 19,783
20,367
(2.9 )%
Utilization of licensed beds(3)
46.9 % 47.7 % (0.8 )% (1)
Total visits 1,867,471
2,009,019
(7.0 )%
Paying visits (excludes charity and uninsured) 1,741,815
1,862,046
(6.5 )%
Charity and uninsured visits 125,656
146,973
(14.5 )%
Ambulatory Care
Total consolidated facilities (at end of period) 220
212
8
(1)
Total cases 454,484
445,493
2.0 %


	Continuing Operations Three Months Ended March 31,
Selected Operating Statistics	2021		2020		Increase (Decrease)
Hospital Operations – hospitals and related outpatient facilities:
Number of hospitals (at end of period)	65		65		—		(1)
Total admissions	147,674		165,735		(10.9)	%
Adjusted patient admissions(2)	251,017		290,912		(13.7)	%
Paying admissions (excludes charity and uninsured)	138,756		155,820		(11.0)	%
Charity and uninsured admissions	8,918		9,915		(10.1)	%
Admissions through emergency department	112,730		122,291		(7.8)	%
Emergency department visits, outpatient	450,830		641,282		(29.7)	%
Total emergency department visits	563,560		763,573		(26.2)	%
Total surgeries	89,964		95,352		(5.7)	%
Patient days — total	797,489		810,479		(1.6)	%
Adjusted patient days(2)	1,321,890		1,385,763		(4.6)	%
Average length of stay (days)	5.40		4.89		10.4	%
Average licensed beds	17,178		17,218		(0.2)	%
Utilization of licensed beds(3)	51.6	%	51.7	%	(0.1)	%	(1)
Total visits	1,401,217		1,616,527		(13.3)	%
Paying visits (excludes charity and uninsured)	1,312,096		1,499,538		(12.5)	%
Charity and uninsured visits	89,121		116,989		(23.8)	%
Ambulatory Care:
Total consolidated facilities (at end of period)	291		244		47		(1)
Total cases	553,814		501,226		10.5	%




(1)	The change is the difference between the ~~2017~~2021 and ~~2016~~2020 amounts shown.
(2)		Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services provided by facilities in our Hospital Operations ~~and other~~ segment by multiplying actual patient admissions/days by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues.
(3)		Utilization of licensed beds represents patient days divided by number of days in the period divided by average licensed beds.

Total admissions decreased by ~~8,953,~~18,061, or ~~4.6%~~10.9%, in the three months ended ~~September 30, 2017~~March 31, 2021 compared to the three months ended ~~September 30, 2016,~~March 31, 2020, and total surgeries decreased by ~~9,086,~~5,388, or ~~7.1%~~5.7%, in the 2021 period compared to the 2020 period. Total emergency department visits decreased 26.2% in the three months ended ~~September 30, 2017 compared to the 2016 period. Our emergency department visits decreased 3.2% in the three months ended September 30, 2017~~March 31, 2021 compared to the same period in the prior year. ~~Our~~The decrease in our patient volumes from continuing operations in the three months ended ~~September 30, 2017~~March 31, 2021 compared to the three months ended ~~September 30, 2016 were negatively affected by~~March 31, 2020 continues to reflect the ~~sale of our Houston-area facilities effective August 1, 2017 and the~~overall adverse impact of ~~Hurricane Irma on~~the COVID-19 pandemic. Despite the severe weather impact of Winter Storm Uri in February 2021, our ~~facilities in Florida and South Carolina. Our~~ Ambulatory Care total cases increased ~~2.0%~~10.5% in the three months ended March 31, 2021 compared to the 2020 period primarily due to the ~~increase~~acquisition of the SCD Centers in ~~consolidated facilities.~~ December 2020.


	Continuing Operations Three Months Ended March 31,
Revenues	2021		2020		Increase (Decrease)
Net operating revenues:
Hospital Operations prior to inter-segment eliminations	$	3,947	$	3,834	2.9	%
Ambulatory Care	646		490		31.8	%
Conifer	310		332		(6.6)	%
Inter-segment eliminations	(122)		(136)		(10.3)	%
Total	$	4,781	$	4,520	5.8	%

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Continuing Operations
Three Months Ended September 30,
Revenues 2017 2016 Increase
(Decrease)
Net operating revenues before provision for doubtful accounts
Hospital Operations and other prior to inter-segment eliminations $ 4,212
$ 4,520
(6.8 )%
Ambulatory Care 477
457
4.4 %
Conifer 401
398
0.8 %
Inter-segment eliminations (149 ) (159 ) (6.3 )%
Total $ 4,941
$ 5,216
(5.3 )%
Selected Hospital Operations and other – acute care hospitals and related outpatient facilities revenue data

Net inpatient revenues $ 2,434
$ 2,644
(7.9 )%
Net outpatient revenues 1,426
1,417
0.6 %
Net patient revenues $ 3,860
$ 4,061
(4.9 )%

Self-pay net inpatient revenues $ 112
$ 106
5.7 %
Self-pay net outpatient revenues 149
145
2.8 %
Total self-pay revenues $ 261
$ 251
4.0 %

Net operating revenues ~~before provision for doubtful accounts decreased~~increased by ~~$275~~$261 million, or ~~5.3%~~5.8%, in the three months ended ~~September 30, 2017~~March 31, 2021 compared to the same period in ~~2016,~~2020, primarily due to higher patient acuity, USPI’s acquisition of the SCD Centers in December 2020 and a more favorable payer mix, partially offset by lower inpatient and outpatient volumes, as well as the sale of our Houston-area facilities effective August 1, 2017, as described above. The 2016 period also included $55 million of net revenues from the California provider fee program compared to no revenues under the program in the 2017 period because CMS has not yet approved the 2017 program. For our Hospital Operations and other segment, the impact of lower volumes on net operating revenues was partially mitigated by improved managed care pricing.

Continuing Operations
Three Months Ended September 30,
Provision for Doubtful Accounts 2017 2016 Increase
(Decrease)
Provision for doubtful accounts
Hospital Operations and other $ 346
$ 358
(3.4 )%
Ambulatory Care 9
9
— %
Total $ 355
$ 367
(3.3 )%
Provision for doubtful accounts as a percentage of net operating revenues before provision for doubtful accounts
Hospital Operations and other 8.2 % 7.9 % 0.3 % (1)
Ambulatory Care 1.9 % 2.0 % (0.1 )% (1)
Total 7.2 % 7.0 % 0.2 % (1)




~~(1)~~	~~The change is the difference between the 2017 and 2016 amounts shown.~~

~~Provision for doubtful accounts as a percentage of net operating revenues before provision for doubtful accounts was 7.2% and 7.0% for~~patient volumes. During the three months ended ~~September 30, 2017 and 2016, respectively. This increase was primarily due to increases~~March 31, 2021, we recognized $31 million of grant income, which amount is not included in ~~uninsured~~net operating revenues.

Our accounts receivable days outstanding (“AR Days”) from continuing operations ~~(which~~were 55.8 days at March 31, 2021 and 55.6 days at December 31, 2020, compared to 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. This calculation includes our Hospital Operations segment’s contract assets, as well as the accounts receivable of ~~our Philadelphia-area, Chicago-area and Aspen~~the urgent care facilities ~~that have been~~ classified ~~in assets~~as held for sale on our Condensed Consolidated Balance ~~Sheet~~Sheets at ~~September 30, 2017, excludes our divested Houston-area facilities~~March 31, 2021 and ~~health plan revenues, and~~December 31, 2020. The AR Days calculation excludes our California provider fee revenue from the 2016 period because the 2017 program has not yet been approved) were 55.6 days at September 30, 2017 and 56.5 days at December 31, 2016, compared to our target of less than 55 days.revenues.

Continuing Operations
Three Months Ended September 30,
Selected Operating Expenses 2017 2016 Increase
(Decrease)
Hospital Operations and other
Salaries, wages and benefits $ 1,879
$ 1,924
(2.3 )%
Supplies 644
678
(5.0 )%
Other operating expenses 936
1,066
(12.2 )%
Total $ 3,459
$ 3,668
(5.7 )%
Ambulatory Care

Salaries, wages and benefits $ 155
$ 144
7.6 %
Supplies 95
89
6.7 %
Other operating expenses 93
86
8.1 %
Total $ 343
$ 319
7.5 %
Conifer

Salaries, wages and benefits $ 230
$ 240
(4.2 )%
Supplies 1
—
100.0 %
Other operating expenses 91
79
15.2 %
Total $ 322
$ 319
0.9 %
Total

Salaries, wages and benefits $ 2,264
$ 2,308
(1.9 )%
Supplies 740
767
(3.5 )%
Other operating expenses 1,120
1,231
(9.0 )%
Total $ 4,124
$ 4,306
(4.2 )%
Rent/lease expense(1)

Hospital Operations and other $ 61
$ 59
3.4 %
Ambulatory Care 20
18
11.1 %
Conifer 4
5
(20.0 )%
Total $ 85
$ 82
3.7 %


	Continuing Operations Three Months Ended March 31,
Selected Operating Expenses	2021		2020		Increase (Decrease)
Hospital Operations:
Salaries, wages and benefits	$	1,857	$	1,846	0.6	%
Supplies	646		650		(0.6)	%
Other operating expenses	916		862		6.3	%
Total	$	3,419	$	3,358	1.8	%
Ambulatory Care:
Salaries, wages and benefits	$	174	$	162	7.4	%
Supplies	157		112		40.2	%
Other operating expenses	103		86		19.8	%
Total	$	434	$	360	20.6	%
Conifer:
Salaries, wages and benefits	$	170	$	179	(5.0)	%
Supplies	1		1		—	%
Other operating expenses	53		65		(18.5)	%
Total	$	224	$	245	(8.6)	%
Total:
Salaries, wages and benefits	$	2,201	$	2,187	0.6	%
Supplies	804		763		5.4	%
Other operating expenses	1,072		1,013		5.8	%
Total	$	4,077	$	3,963	2.9	%
Rent/lease expense(1):
Hospital Operations	$	77	$	65	18.5	%
Ambulatory Care	27		23		17.4	%
Conifer	3		3		—	%
Total	$	107	$	91	17.6	%



(1)
~~(1)~~	Included in other operating expenses.

Continuing Operations
Three Months Ended September 30,
Selected Operating Expenses per Adjusted Patient Admission 2017 2016 Increase
(Decrease)
Hospital Operations and other
Salaries, wages and benefits per adjusted patient admission(1)
$ 5,651
$ 5,551
1.8 %
Supplies per adjusted patient admission(1)
1,938
1,958
(1.0 )%
Other operating expenses per adjusted patient admission(1)
2,778
2,681
3.6 %
Total per adjusted patient admission $ 10,367
$ 10,190
1.7 %


	Continuing Operations Three Months Ended March 31,
Selected Operating Expenses per Adjusted Patient Admission	2021		2020		Increase (Decrease)
Hospital Operations:
Salaries, wages and benefits per adjusted patient admission(1)	$	7,396	$	6,347	16.5	%
Supplies per adjusted patient admission(1)	2,571		2,236		15.0	%
Other operating expenses per adjusted patient admission(1)	3,647		2,961		23.2	%
Total per adjusted patient admission	$	13,614	$	11,544	17.9	%



(1)
~~(1)~~	~~Calculation excludes the expenses from our health plan businesses.~~ Adjusted patient admissions represents actual patient admissions adjusted to include outpatient services provided by facilities in our Hospital Operations ~~and other~~ segment by multiplying actual patient admissions by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues.

Salaries, wages and benefits ~~per adjusted patient admission~~for our Hospital Operations segment increased ~~1.8%~~$11 million, or 0.6%, in the three months ended ~~September 30, 2017~~March 31, 2021 compared to the same period in ~~2016.~~2020. This change iswas primarily ~~due~~attributable to increased contract labor costs, as well as increased incentive compensation and annual merit increases for certain of our employees, ~~increased~~partially offset by

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lower health benefits ~~costs~~costs. A higher average length of patient stay and a greater number of employed physicians also contributed to the ~~effect of lower volumes on operating leverage due to certain fixed staffing costs,~~increase. The increase was also partially offset by ~~decreased accruals for annual incentive compensation.~~

~~Supplies expense~~reduced patient volumes as a result of the COVID-19 pandemic and our continuing cost efficiency initiatives. On a per adjusted patient admission ~~decreased 1.0%~~basis, salaries, wages and benefits increased 16.5% in the three months ended ~~September 30, 2017~~March 31, 2021 compared to the three months ended ~~September 30, 2016. The change in supplies expense was primarily attributable~~March 31, 2020 due to ~~lower surgical~~reduced patient volumes ~~and the benefit~~as a result of the ~~group-purchasing strategies and supplies-management services we utilize to reduce costs.~~COVID-19 pandemic.

~~Other operating expenses per adjusted patient admission increased by 3.6%~~Supplies expense for our Hospital Operations segment decreased $4 million, or 0.6%, in the three months ended ~~September 30, 2017~~March 31, 2021 compared to the ~~prior-year period. This increase is~~same period in 2020. The decrease was primarily due to ~~higher contracted services~~reduced patient volumes and ~~medical fees~~our continued focus on cost efficiency initiatives, partially offset by increased costs for certain supplies as a result of the COVID-19 pandemic. On a per adjusted patient admission ~~as well as~~basis, supplies expense increased 15.0% in the ~~effect of lower volumes on operating leverage~~three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to increased costs for certain ~~fixed costs. These increases~~supplies as a result of the COVID-19 pandemic and growth in our higher‑acuity, supply‑intensive surgical services.

Other operating expenses for our Hospital Operations segment increased $54 million, or 6.3%, in the three months ended March 31, 2021 compared to the same period in 2020. The increase was primarily due to higher malpractice expense, increased rent and lease expense, higher medical fees, and increased legal and consulting fees. On a per adjusted patient admission were partially offset by decreased malpractice expense and decreased costs associated with funding indigent care services, which decrease was substantially offset by reduced net patient revenues. Malpractice expense for our Hospital Operations andbasis, other ~~segment was $11 million lower~~operating expenses increased 23.2% in the ~~2017 period~~three months ended March 31, 2021 compared to the ~~2016 period. In~~three months ended March 31, 2020 due to the ~~2017 period, we recognized~~decrease in patient volumes as a ~~favorable adjustment~~result of ~~approximately $1 million from~~the COVID-19 pandemic and the fact that there is a ~~two basis point increase~~high level of fixed costs (e.g., rent expense) in the interest rate used to estimate the discounted present value of projected future malpractice liabilities. In the 2016 period, we recognized a favorable adjustment of approximately $3 million from a 13 basis point increase in the interest rate used to estimate the discounted present value of projected future malpractice liabilities.other operating expenses.

LIQUIDITY AND CAPITAL RESOURCES OVERVIEW

Cash and cash equivalents were ~~$429 million~~$2.141 billion at ~~September 30, 2017~~March 31, 2021 compared to ~~$475 million~~$2.446 billion at ~~June 30, 2017.~~December 31, 2020.

Significant cash flow items in the three months ended ~~September 30, 2017~~March 31, 2021 included:

•Net cash provided by operating activities before interest, taxes, discontinued operations and restructuring charges, acquisition-related costs, and litigation costs and settlements of ~~$494~~$777 million;

•Cash received from federal, state and local grants of $59 million ($31 million is included in net cash provided by operating activities, and $28 million of grant funds received by our Ambulatory Care segment’s unconsolidated affiliates is included in net cash provided by financing activities);

•Debt payments of $541 million, including $495 million of cash to retire our 2025 Senior Notes;

•Interest payments of $190 million;

•Capital expenditures of $121 million;

•$119 million of distributions paid to noncontrolling interests;

•Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements of ~~$26~~$51 million;

~~Capital expenditures~~•Purchases of ~~$144 million;~~

~~Proceeds from the sale of facilities~~businesses and ~~other assets of $752 million;~~

~~Interest payments of $149 million;~~

~~Income tax payments of~~ ~~$10 million~~;

~~$2.950 billion of proceeds from the issuance of our 4.625% senior secured notes due 2024, our 5.125% senior secured notes due 2025, and our 7.000% senior unsecured notes due 2025;~~

~~$3.071 billion of payments to redeem our 6.250% senior secured notes due 2018, our 5.000% senior unsecured notes due 2019 and our 8.000% senior unsecured notes due 2020;~~

~~$33 million of payments for debt issuance costs;~~

~~$717 million of purchases of noncontrolling interests, primarily to increase our ownership interest in our USPI~~ joint venture ~~to 80.0%;~~interests of $25 million; and

~~$55 million~~•Purchases of ~~distributions paid to noncontrolling interests.~~marketable securities and equity investments of $11 million.

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Net cash provided by operating activities was ~~$709~~$534 million in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 compared to ~~$851~~$129 million in the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2020. Key factors contributing to the change between the ~~2017~~2021 and ~~2016~~2020 periods include the following:

~~Decreased~~•An increase in net income ~~from continuing~~before interest, taxes, discontinued operations before income taxes of $224 million, excluding other non-operating expense, net, gain (loss) from early extinguishment of debt, interest expense, gains on sales, consolidation and deconsolidation of facilities, litigation and investigation costs, impairment and restructuring charges, ~~and~~ acquisition-related costs, ~~depreciation~~ and ~~amortization,~~litigation costs and ~~income (loss)~~settlements of $192 million (including $31 million of cash received from ~~divested operations~~federal and ~~closed businesses (i.e., our health plan businesses)~~state grants in the ~~nine months ended September 30, 2017 compared~~2021 period);

•Additional cash inflows of $54 million related to ~~the nine months ended September 30, 2016;~~supplemental Medicaid programs in California and Texas;

•Reduced cash outflows of $67 million attributable to a decrease in malpractice claim payments;

•Additional cash outflows of $79 million due to an increase in our annual 401(k) match funding;

•A ~~$44~~decrease of $17 million ~~decrease~~ in payments on reserves for restructuring charges, acquisition-related costs, and litigation costs and settlements; and

Reduced cash flows from our health plan businesses of $101 million due to cash outflows in the 2017 period resulting from the sales and wind-down of these businesses in 2017, compared to slightly positive cash flows in the 2016 period; and

•The timing of other working capital ~~items.~~items, including improved patient accounts receivable collection performance.

FORWARD-LOOKING STATEMENTS

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, target, estimate or anticipate (and other similar expressions) will, should or may occur in the future are forward-looking ~~statements. These forward-looking~~statements, including (but not limited to) disclosure regarding (i) the impact of the COVID-19 pandemic, (ii) our future earnings, financial position, and operational and strategic initiatives, and (iii) developments in the healthcare industry. Forward-looking statements represent management’s ~~current~~ expectations, based on currently available information, as to the outcome and timing of future ~~events.~~events, but, by their nature, address matters that are indeterminate. 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.

When considering forward-looking statements, ~~a reader~~you 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~~these reports occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statement. 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.~~except as required by law.

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

~~HOSPITAL OPERATIONS AND OTHER SEGMENT~~

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SOURCES OF REVENUE FOR OUR HOSPITAL OPERATIONS SEGMENT

We earn 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~~uninsured patients (that is, patients who do not have health insurance and are not covered by some other form of third-party arrangement).

The following table shows the sources of net patient service revenues ~~before provision for doubtful accounts~~less implicit price concessions for our ~~acute care~~ hospitals and related outpatient facilities, expressed as percentages of net patient service revenues ~~before provision for doubtful accounts~~less implicit price concessions from all sources:

Three Months Ended
September 30, Nine Months Ended
September 30,
Net Patient Revenues from: 2017 2016
Increase
(Decrease) (1)
2017 2016
Increase
(Decrease) (1)
Medicare 20.0 % 19.9 % 0.1 % 20.4 % 20.5 % (0.1 )%
Medicaid 6.5 % 8.4 % (1.9 )% 6.7 % 8.2 % (1.5 )%
Managed care 62.5 % 64.0 % (1.5 )% 62.4 % 61.5 % 0.9 %
Indemnity, self-pay and other 11.0 % 7.7 % 3.3 % 10.5 % 9.8 % 0.7 %


	Three Months Ended March 31,
Net Patient Service Revenues Less Implicit Price Concessions from:	2021		2020		Increase (Decrease)(1)
Medicare	18.8	%	19.9	%	(1.1)	%
Medicaid	7.1	%	7.9	%	(0.8)	%
Managed care(2)	68.0	%	65.6	%	2.4	%
Uninsured	1.3	%	1.1	%	0.2	%
Indemnity and other	4.8	%	5.5	%	(0.7)	%




(1)	The ~~increase (decrease)~~change is the difference between the ~~2017~~2021 and ~~2016~~2020 percentages shown.
(2)		Includes Medicare and Medicaid managed care programs.

Our payer mix on an admissions basis for our ~~acute care~~ hospitals and related outpatient facilities, expressed as a percentage of total admissions from all sources, is shown below:


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
Admissions from:	2017		2016		Increase (Decrease) (1)		2017		2016		Increase (Decrease) (1)		Admissions from:	2021		2020		Increase (Decrease)(1)
Medicare	25.1	%	25.0	%	0.1	%	26.0	%	26.1	%	(0.1	)%	Medicare	21.4	%	24.5	%	(3.1)	%
Medicaid	6.7	%	7.2	%	(0.5	)%	6.5	%	7.1	%	(0.6	)%	Medicaid	5.7	%	6.0	%	(0.3)	%
Managed care	60.2	%	60.2	%	—	%	59.7	%	59.2	%	0.5	%
Indemnity, self-pay and other	8.0	%	7.6	%	0.4	%	7.8	%	7.6	%	0.2	%
Managed care(2)													Managed care(2)	63.7	%	60.7	%	3.0	%
Charity and uninsured													Charity and uninsured	6.0	%	6.0	%	—	%
Indemnity and other													Indemnity and other	3.2	%	2.8	%	0.4	%




(1)	The ~~increase (decrease)~~change is the difference between the ~~2017~~2021 and ~~2016~~2020 percentages shown.
(2)		Includes Medicare and Medicaid managed care programs.

GOVERNMENT PROGRAMS

The Centers for Medicare and Medicaid Services (“CMS”), an agency of the U.S. Department of Health and Human Services (“HHS”), is the single largest payer of healthcare services in the United States. Approximately 5761 million individuals rely on healthcare benefits through Medicare, and approximately 7479 million individuals are enrolled in Medicaid and the Children’s Health Insurance Program (“CHIP”). These three programs are authorized by federal law and ~~directed~~administered by CMS. Medicare is a federally funded health insurance program primarily for individuals 65 years of age and older, ~~certain~~as well as some younger people with certain disabilities and ~~people with end-stage renal disease,~~conditions, and is provided without regard to income or assets. Medicaid is ~~administered~~co-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, which is also ~~administered~~co-administered by the states and jointly funded, provides health coverage to children in families with incomes too high to qualify for Medicaid, but too low to afford private coverage. Unlike Medicaid, the CHIP is limited in duration and requires the enactment of reauthorizing ~~legislation every five years. The most recent funding authorization expired on September 30, 2017. Legislation~~legislation. Funding for the CHIP has been ~~introduced that would extend CHIP funding~~reauthorized through ~~2022, however, we cannot predict what action the~~ federal ~~government may take with regard to the continuation of the CHIP.~~fiscal year (“FFY”) 2027.

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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 (“FFS”) 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~~FFS Medicare special needs plans and Medicare medical savings account plans. ~~The major components of our~~Our total net patient service revenues from continuing operations of the hospitals and related outpatient facilities in our Hospital Operations ~~and other~~ segment for services provided to patients enrolled in the Original Medicare Plan for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016 are set forth in the following table:~~2020 were $688 million and $705 million, respectively.

Three Months Ended
September 30, Nine Months Ended
September 30,
Revenue Descriptions 2017 2016 2017 2016
Medicare severity-adjusted diagnosis-related group — operating $ 388
$ 402
$ 1,248
$ 1,291
Medicare severity-adjusted diagnosis-related group — capital 37
38
115
119
Outliers 21
20
64
58
Outpatient 221
221
686
695
Disproportionate share 65
74
204
224
Direct Graduate and Indirect Medical Education(1)
63
62
194
187
Other(2)
5
15
17
42
Adjustments for prior-year cost reports and related valuation allowances 9
12
35
42
Total Medicare net patient revenues
$ 809
$ 844
$ 2,563
$ 2,658




~~(1)~~	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.
~~(2)~~	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.

Medicaid

Medicaid programs and the corresponding reimbursement methodologies ~~are administered by the states and~~ vary from ~~state to state~~state-to-state and from ~~year to~~ year‑to‑year. Estimated revenues under various state Medicaid programs, including state-funded managed care Medicaid programs, constituted approximately 17.6% and 18.7% of total net patient revenues before provision for doubtful accounts of our acute care hospitals and related outpatient facilities for the nine months ended September 30, 2017 and 2016, respectively. We also receive disproportionate share hospital (“DSH”) and other supplemental revenues under various state Medicaid programs. For the nine months ended September 30, 2017 and 2016, our total Medicaid revenues attributable to DSH and other supplemental revenues were approximately $462 million and $691 million, respectively. The 2017 period included $167 million related the Michigan provider fee program, $107 million related to Medicaid DSH programs in multiple states, $71 million relatedEven prior to the Texas 1115 waiver program, and $117 million from a number of other state and local programs. The 2016 period included $167 million from the 36-month California provider fee program, which ended on December 31, 2016, compared to no revenues under the 30-month program, which covers the period from January 1, 2017 through June 30, 2019, in the 2017 period because CMS has not yet approved the 30-month program. In addition, the results for the three months ended September 30, 2017 included unfavorable revenue adjustments of approximately $8 million and $2 million from the Texas 1115 waiver program and the Florida Medicaid program, respectively.

~~Several~~COVID-19 pandemic, several states in which we operate ~~face~~faced budgetary challenges 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 or not increase 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 ~~provider fee~~supplemental payment programs ~~or received waivers~~authorized under ~~Section 1115 of~~ the Social Security Act. Under a Medicaid waiver, the federal government waives certain Medicaid requirements, thereby giving states flexibility in the operation of their Medicaid program to allow states to test new approaches and demonstration projects to improve care. Generally the Section 1115 waivers are for a period of five years with an option to extend the waiver for three additional years. Continuing pressure on state budgets and other factors could ~~result in future reductions~~adversely affect the Medicaid supplemental payments our hospitals receive.

Estimated revenues under various state Medicaid programs, including state-funded Medicaid managed care programs, constituted approximately 16.9% and 18.1% of total net patient service revenues less implicit price concessions of our acute care hospitals and related outpatient facilities for the three months ended March 31, 2021 and 2020, respectively. We also receive disproportionate share hospital (“DSH”) and other supplemental revenues under various state Medicaid programs. For the three months ended March 31, 2021 and 2020, our total Medicaid revenues attributable to DSH and other supplemental revenues were approximately $180 million and $182 million, respectively. The 2021 period included $46 million related to the California provider fee program, $62 million related to the Michigan provider fee program, $33 million related to Medicaid ~~payments, payment delays~~DSH programs in multiple states, $6 million related to the Texas Section 1115 waiver program, and $33 million from a number of other state and local programs.

Total Medicaid and Managed Medicaid net patient service revenues from continuing operations recognized by the hospitals and related outpatient facilities in our Hospital Operations segment from Medicaid-related programs in the states in which our facilities are located, as well as from Medicaid programs in neighboring states, for the three months ended March 31, 2021 and 2020 were $617 million and $641 million, respectively. These revenues are presented net of provider taxes or ~~additional taxes on hospitals.~~assessments paid by our hospitals, which are reported as an offset reduction to FFS Medicaid revenue.

Medicaid and Managed Medicaid revenues comprised 42% and 58%, respectively, of our Medicaid-related net patient service revenues from continuing operations recognized by the hospitals and related outpatient facilities in our Hospital Operations segment for the three months ended March 31, 2021.

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

Medicaid-related patient revenues from continuing operations recognized by our Hospital Operations and other segment from Medicaid-related programs in the states in which our facilities are located, as well as from Medicaid programs in neighboring states, for the nine months ended September 30, 2017 and 2016 are set forth in the following table:

Nine Months Ended
September 30,
2017 2016
Hospital Location Medicaid Managed
Medicaid Medicaid Managed
Medicaid
Alabama $ 78
$ —
$ 60
$ —
Arizona (5 ) 155
(4 ) 163
California 125
324
293
317
Florida 51
130
55
128
Georgia —
—
11
8
Illinois 55
56
35
56
Massachusetts 25
40
30
43
Michigan 284
266
273
239
Missouri 1
1
—
1
North Carolina —
—
(2 ) —
Pennsylvania 60
178
63
174
South Carolina 9
28
13
29
Tennessee 3
24
3
24
Texas 137
171
180
189
$ 823
$ 1,373
$ 1,010
$ 1,371

Regulatory and Legislative Changes

Material updates to the information set forth in our Annual Report about the Medicare and Medicaid payment systems, as well as other government programs impacting our business, are provided below.

~~Final~~Proposed Payment and Policy Changes to the Medicare Inpatient Prospective Payment ~~Systems~~

~~Under Medicare law,~~Systems—Section 1886(d) of the Social Security Act requires CMS ~~is required~~ to ~~annually~~ update ~~certain rules governing~~inpatient FFS payment rates for hospitals reimbursed under the inpatient prospective payment systems (“IPPS”). annually. The updates generally become effective October 1, the beginning of the

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federal fiscal ~~year (“FFY”). On August 2, 2017,~~year. In April 2021, CMS issued ~~Changes~~proposed changes to the Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and Fiscal Year ~~2018~~2022 Rates ~~and, on September 29, 2017, CMS issued a correction notice to the rule issued on August 2, 2017.~~(“Proposed IPPS Rule”). The ~~August 2, 2017 final rule and the September 29, 2017 correction notice are collectively referred to hereinafter as the “Final IPPS Rule.” The Final~~Proposed IPPS Rule includes the following proposed payment and policy changes:

•A market basket increase of ~~2.7%~~2.5% for Medicare severity-adjusted diagnosis-related group (“MS-DRG”) operating payments for hospitals reporting specified quality measure data and that are meaningful users of electronic health record ~~(“EHR”) technology (hospitals that do not report specified quality measure data and/or are not meaningful users of EHR technology will receive a reduced market basket increase);~~technology; CMS also ~~made certain adjustments to~~proposed a 0.2% multifactor productivity reduction required by the ~~2.7% market basket~~ACA and a 0.5% increase required by the Medicare Access and CHIP Reauthorization Act that ~~resulted~~collectively result in a net operating payment update of ~~1.21% (before~~2.8% before budget neutrality ~~adjustments), including:~~adjustments;

~~Market basket index and multifactor productivity reductions required by the ACA of 0.75% and 0.6%, respectively;~~

~~A 0.4588% increase required under the 21st Century Cures Act; and~~

~~A reduction of 0.6% to reverse the one-time increase of 0.6% made in FFY 2017 to address the effects of the 0.2% reduction in effect for FFYs 2014 through 2016 related to the two-midnight rule.~~

•Updates to the three factors used to determine the amount and distribution of Medicare uncompensated care disproportionate share (“UC-DSH”) ~~payments, including a transition from using low-income days to estimated uncompensated care costs for the distribution of the UC-DSH pool;~~payments;

•A ~~1.60%~~1.22% net increase in the capital federal MS-DRG rate; ~~and~~

•An increase in the cost outlier threshold from ~~$23,573~~$29,064 to ~~$26,537.~~$30,967;

•An extension of the New COVID-19 Treatments Add-on Payment for certain eligible products through the end of the FFY in which the public health emergency as declared by the Secretary of HHS ends; and

•The establishment of new requirements and the revision of existing requirements for the Hospital Value-Based Purchasing, Hospital Readmissions Reduction and Hospital Acquired Condition Reduction programs.

According to CMS, the combined impact of the proposed payment and policy changes in the ~~Final~~Proposed IPPS Rule for operating costs will yield an average ~~1.4%~~2.7% increase in Medicare operating MS-DRG ~~fee-for-service (“FFS”)~~FFS payments for hospitals in ~~large~~ urban areas ~~(populations over one million)~~and an average 2.8% increase in such payments for proprietary hospitals in FFY ~~2018.~~2022. We estimate that all of the proposed payment and policy changes affecting operating MS-DRG ~~payments, notably those affecting Medicare~~and UC-DSH payments will result in an estimated ~~0.1%~~1.6% increase in our annual Medicare FFS IPPS payments, which yields an estimated increase of approximately $2$32 million. The payment increase resulting from the 1.21% net market basket increase is offset by a reduction to our UC-DSH payments primarily due to the aforementioned transition to using uncompensated care costs for the distribution of the UC-DSH pool. Because of the uncertainty associated with various factors that may influence our future IPPS payments by individual hospital, including legislative, ~~action,~~regulatory or legal actions, admission volumes, length of stay and case mix, as well as potential changes to the Proposed IPPS Rule, we cannot provide any assurances regarding our ~~estimate~~estimates of the impact of the ~~final~~proposed payment and policy changes.

~~Final Payment~~Public Health and ~~Policy Changes to~~Social Services Emergency Fund—During the ~~Medicare Outpatient Prospective Payment~~three months ended March 31, 2021, our Hospital Operations and Ambulatory ~~Surgery Center Payment Systems~~

~~On November 1, 2017, CMS released final policy changes, quality provisions~~Care segments recognized approximately $24 million of Provider Relief Fund grant income associated with lost revenues and ~~payment rates~~COVID-related costs. We recognized an additional $6 million of Provider Relief Fund grant income from our unconsolidated affiliates during this period. Our Hospital Operations and Ambulatory Care segments also recognized $7 million of grant income from state and local grant programs during the three months ended March 31, 2021. Grant income recognized by our Hospital Operations and Ambulatory Care segments was presented in grant income and grant income recognized through our unconsolidated affiliates was presented in equity in earnings of unconsolidated affiliates in our accompanying Condensed Consolidated Statement of Operations for the three months ended March 31, 2021. Based on the uncertainty regarding future estimates of lost revenues and COVID-related costs or the impact of further updates to HHS guidance, if any, we cannot provide any assurances regarding the amount of grant income to be recognized in the future.

Medicare ~~Hospital Outpatient Prospective~~and Medicaid Payment ~~System (“OPPS”)~~Policy Changes—Effective May 1, 2020, the 2% sequestration reduction on Medicare FFS and ~~Ambulatory Surgical Center (“ASC”) Payment System for calendar year 2018 (“Final OPPS/ASC Rule”).~~Medicare Advantage payments to hospitals, physicians and other providers was suspended, but it had been scheduled to resume on April 1, 2021. On April 14, 2021, President Biden signed H.R. 1868, which included an extension of the suspension of the 2% sequestration reduction through December 31, 2021. The ~~Final OPPS/ASC rule includes~~impact of the ~~following payment and policy changes:~~

Ansuspension on our operations was an increase of approximately ~~4.85%~~$20 million of revenues in the ~~OPPS conversion factor (i.e.,~~three months ended March 31, 2021. We expect the ~~base rate that is adjusted for geographic wage differences and multiplied by the Ambulatory Payment Classification (“APC”) relative weight~~suspension to ~~determine individual APC payments) comprised of (i)~~result in an increase of 1.35% based on a market basket increase of 2.7% reduced by market basket index and multifactor productivity reductions required by the ACA of 0.75% and 0.6%, respectively, (ii) wage index budget neutrality, pass-through and outlier spending adjustments, and (iii) an

~~increase of 3.19% resulting from a budget-neutral redistribution~~ of approximately ~~$1.6 billion related~~$80 million of revenues for the year ending December 31, 2021. Because of the uncertainty associated with various factors that may influence our future Medicare and Medicaid payments, including future legislative, legal or regulatory actions, or changes in volumes and case mix, there is a risk that actual payments received under, or the ultimate impact of, these programs will differ materially from our expectations.

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The American Rescue Plan Act of 2021—During the three months ended March 31, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (“ARPA”), a $1.9 trillion COVID-19 relief package, which includes a number of provisions that affect hospitals and health systems, specifically:

•Additional funding for rural health care providers for COVID-19 relief;

•An incentive for states that have not already done so to ~~payments~~expand Medicaid by temporarily increasing each respective state’s Federal Medical Assistance Percentage for ~~separately payable drugs purchased under~~their base program by five percentage points for two years;

•Federal subsidies valued at 100% of the health insurance premium for eligible individuals and families to remain on their employer-based coverage through September 30, 2021;

•Additional COVID-19 funding for vaccines, treatment, PPE, testing, contact tracing and workforce development; and

•Funding to the Department of Labor for worker protection activities.

Significant Litigation

340B ~~program from average sale price (“ASP”) plus 6% to ASP minus 22.5%; the~~Litigation

The 340B program allows certain hospitals (i.e., only nonprofit organizations with specific federal designations and/or funding) (“340B Hospitals”) to purchase ~~separately payable~~ drugs at discounted rates from drug ~~manufacturers;~~

~~The removal of total knee arthroplasty~~manufacturers. In the final rule regarding Hospital Outpatient Prospective Payment System (“~~TKA”~~OPPS”) from the CMS list of procedures that can be performed only on an inpatient basis (the “Inpatient Only List”), which permits TKAs to be performed in a hospital outpatient department; CMS did not add TKA to the ASC list of covered surgical procedures; and

~~A 1.2% update to the ASC payment rates.~~

~~CMS projects that the combined impact of the~~ payment and policy changes infor calendar year (“CY”) 2018, CMS reduced the ~~Final OPPS/ASC Rule will yield an~~payment for 340B Drugs from the average ~~1.4%~~sale price (“ASP”) plus 6% to ASP minus 22.5% and made a corresponding budget‑neutral increase ~~in Medicare FFS OPPS~~to payments ~~for~~to all hospitals ~~an average 1.3% increase in Medicare FFS~~for other drugs and services reimbursed under the OPPS ~~payments for hospitals in large urban areas (populations over one million), and an average 4.5% increase in Medicare FFS~~(the “340B Payment Adjustment”). In the final rules regarding OPPS ~~payments for proprietary hospitals. Based on CMS’ estimates, the projected annual impact of the~~ payment and policy changes for CYs 2019, 2020 and 2021, CMS continued the 340B Payment Adjustment. Certain hospital associations and hospitals commenced litigation challenging CMS’ authority to impose the 340B Payment Adjustment for CYs 2018, 2019 and 2020. Previously, the U.S. District Court for the District of Columbia (the “District Court”) held that the adoption of the 340B Payment Adjustment in the CYs 2018 and 2019 OPPS Final ~~OPPS/ASC Rule~~Rules exceeded CMS’ statutory authority by reducing drug reimbursement rates for 340B Hospitals. During the three months ended September 2020, the U.S. Court of Appeals for the District of Columbia Circuit (the “Appeals Court”) reversed the District Court’s holding, finding that HHS’ decision to reduce the payment rate for 340B Drugs was based on a reasonable interpretation of the Medicare statute. The Appeals Court subsequently denied the 340B Hospital’s petition for a rehearing. During the three months ended March 31, 2021, the 340B Hospitals filed a timely petition asking the U.S. Supreme Court (“Supreme Court”) to reverse the Appeals Court’s decision. We cannot predict whether the Supreme Court will agree to review the Appeals Court’s decision or what further actions CMS or Congress might take with respect to the 340B program; however, a reversal of the current payment policy and return to the prior 340B payment methodology could have an adverse effect on our ~~hospitals is an increase to Medicare FFS hospital outpatient~~net operating revenues of approximately $32 million, which represents an increase of approximately 4.5%. Because of the uncertainty associated with various factors that may influence our future OPPS payments, including legislative or legal actions, volumes and ~~case mix, we cannot provide any assurances regarding our estimate of the impact of the final payment and policy changes.~~cash flows.

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.

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The amount of our managed care net patient service revenues, including Medicare and Medicaid managed care programs, from our ~~Hospital Operations~~hospitals and ~~other segment~~related outpatient facilities during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 was ~~$7.867~~$2.480 billion and ~~$8.031~~$2.321 billion, respectively. ~~Approximately 63%~~Our top 10 managed care payers generated 61% of our managed care net patient service revenues for the ~~nine~~three months ended ~~September 30, 2017 was derived from~~March 31, 2021. During the same period, national payers generated 43% of our ~~top ten~~ managed care ~~payers. National payers generated approximately 45% of our total~~ net ~~managed care~~patient service revenues. The remainder ~~comes~~came from regional or local payers. At ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016, approximately 62%~~2020, 65% and ~~63%~~66%, respectively, of our net accounts receivable for our Hospital Operations ~~and other~~ segment were due from managed care payers.

In April 2017, we successfully concluded negotiations with a national payer to return to its provider network after ceasing our participation on October 1, 2016. As a result of this new agreement, our hospitals and other healthcare facilities, as well as our employed physicians, were all added to the payer’s national provider network on June 1, 2017. Prior to expiration of the contract on October 1, 2016, the contract represented approximately 2.9% of our net operating revenues before provision for doubtful accounts for the period subsequent to the sale of our Georgia hospitals on March 31, 2016 to the contract expiration on September 30, 2016.

Revenues under managed care plans are based primarily on payment terms involving predetermined rates per diagnosis, per-diem rates, discounted ~~fee-for-service~~FFS rates ~~and~~and/or 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~~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 at ~~September 30, 2017,~~March 31, 2021, a 3% increase or decrease in the estimated contractual allowance would impact the estimated reserves by approximately ~~$15~~$17 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~~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 and payment 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~~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.~~revenues. In addition, on a corporate-wide basis, we do not record any general provision for adjustments to estimated contractual allowances for managed care plans. Managed care accounts, net of contractual allowances recorded, are further reduced to their net realizable value through implicit price concessions based on historical collection trends for these payers and other factors that affect the estimation process.

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 benefited from solid year-over-year aggregate managed care pricing improvements for ~~several years,~~some time, we have seen these improvements moderate in recent years, and we believe ~~the~~this moderation could continue ~~in future years.~~into the future. In the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, our commercial managed care net inpatient revenue per admission from the hospitals in our ~~acute care hospitals~~Hospital Operations segment was approximately ~~88%~~85% higher than our aggregate yield on a per admission basis from government payers, including managed Medicare and Medicaid insurance plans.

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~~UNINSURED PATIENTS

~~Self-pay~~Uninsured 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 number of our ~~self-pay~~uninsured patients are admitted through our hospitals’ emergency departments and often require high-acuity treatment that is more costly to provide and, therefore, results in higher billings, which are the least collectible of all accounts.

Self-pay accounts receivable, which include amounts due from uninsured patients, as well as co-pays, co-insurance amounts and deductibles owed to us by patients with insurance, pose significant collectability problems. At ~~September 30, 2017~~both March 31, 2021 and December 31, ~~2016,~~2020, approximately ~~6% and 5%, respectively,~~4% of our net accounts receivable for our Hospital Operations ~~and other~~ segment ~~were due from self-pay patients.~~was self-pay. Further, a significant portion of our ~~provision for doubtful accounts~~implicit price concessions relates to self-pay ~~patients, as well as co-pays and deductibles owed to us by patients with insurance.~~amounts. We provide revenue cycle management services through ~~our~~ Conifer, ~~subsidiary,~~ which is subject to various ~~laws, rules~~statutes and regulations regarding consumer protection

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in areas including finance, debt collection and credit reporting activities. For additional information, see Item 1, Business — Regulations Affecting Conifer’s Operations, inof Part I of our Annual Report.

Conifer has performed systematic analyses to focus our attention on the drivers of bad debt expense for each hospital. While emergency department use is the primary contributor to our ~~provision for doubtful accounts~~implicit price concessions 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~~self-pay accounts, as well as co-pay, co-insurance and deductible amounts owed to us by patients with insurance, that we deem highly collectible. We leverage a statistical-based collections model that aligns our operational capacity to maximize our collections performance. 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.~~the challenges associated with serving uninsured patients. For example, our Compact with Uninsured Patients (“~~Compact”~~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 had 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~~implicit price concessions based on historical collection trends for self-pay accounts and other factors that affect the estimation process.

We also provide financial assistance through our charity ~~care~~and uninsured discount programs to uninsured patients who are 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~~Our policy is not to pursue collection of amounts determined to qualify ~~as charity care;~~for financial assistance; 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. These payments are intended to mitigate our cost of uncompensated ~~care, as well as reduced~~care. Some states have also developed provider fee or other supplemental payment programs to mitigate the shortfall of Medicaid ~~funding levels. Generally, our method of measuring~~reimbursement compared to the estimated costs uses adjusted self-pay/charity patient days multiplied by selected operating expenses (which include salaries, wages and benefits, supplies and other 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 following table shows our estimated costs (based on selected operating expenses, which exclude the costs of our health plan businesses)cost of caring for ~~self-pay patients and charity care patients, as well as revenues attributable to~~ Medicaid ~~DSH and other supplemental revenues we recognized, in the three and nine months ended September 30, 2017 and 2016:~~patients.

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Estimated costs for:

Self-pay patients $ 164
$ 158
$ 484
$ 453
Charity care patients 29
36
92
104
Total $ 193
$ 194
$ 576
$ 557
Medicaid DSH and other supplemental revenues $ 140
$ 249
$ 462
$ 691

The initial expansion of health insurance coverage ~~in prior periods has~~under the Affordable Care Act resulted in an increase in the number of patients using our facilities ~~who have~~with either health insurance exchange or government healthcare insurance program coverage. However, we continue to have to provide uninsured discounts and charity care due to the failure of states to expand Medicaid coverage and for persons living in the country ~~illegally~~ who are not permitted to enroll in a health insurance exchange or government healthcare insurance program. ~~Furthermore,~~

The following table shows our estimated costs (based on ~~October 12, 2017,~~selected operating expenses, which include salaries, wages and benefits, supplies and other operating expenses) of caring for our uninsured and charity patients in the Trump administration announced that it would immediately end cost-sharing reduction (“CSR”) payments to insurers under the ACA, which compensate insurers for subsidizing out-of-pocket costs for low-income enrollees. Without the CSR payments, some insurers may seek approval to increase premiums for plans offered on ACA exchanges or withdraw from offering plans on some or allthree months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
	2021		2020
Estimated costs for:
Uninsured patients	$	168	$	156
Charity care patients	20		40
Total	$	188	$	196

Table of the exchanges. Legislation has been introduced in Congress that would restore the CSR payments. In addition, a group of state attorneys general have filed a lawsuit seeking court action to block the Trump administration order ending the payments. We cannot predict what actions insurers might take as a result of the order, the impact of those actions on our operations, or the outcome of legislative efforts or litigation seeking to restore the payments. We also do not know what adverse impact the continued uncertainty may have on 2018 marketplace enrollment and coverage.Contents

RESULTS OF OPERATIONS

The following two tables summarize our consolidated 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, 2017~~March 31, 2021 and ~~2016:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net operating revenues:

General hospitals $ 3,873
$ 4,065
$ 12,052
$ 12,429
Other operations 1,068
1,151
3,258
3,427
Net operating revenues before provision for doubtful accounts 4,941
5,216
15,310
15,856
Less provision for doubtful accounts 355
367
1,109
1,095
Net operating revenues
4,586
4,849
14,201
14,761
Equity in earnings of unconsolidated affiliates 38
31
95
85
Operating expenses:

Salaries, wages and benefits 2,264
2,308
6,990
7,012
Supplies 740
767
2,285
2,351
Other operating expenses, net 1,120
1,231
3,466
3,686
Electronic health record incentives (1 ) (2 ) (8 ) (23 )
Depreciation and amortization 219
205
662
632
Impairment and restructuring charges, and acquisition-related costs 329
31
403
81
Litigation and investigation costs 6
4
12
291
Gains on sales, consolidation and deconsolidation of facilities (104 ) (3 ) (142 ) (151 )
Operating income $ 51
$ 339
$ 628
$ 967

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net operating revenues 100.0 % 100.0 % 100.0 % 100.0 %
Equity in earnings of unconsolidated affiliates 0.8 % 0.6 % 0.7 % 0.6 %
Operating expenses:

Salaries, wages and benefits 49.4 % 47.6 % 49.3 % 47.5 %
Supplies 16.1 % 15.8 % 16.1 % 15.9 %
Other operating expenses, net 24.4 % 25.4 % 24.4 % 25.0 %
Electronic health record incentives — % — % (0.1 )% (0.2 )%
Depreciation and amortization 4.8 % 4.2 % 4.7 % 4.3 %
Impairment and restructuring charges, and acquisition-related costs 7.2 % 0.6 % 2.8 % 0.5 %
Litigation and investigation costs 0.1 % 0.1 % 0.1 % 2.0 %
Gains on sales, consolidation and deconsolidation of facilities (2.3 )% (0.1 )% (1.0 )% (1.0 )%
Operating income 1.1 % 7.0 % 4.4 % 6.6 %

~~Net operating revenues~~2020. We present metrics as a percentage of our general hospitals include inpatient and outpatient revenues for services provided by facilities in our Hospital Operations and other segment, as well as nonpatient revenues (e.g., 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, which we divested effective August 1, 2017, (3) our Ambulatory Care segment, (4) services provided by our Conifer subsidiary to third parties and (5) our health plans. Revenues from our general hospitals represented approximately 78% of our total net operating revenues ~~before provision for doubtful accounts for both~~because a significant portion of ~~the three month periods ended September 30, 2017 and 2016, and 79% and 78%~~our costs are variable.


	Three Months Ended March 31,
	2021		2020
Net operating revenues:
Hospital Operations	$	3,947	$	3,834
Ambulatory Care	646		490
Conifer	310		332
Inter-segment eliminations	(122)		(136)
Net operating revenues	4,781		4,520
Grant income	31		—
Equity in earnings of unconsolidated affiliates	42		28
Operating expenses:
Salaries, wages and benefits	2,201		2,187
Supplies	804		763
Other operating expenses, net	1,072		1,013
Depreciation and amortization	224		203
Impairment and restructuring charges, and acquisition-related costs	20		55
Litigation and investigation costs	13		2
Net gains on sales, consolidation and deconsolidation of facilities	—		(2)
Operating income	$	520	$	327


	Three Months Ended March 31,
	2021		2020
Net operating revenues	100.0	%	100.0	%
Grant income	0.6	%	—	%
Equity in earnings of unconsolidated affiliates	0.9	%	0.6	%
Operating expenses:
Salaries, wages and benefits	46.0	%	48.4	%
Supplies	16.8	%	16.9	%
Other operating expenses, net	22.4	%	22.4	%
Depreciation and amortization	4.7	%	4.5	%
Impairment and restructuring charges, and acquisition-related costs	0.4	%	1.2	%
Litigation and investigation costs	0.3	%	—	%
Net gains on sales, consolidation and deconsolidation of facilities	—	%	—	%
Operating income	10.9	%	7.2	%

Total net operating revenues increased by $261 million, or 5.8%, for the ~~nine month periods~~three months ended ~~September 30, 2017 and 2016, respectively.~~

~~Net operating revenues from our other operations were $1.068 billion and $1.151 billion in~~March 31, 2021 compared to the three months ended ~~September 30, 2017 and 2016, respectively, and $3.258 billion and $3.427 billion in the nine months ended September 30, 2017 and 2016, respectively. The decrease in~~March 31, 2020. Hospital Operations net operating revenues ~~from other operations during 2017 primarily relates to our health plans, partially offset~~net of inter-segment eliminations increased by ~~increases in revenues from our Conifer subsidiary and our USPI joint venture. Equity earnings of unconsolidated affiliates were $38~~$127 million, ~~and $31 million~~or 3.4%, for the three months ended ~~September 30, 2017~~March 31, 2021 compared to the same period in 2020. These increases were primarily due to higher patient acuity and ~~2016, respectively,~~a more favorable payer mix, partially offset by lower patient volumes in the 2021 period. Our Hospital Operations segment also recognized income from federal, state and ~~$95~~local grants totaling $24 million ~~and $85~~during the three months ended March 31, 2021, which was not included in net operating revenues.

Ambulatory Care net operating revenues increased by $156 million, or 31.8%, for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 compared to the prior-year period despite the severe weather impact of Winter Storm Uri in February 2021. The change was driven by an increase in same-facility net operating revenues of $44 million due primarily to higher patient volumes and ~~2016, respectively.~~acuity, incremental revenue from new service lines and improved terms of our managed care contracts, as well as an increase from acquisitions of $118 million. These increases were partially offset by a decrease of $6 million due to the closure or deconsolidation of facilities. Our Ambulatory Care segment also recognized income from federal grants totaling $7 million during the three months ended March 31, 2021, which was not included in net operating revenues.

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Conifer’s total net operating revenues decreased by $22 million, or 6.6%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The portion of Conifer’s revenues from third-party customers, which are not eliminated in consolidation, decreased $8 million, or 4.1%, for the three months ended March 31, 2021 compared to the same period in 2020. This decrease was primarily attributable to expected client attrition, partially offset by new business expansion. The remainder of the decrease in Conifer’s total net operating revenues was primarily driven by the revised terms in the Amended RCM Agreement.

The following table shows selected operating expenses of our three reportable business segments. Information for our Hospital Operations ~~and other~~ segment is presented on a same-hospital basis, which includes the results of our same

72 65 hospitals operated throughout the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016. The results~~2020. We present same-hospital data because we believe it provides investors with useful information regarding the performance of ~~five Georgia~~our hospitals ~~which we divested effective April 1, 2016, our new THOP Transmountain Campus teaching hospital, which we opened in January 2017 in El Paso,~~ and ~~three Houston-area hospitals, which we divested effective August 1, 2017,~~other operations that are ~~excluded from our same-hospital information.~~comparable for the periods presented.

Three Months Ended
September 30, Nine Months Ended
September 30,
Selected Operating Expenses 2017 2016
Increase
(Decrease)
2017 2016
Increase
(Decrease)
Hospital Operations and other — Same-Hospital
Salaries, wages and benefits $ 1,846
$ 1,856
(0.5 )% $ 5,617
$ 5,579
0.7 %
Supplies 633
657
(3.7 )% 1,946
2,003
(2.8 )%
Other operating expenses 898
1,004
(10.6 )% 2,771
2,961
(6.4 )%
Total $ 3,377
$ 3,517
(4.0 )% $ 10,334
$ 10,543
(2.0 )%
Ambulatory Care

Salaries, wages and benefits $ 155
$ 144
7.6 % $ 458
$ 437
4.8 %
Supplies 95
89
6.7 % 285
266
7.1 %
Other operating expenses 93
86
8.1 % 267
263
1.5 %
Total $ 343
$ 319
7.5 % $ 1,010
$ 966
4.6 %
Conifer

Salaries, wages and benefits $ 230
$ 240
(4.2 )% $ 730
$ 717
1.8 %
Supplies 1
—
100.0 % 3
—
100.0 %
Other operating expenses 91
79
15.2 % 266
247
7.7 %
Total $ 322
$ 319
0.9 % $ 999
$ 964
3.6 %
Total
Salaries, wages and benefits $ 2,231
$ 2,240
(0.4 )% $ 6,805
$ 6,733
1.1 %
Supplies 729
746
(2.3 )% 2,234
2,269
(1.5 )%
Other operating expenses 1,082
1,169
(7.4 )% 3,304
3,471
(4.8 )%
Total $ 4,042
$ 4,155
(2.7 )% $ 12,343
$ 12,473
(1.0 )%
Rent/lease expense (1)

Hospital Operations and other $ 57
$ 55
3.6 % $ 170
$ 167
1.8 %
Ambulatory Care 20
18
11.1 % 57
55
3.6 %
Conifer 4
5
(20.0 )% 14
14
— %
Total $ 81
$ 78
3.8 % $ 241
$ 236
2.1 %


	Three Months Ended March 31,
Selected Operating Expenses	2021		2020		Increase (Decrease)
Hospital Operations — Same-Hospital:
Salaries, wages and benefits	$	1,857	$	1,846	0.6	%
Supplies	646		651		(0.8)	%
Other operating expenses	916		870		5.3	%
Total	$	3,419	$	3,367	1.5	%
Ambulatory Care:
Salaries, wages and benefits	$	174	$	162	7.4	%
Supplies	157		112		40.2	%
Other operating expenses	103		86		19.8	%
Total	$	434	$	360	20.6	%
Conifer:
Salaries, wages and benefits	$	170	$	179	(5.0)	%
Supplies	1		1		—	%
Other operating expenses	53		65		(18.5)	%
Total	$	224	$	245	(8.6)	%
Total:
Salaries, wages and benefits	$	2,201	$	2,187	0.6	%
Supplies	804		764		5.2	%
Other operating expenses	1,072		1,021		5.0	%
Total	$	4,077	$	3,972	2.6	%
Rent/lease expense(1):
Hospital Operations	$	77	$	65	18.5	%
Ambulatory Care	27		23		17.4	%
Conifer	3		3		—	%
Total	$	107	$	91	17.6	%



(1)
~~(1)~~	Included in other operating expenses.

RESULTS OF OPERATIONS BY SEGMENT

Our operations are reported in three segments:

•Hospital Operations, ~~and other,~~ which is comprised of ~~our~~ acute care and specialty hospitals, ancillary outpatient facilities, micro-hospitals, imaging centers, physician practices and urgent care ~~centers, microhospitals and physician practices;~~centers. As described in Note 4 to the accompanying Condensed Consolidated Financial Statements, certain of these facilities were classified as held for sale at March 31, 2021.

•Ambulatory Care, which is comprised of ~~our USPI joint venture’s~~USPI’s ambulatory surgery centers, urgent care centers and surgical hospitals. As described in Note 4 to the accompanying Condensed Consolidated Financial Statements, certain of these facilities were classified as held for sale at March 31, 2021. For the three months ended March 31, 2021 and 2020, our Ambulatory Care segment also included imaging centers, ~~and surgical hospitals, as well as Aspen’s hospitals and clinics; and~~which were transferred to our Hospital Operations segment effective April 1, 2021.

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•Conifer, which provides ~~healthcare business process services in the areas of hospital and physician~~ revenue cycle management and value-based care ~~solutions~~services to ~~healthcare~~hospitals, health systems, ~~as well as individual hospitals,~~ physician practices, ~~self-insured organizations, health plans~~employers and other ~~entities.~~clients.

HospitalOperations ~~andOther~~Segment

The following tables show operating statistics of our continuing operations ~~acute care~~ hospitals and related outpatient facilities on a same-hospital basis, unless otherwise indicated, which includes the results of our same 7265 hospitals operated throughout the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016. The results~~2020. We present same-hospital data because we believe it provides investors with useful information regarding the performance of ~~five Georgia~~our hospitals ~~which we divested effective April 1, 2016,~~and other operations that are comparable for the periods presented. We present certain metrics on a per-adjusted-patient-admission and per-adjusted-patient-day basis to show trends other than volume. We present certain metrics as a percentage of net operating revenues because a significant portion of our ~~new THOP Transmountain Campus teaching hospital, which we opened in January 2017 in El Paso, and three Houston-area hospitals, which we divested effective August 1, 2017,~~operating expenses are ~~excluded from our same-hospital information.~~variable.

Same-Hospital
Continuing Operations

Same-Hospital
Continuing Operations
Three Months Ended
September 30, Nine Months Ended
September 30,
Admissions, Patient Days and Surgeries 2017 2016 Increase
(Decrease) 2017 2016
Increase
(Decrease)
Number of hospitals (at end of period) 72
72
—
(1) 72
72
—
(1)
Total admissions 181,970
186,765
(2.6 )% 553,651
569,112
(2.7 )%
Adjusted patient admissions(2)
320,821
327,960
(2.2 )% 970,418
990,517
(2.0 )%
Paying admissions (excludes charity and uninsured) 171,791
176,376
(2.6 )% 524,588
540,172
(2.9 )%
Charity and uninsured admissions 10,179
10,389
(2.0 )% 29,063
28,940
0.4 %
Admissions through emergency department 118,361
116,234
1.8 % 357,078
359,694
(0.7 )%
Paying admissions as a percentage of total admissions 94.4 % 94.4 % — % (1) 94.8 % 94.9 % (0.1 )% (1)
Charity and uninsured admissions as a
percentage of total admissions 5.6 % 5.6 % — % (1) 5.2 % 5.1 % 0.1 % (1)
Emergency department admissions as a
percentage of total admissions 65.0 % 62.2 % 2.8 % (1) 64.5 % 63.2 % 1.3 % (1)
Surgeries — inpatient 50,074
52,556
(4.7 )% 149,801
156,638
(4.4 )%
Surgeries — outpatient 66,482
70,206
(5.3 )% 202,796
215,632
(6.0 )%
Total surgeries 116,556
122,762
(5.1 )% 352,597
372,270
(5.3 )%
Patient days — total 838,215
863,100
(2.9 )% 2,570,717
2,657,969
(3.3 )%
Adjusted patient days(2)
1,466,266
1,508,217
(2.8 )% 4,478,793
4,598,669
(2.6 )%
Average length of stay (days) 4.61
4.62
(0.2 )% 4.64
4.67
(0.6 )%
Licensed beds (at end of period) 19,327
19,292
0.2 % 19,327
19,292
0.2 %
Average licensed beds 19,328
19,319
— % 19,297
19,326
(0.2 )%
Utilization of licensed beds(3)
47.1 % 48.6 % (1.5 )% (1) 48.8 % 50.4 % (1.6 )% (1)


	Same-Hospital Continuing Operations
	Three Months Ended March 31,
Admissions, Patient Days and Surgeries	2021		2020		Increase (Decrease)
Number of hospitals (at end of period)	65		65		—		(1)
Total admissions	147,674		165,735		(10.9)	%
Adjusted patient admissions(2)	251,017		290,912		(13.7)	%
Paying admissions (excludes charity and uninsured)	138,756		155,820		(11.0)	%
Charity and uninsured admissions	8,918		9,915		(10.1)	%
Admissions through emergency department	112,730		122,291		(7.8)	%
Paying admissions as a percentage of total admissions	94.0	%	94.0	%	—	%	(1)
Charity and uninsured admissions as a percentage of total admissions	6.0	%	6.0	%	—	%	(1)
Emergency department admissions as a percentage of total admissions	76.3	%	73.8	%	2.5	%	(1)
Surgeries — inpatient	36,787		41,962		(12.3)	%
Surgeries — outpatient	53,177		53,390		(0.4)	%
Total surgeries	89,964		95,352		(5.7)	%
Patient days — total	797,489		810,479		(1.6)	%
Adjusted patient days(2)	1,321,890		1,385,763		(4.6)	%
Average length of stay (days)	5.40		4.89		10.4	%
Licensed beds (at end of period)	17,178		17,219		(0.2)	%
Average licensed beds	17,178		17,218		(0.2)	%
Utilization of licensed beds(3)	51.6	%	51.7	%	(0.1)	%	(1)




(1)	The change is the difference between ~~2017~~the 2021 and ~~2016~~2020 amounts shown.
(2)		Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services provided by facilities in our Hospital Operations ~~and other~~ segment by multiplying actual patient admissions/days by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues.
(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 Same-Hospital
Continuing Operations
Three Months Ended
September 30, Nine Months Ended
September 30,
Outpatient Visits 2017 2016 Increase
(Decrease) 2017 2016 Increase
(Decrease)
Total visits 1,813,595
1,917,200
(5.4 )% 5,629,973
5,843,476
(3.7 )%
Paying visits (excludes charity and uninsured) 1,696,468
1,784,379
(4.9 )% 5,281,403
5,447,091
(3.0 )%
Charity and uninsured visits 117,127
132,821
(11.8 )% 348,570
396,385
(12.1 )%
Emergency department visits 646,331
662,625
(2.5 )% 1,987,743
2,038,946
(2.5 )%
Surgery visits 66,482
70,206
(5.3 )% 202,796
215,632
(6.0 )%
Paying visits as a percentage of total visits 93.5 % 93.1 % 0.4 %
⁽¹⁾
93.8 % 93.2 % 0.6 %
⁽¹⁾
Charity and uninsured visits as a percentage of total visits 6.5 % 6.9 % (0.4 )%
⁽¹⁾
6.2 % 6.8 % (0.6 )%
⁽¹⁾


	Same-Hospital Continuing Operations
	Three Months Ended March 31,
Outpatient Visits	2021		2020		Increase (Decrease)
Total visits	1,401,217		1,616,527		(13.3)	%
Paying visits (excludes charity and uninsured)	1,312,098		1,499,540		(12.5)	%
Charity and uninsured visits	89,119		116,987		(23.8)	%
Emergency department visits	450,830		641,282		(29.7)	%
Surgery visits	53,177		53,390		(0.4)	%
Paying visits as a percentage of total visits	93.6	%	92.8	%	0.8	%	(1)
Charity and uninsured visits as a percentage of total visits	6.4	%	7.2	%	(0.8)	%	(1)



(1)
~~(1)~~	The change is the difference between ~~2017~~the 2021 and ~~2016~~2020 amounts shown.

Table of Contents

Same-Hospital
Continuing Operations Same-Hospital
Continuing Operations
Three Months Ended
September 30, Nine Months Ended
September 30,
Revenues 2017 2016 Increase
(Decrease) 2017 2016 Increase
(Decrease)
Total segment net operating revenues $ 3,641
$ 3,849
(5.4 )% $ 11,195
$ 11,642
(3.8 )%
Selected acute care hospitals and related outpatient facilities revenue data
Net inpatient revenues $ 2,391
$ 2,533
(5.6 )% $ 7,342
$ 7,571
(3.0 )%
Net outpatient revenues 1,386
1,334
3.9 % 4,195
4,081
2.8 %
Net patient revenues $ 3,777
$ 3,867
(2.3 )% $ 11,537
$ 11,652
(1.0 )%

Self-pay net inpatient revenues $ 107
$ 89
20.2 % $ 297
$ 254
16.9 %
Self-pay net outpatient revenues 142
127
11.8 % 418
368
13.6 %
Total self-pay revenues $ 249
$ 216
15.3 % $ 715
$ 622
15.0 %

Same-Hospital
Continuing Operations Same-Hospital
Continuing Operations
Three Months Ended
September 30, Nine Months Ended
September 30,
Revenues on a Per Admission,
Per Patient Day and Per Visit Basis 2017 2016 Increase
(Decrease) 2017 2016 Increase
(Decrease)
Net inpatient revenue per admission $ 13,140
$ 13,562
(3.1 )% $ 13,261
$ 13,303
(0.3 )%
Net inpatient revenue per patient day $ 2,852
$ 2,935
(2.8 )% $ 2,856
$ 2,848
0.3 %
Net outpatient revenue per visit $ 764
$ 696
9.8 % $ 745
$ 698
6.7 %
Net patient revenue per adjusted patient admission(1)
$ 11,773
$ 11,791
(0.2 )% $ 11,889
$ 11,764
1.1 %
Net patient revenue per adjusted patient day(1)
$ 2,576
$ 2,564
0.5 % $ 2,576
$ 2,534
1.7 %


	Same-Hospital Continuing Operations
	Three Months Ended March 31,
Revenues	2021		2020		Increase (Decrease)
Total segment net operating revenues(1)	$	3,822	$	3,700	3.3	%
Selected revenue data – hospitals and related outpatient facilities:
Net patient service revenues(1)(2)	$	3,647	$	3,542	3.0	%
Net patient service revenue per adjusted patient admission(1)(2)	$	14,529	$	12,176	19.3	%
Net patient service revenue per adjusted patient day(1)(2)	$	2,759	$	2,556	7.9	%



(1)		Revenues are net of implicit price concessions.
~~(1)~~(2)	Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services provided by facilities in our Hospital Operations ~~and other~~ segment 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 Same-Hospital
Continuing Operations
Three Months Ended
September 30, Nine Months Ended
September 30,
Total Segment Provision for Doubtful Accounts 2017 2016 Increase
(Decrease) 2017 2016 Increase
(Decrease)
Provision for doubtful accounts $ 334
$ 308
8.4 % $ 986
$ 906
8.8 %
Provision for doubtful accounts as a percentage of net operating revenues before provision for doubtful accounts 8.4 % 7.4 % 1.0 % (1) 8.1 % 7.2 % 0.9 % (1)


	Same-Hospital Continuing Operations
	Three Months Ended March 31,
Total Segment Selected Operating Expenses	2021		2020		Increase (Decrease)
Salaries, wages and benefits as a percentage of net operating revenues	48.6	%	49.9	%	(1.3)	%	(1)
Supplies as a percentage of net operating revenues	16.9	%	17.6	%	(0.7)	%	(1)
Other operating expenses as a percentage of net operating revenues	24.0	%	23.5	%	0.5	%	(1)



(1)
~~(1)~~	The change is the difference between ~~2017~~the 2021 and ~~2016~~2020 amounts shown.

Same-Hospital
Continuing Operations Same-Hospital
Continuing Operations
Three Months Ended
September 30, Nine Months Ended
September 30,
Total Segment Selected Operating Expenses 2017 2016 Increase
(Decrease) 2017 2016 Increase
(Decrease)
Salaries, wages and benefits as a percentage of net
operating revenues 50.7 % 48.2 % 2.5 % (1) 50.2 % 47.9 % 2.3 % (1 )
Supplies as a percentage of net operating revenues 17.4 % 17.1 % 0.3 % (1) 17.4 % 17.2 % 0.2 % (1 )
Other operating expenses as a percentage of net operating revenues 24.7 % 26.1 % (1.4 )% (1) 24.8 % 25.4 % (0.6 )% (1 )




~~(1)~~	~~The change is the difference between 2017 and 2016 amounts shown.~~

Revenues

Same-hospital net operating revenues ~~decreased $208~~increased $122 million, or ~~5.4%~~3.3%, during the three months ended ~~September 30, 2017~~March 31, 2021 compared to the three months ended ~~September 30, 2016,~~March 31, 2020, primarily due to higher patient acuity and a more favorable payer mix, partially offset by lower ~~inpatient and outpatient~~patient volumes as well as California provider fee revenues. Our 2017 same-hospital inpatient and outpatient volumes were negatively affected compared to the 2016 period by the impact of Hurricane Irma on our facilities in Florida and South Carolina. Also, the 2016 period included $55 million of net revenues from the California provider fee program compared to no revenues under the program in the ~~2017 period because CMS has not yet approved the 2017 program. In addition, the results for the three months ended September 30, 2017 included unfavorable revenue adjustments of approximately $8~~2021 period. Our Hospital Operations segment also recognized income from federal, state and local grants totaling $24 million and $2 million from the Texas 1115 waiver program and the Florida Medicaid program, respectively. Same-hospital net inpatient revenues decreased $142 million, or 5.6%, and same-hospital admissions decreased 2.6% in the three months ended ~~September 30, 2017~~March 31, 2021, which is not included in net operating revenues. Same-hospital admissions decreased 10.9% in the three months ended March 31, 2021 compared to the same period in ~~2016.~~2020. Same-hospital ~~net inpatient revenue per admission~~outpatient visits decreased ~~3.1% despite the improved terms of our managed care contracts~~13.3% in the three months ended ~~September 30, 2017~~March 31, 2021 compared to the three months ended September 30, 2016, primarily due to the impact of the delay in approval of the California provider fee program. Same-hospital net outpatient revenues increased $52 million, or 3.9%, while same-hospital outpatient visits decreased 5.4% in the three months ended September 30, 2017 compared to the same period in 2016 due in part to the sale of home health and hospice assets. Growth in outpatient revenues was primarily driven by improved terms of our managed care contracts. Same-hospital net outpatient revenue per visit increased 9.8% in the three months ended September 30, 2017 compared to the three months ended September 30, 2016, primarily due to the improved terms of our managed care contracts and the sale of home health and hospice assets, which generate lower revenues per visit.prior-year period.

Same-hospital net operating revenues decreased $447 million, or 3.8%, during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, primarily due to lower inpatient and outpatient volumes, as well as California provider fee revenues. Our 2017 same-hospital inpatient and outpatient volumes were negatively affected compared to the 2016 period by the impact of Hurricane Irma on our facilities in Florida and South Carolina, a leap-year day in the 2016 period and our out-of-network status with a national payer for over half of the 2017 period. Also, the 2016 period included $167 million of net revenues from the California provider fee program compared to no revenues under the program in the 2017 period because CMS has not yet approved the 2017 program. Same-hospital net inpatient revenues decreased $229 million, or 3.0%, and same-hospital admissions decreased 2.7% in the nine months ended September 30, 2017 compared to the same period in 2016. Same-hospital net inpatient revenue per admission decreased 0.3% despite the improved terms of our managed care contracts in the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, primarily due to the impact of the delay in approval of the California provider fee program. Same-hospital net outpatient revenues increased $114 million, or 2.8%, while same-hospital outpatient visits decreased 3.7% in the nine months ended September 30, 2017 compared to the same period in 2016 due in part to the sale of home health and hospice assets. Growth in outpatient revenues was primarily driven by improved terms of our managed care contracts. Same-hospital net outpatient revenue per visit increased 6.7% in the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, primarily due to the improved terms of our managed care contracts and the sale of home health and hospice assets, which generate lower revenues per visit.

~~Provision for Doubtful Accounts~~

Same-hospital provision for doubtful accounts as a percentage of net operating revenues before provision for doubtful accounts was 8.4% and 7.4% for the three months ended September 30, 2017 and 2016, respectively, and 8.1% and 7.2% for the nine months ended September 30, 2017 and 2016, respectively. The increases in the 2017 periods compared to the 2016 periods were primarily driven by increases in uninsured revenues of $33 million and $93 million in the three month and nine month periods, respectively.

The following table shows the consolidated net accounts receivable ~~and allowance for doubtful accounts~~ by payer at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016:~~2020:


	March 31, 2021		December 31, 2020
Medicare	$	174	$	152
Medicaid	50		49
Net cost report settlements receivable and valuation allowances	43		34
Managed care	1,593		1,567
Self-pay uninsured	34		32
Self-pay balance after insurance	72		74
Estimated future recoveries	156		156
Other payers	325		318
Total Hospital Operations	2,447		2,382
Ambulatory Care	296		307
Total discontinued operations	2		1
	$	2,745	$	2,690

September 30, 2017 December 31, 2016

Accounts
Receivable
Before
Allowance
for Doubtful
Accounts

Allowance
for Doubtful
Accounts
Net
Accounts
Receivable
Before
Allowance
for Doubtful
Accounts

Allowance
for Doubtful
Accounts
Net
Medicare $ 264
$ —
$ 264
$ 294
$ —
$ 294
Medicaid 96
—
96
125
—
125
Net cost report settlements payable and valuation allowances (2 ) —
(2 ) (14 ) —
(14 )
Managed care 1,687
178
1,509
1,911
190
1,721
Self-pay uninsured 416
363
53
479
412
67
Self-pay balance after insurance 265
165
100
226
147
79
Estimated future recoveries 130
—
130
141
—
141
Other payers 451
185
266
537
239
298
Total Hospital Operations and other 3,307
891
2,416
3,699
988
2,711
Ambulatory Care 192
43
149
227
43
184
Total discontinued operations 2
—
2
2
—
2
$ 3,501
$ 934
$ 2,567
$ 3,928
$ 1,031
$ 2,897

~~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. At ~~September 30, 2017,~~March 31, 2021, our Hospital Operations ~~and other~~ segment collection rate on self-pay accounts was approximately ~~25.2%~~26.1%. Our ~~self-pay~~self‑pay collection rate includes payments made by patients, including co-pays, co-insurance amounts and deductibles paid by patients with insurance. Based on our accounts receivable from ~~self-pay~~uninsured patients and co-pays, co-insurance amounts and deductibles owed to us by patients with insurance at ~~September 30, 2017,~~March 31, 2021, a 10% decrease or increase in our self-pay collection rate, or approximately 3%2%, which we believe could be a reasonably likely change, would result in an unfavorable or favorable adjustment to ~~provision for doubtful~~patient accounts receivable of approximately ~~$10~~$9 million. There are various factors that can impact collection

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trends, such as changes in the economy, which in turn have an impact on unemployment rates and the number of uninsured and underinsured patients, the volume of patients through our emergency departments, the increased burden of co-pays and deductibles to be made by patients with insurance, and business practices related to collection efforts. These factors, many of which have been affected by the COVID-19 pandemic, continuously change and can have an impact on collection trends and our estimation process.

Payment pressure from managed care payers also affects the collectability of our ~~provision for doubtful accounts.~~accounts receivable. 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 Hospital Operations ~~and other~~ segment collection rate from managed care payers was approximately ~~97.3%~~97.2% at ~~September 30, 2017.~~March 31, 2021.

We manage our ~~provision for doubtful accounts~~implicit price concessions using hospital-specific goals and benchmarks such as (1) total cash collections, (2) point-of-service cash collections, (3) AR Days and (4) accounts receivable by aging category. The following tables present the approximate aging by payer of our net accounts receivable from the continuing operations of our Hospital Operations ~~and other~~ segment of ~~$2.418~~$2.404 billion and ~~$2.725~~$2.348 billion at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, respectively, excluding cost report settlements ~~payable~~receivable and valuation allowances of $2$43 million and ~~$14~~$34 million, respectively, at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016:~~2020:


	September 30, 2017											March 31, 2021
	Medicare		Medicaid		Managed Care		Indemnity, Self-Pay and Other		Total			Medicare		Medicaid		Managed Care		Indemnity, Self-Pay and Other		Total
0-60 days	89	%	60	%	62	%	23	%	57	%	0-60 days	90	%	39	%	58	%	24	%	51	%
61-120 days	6	%	18	%	14	%	18	%	14	%	61-120 days	6	%	30	%	17	%	13	%	16	%
121-180 days	2	%	8	%	8	%	12	%	8	%	121-180 days	2	%	12	%	8	%	8	%	8	%
Over 180 days	3	%	14	%	16	%	47	%	21	%	Over 180 days	2	%	19	%	17	%	55	%	25	%
Total	100	%	100	%	100	%	100	%	100	%	Total	100	%	100	%	100	%	100	%	100	%


	December 31, 2016											December 31, 2020
	Medicare		Medicaid		Managed Care		Indemnity, Self-Pay and Other		Total			Medicare		Medicaid		Managed Care		Indemnity, Self-Pay and Other		Total
0-60 days	92	%	75	%	61	%	24	%	60	%	0-60 days	91	%	33	%	58	%	24	%	52	%
61-120 days	5	%	15	%	15	%	14	%	13	%	61-120 days	5	%	31	%	15	%	13	%	14	%
121-180 days	2	%	4	%	8	%	10	%	6	%	121-180 days	2	%	14	%	8	%	8	%	8	%
Over 180 days	1	%	6	%	16	%	52	%	21	%	Over 180 days	2	%	22	%	19	%	55	%	26	%
Total	100	%	100	%	100	%	100	%	100	%	Total	100	%	100	%	100	%	100	%	100	%

Conifer continues to implement 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~~collections at point-of-service, and financial counseling. These initiatives are intended to reduce denials, improve service levels to patients and increase 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.

At ~~September 30, 2017,~~March 31, 2021, we had a cumulative total of patient account assignments to Conifer of ~~approximately $2.537~~$2.321 billion related to our continuing operations. 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 Conifer 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 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. Based on recent trends, approximately ~~95%~~98% of all accounts in the MEP are ultimately approved for benefits under a government program, such as Medicaid.

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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, 2017~~March 31, 2021 and December 31, ~~2016~~2020 by aging ~~category for the hospitals currently in the program:~~category:


	March 31, 2021		December 31, 2020
0-60 days	$	80	$	91
61-120 days	10		24
121-180 days	4		6
Over 180 days	6		6
Total	$	100	$	127

September 30, December 31,
2017 2016
0-60 days $ 63
$ 84
61-120 days 13
13
121-180 days 2
4
Over 180 days 3
4
Total
$ 81
$ 105

Salaries, Wages and Benefits

Same-hospital salaries, wages and benefits ~~as a percentage of net operating revenues~~ increased ~~250 basis points to 50.7%~~$11 million, or 0.6%, in the three months ended ~~September 30, 2017~~March 31, 2021 compared to the same period in 2016. Same-hospital net operating revenues decreased 5.4% during the three months ended September 30, 2017 compared to the three months ended September 30, 2016, and same-hospital salaries, wages and benefits decreased 0.5% in the three months ended September 30, 2017 compared to the 2016 period. The2020. This change ~~in same-hospital salaries, wages and benefits as a percentage of net operating revenues~~ was primarily ~~due~~attributable to increased contract labor costs, as well as increased incentive compensation and annual merit increases for certain of our employees, ~~increased health benefits costs and the effect of lower net operating revenues and volumes on operating leverage due to certain fixed staffing costs,~~ partially offset by ~~decreased accruals for annual incentive compensation. Salaries, wages~~lower health benefits costs. A higher average length of patient stay and ~~benefits expense for~~a greater number of employed physicians also contributed to the ~~three months ended September 30, 2017~~increase. This increase was partially offset by reduced patient volumes as a result of the COVID-19 pandemic and ~~2016 included stock-based compensation expense of $10 million and $15 million, respectively.~~

our continuing cost efficiency initiatives. Same-hospital salaries, wages and benefits as a percentage of net operating revenues ~~increased 230~~decreased by 130 basis points to ~~50.2%~~48.6% in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 compared to the ~~same period in 2016. Same-hospital net operating revenues decreased 3.8% during the nine~~three months ended September 30, 2017 compared to the nine months ended September 30, 2016, and same-hospital salaries, wages and benefits increased 0.7% in the nine months ended September 30, 2017 compared to the 2016 period. The change in same-hospital salaries, wages and benefits as a percentage of net operating revenues wasMarch 31, 2020, primarily due to ~~annual merit increases for certain of our employees,~~ increased health benefits costs and the effect of lower net operating revenues and volumes on operating leverage due to certain fixed staffing costs, partially offset by decreased accruals for annual incentive compensation and the impact of recent favorable workers’ compensation

~~claims experience.~~patient revenues. Salaries, wages and benefits expense for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 included stock-based compensation expense of ~~$32~~$10 million and ~~$44~~$7 million, respectively.

At September 30, 2017, approximately 24% of the employees in our Hospital Operations and other segment were represented by labor unions. There were no unionized employees in our Ambulatory Care segment, and less than 1% of Conifer’s employees belong to a union. Unionized employees – primarily registered nurses and service, technical and maintenance workers – are located at 34 of our hospitals, the majority of which are in California, Florida and Michigan. We currently have eight expired contracts covering approximately 7% of our unionized employees and are or will be negotiating renewals under extension agreements. We are also negotiating (or will soon negotiate) first contracts at three hospitals and one physician practice where employees recently selected union representation; these contracts cover approximately 6% of our unionized employees. 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. Organizing activities by labor unions could increase our level of union representation in future periods.

Supplies

Same-hospital supplies expense decreased $5 million, or 0.8%, in the three months ended March 31, 2021 compared to the same period in 2020. The decrease was primarily due to reduced patient volumes and our continued focus on cost efficiency initiatives, including the practices described below. The impact of these factors was partially offset by increased costs for certain supplies as a result of the COVID-19 pandemic and growth in our higher-acuity, supply-intensive surgical services. Same-hospital supplies expense as a percentage of net operating revenues ~~increased 30~~decreased by 70 basis points to ~~17.4% for~~16.9% in the three months ended ~~September 30, 2017~~March 31, 2021 compared to the three months ended September 30, 2016. Same-hospital supplies expense as a percentage of net operating revenues increased 20 basis points to 17.4% for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The change in supplies expense as a percentage of net operating revenues wasMarch 31, 2020, primarily ~~attributable~~due to increased costs from our higher acuity supply-intensive surgical services and lower California provider fee revenues, partially offset by the benefit of the group-purchasing strategies and supplies-management services we utilize to reduce costs.patient revenues.

We strive to control supplies expense through product standardization, consistent contract ~~compliance,~~terms and end‑to‑end contract management, improved utilization, bulk purchases, focused spending with a smaller number of vendors and operational improvements. The items of current ~~cost reduction~~cost-reduction focus ~~continue to be~~include PPE, cardiac stents and pacemakers, orthopedics, ~~and~~ implants, and high-cost pharmaceuticals.

Other Operating Expenses, Net

Same-hospital other operating expenses ~~as a percentage of net operating revenues decreased 140 basis points to 24.7%~~increased by $46 million, or 5.3%, in the three months ended ~~September 30, 2017~~March 31, 2021 compared to ~~26.1% in~~ the same period in 2016. Same-hospital other operating expenses decreased by $106 million, or 10.6%, and net operating revenues decreased by $208 million, or 5.4%, for the three months ended September 30, 2017 compared to the three months ended September 30, 2016. The changes in other operating expenses included:

~~decreased expenses associated with our health plan businesses of $110 million due to the sale and wind-down of these businesses in 2017;~~

~~decreased costs associated with funding indigent care services of $7 million, which costs were substantially offset by additional net patient revenues; and~~

~~decreased malpractice expense of $10 million; partially offset by~~

~~increased costs of contracted services of $9 million; and~~

~~the effect of lower volumes on operating leverage due to certain fixed costs.~~

Same-hospital malpractice expense in the 2017 period included a favorable adjustment of approximately $1 million from the two basis point increase in the interest rate used to estimate the discounted present value of projected future malpractice liabilities. In the 2016 period, we recognized a favorable adjustment of approximately $3 million from the 13 basis point increase in the interest rate used to estimate the discounted present value of projected future malpractice liabilities.

2020. Same-hospital other operating expenses as a percentage of net operating revenues ~~decreased 60~~increased by 50 basis points to ~~24.8% in~~24.0% for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 compared to ~~25.4% in the same period in 2016. Same-hospital other operating expenses decreased by $190 million, or 6.4%, and net operating revenues decreased by $447 million, or 3.8%,~~23.5% for the ~~nine~~three months ended ~~September 30, 2017 compared to the nine months ended September 30, 2016.~~March 31, 2020. The changes in other operating expenses included:

~~decreased expenses associated with our health plan businesses~~•increased malpractice expense of ~~$249 million due to the sale~~$18 million;

•increased rent and ~~wind-down~~lease expense of ~~these businesses in 2017; and~~$12 million;

~~gains on the sales of assets of $20 million primarily related to the sale of home health and hospice assets; partially offset by~~

•increased medical fees of ~~$18~~$8 million; and

•increased ~~costs~~legal and consulting fees of ~~contracted services~~$5 million.

Table of ~~$41 million;~~Contents

~~increased costs associated with funding indigent care services of $9 million, which costs were substantially offset by additional net patient revenues; and~~

~~the effect of lower volumes on operating leverage due to certain fixed costs.~~

Same-hospital malpractice expense in the 2017 period included an unfavorable adjustment of approximately $1 million from the 9 basis point decrease in the interest rate used to estimate the discounted present value of projected future malpractice liabilities. In the 2016 period, we recognized an unfavorable adjustment of approximately $15 million from the 67 basis point decrease in the interest rate used to estimate the discounted present value of projected future malpractice liabilities.

Ambulatory Care Segment

Our Ambulatory Care segment is comprised of ~~our USPI joint venture’s~~USPI’s ambulatory surgery centers and surgical hospitals. At March 31, 2021, our Ambulatory Care segment also included imaging centers, which were transferred to our Hospital Operations segment effective April 1, 2021, and urgent care centers, ~~imaging centers~~which were classified as held for sale at March 31, 2021 and ~~surgical hospitals, as well as Aspen’s hospitals and clinics. Our~~December 31, 2020. USPI ~~joint venture~~ operates its surgical facilities in partnership with local physicians and, in many of these facilities, a ~~healthcare~~health system partner. We hold an ownership interest in each facility, with each being operated through a separate legal entity in most cases. ~~The joint venture~~USPI operates facilities on a day-to-day basis through management services contracts. Our sources of earnings from each facility consist of:

•management services revenues, computed as a percentage of each facility’s net revenues (often net of ~~bad debt expense)~~implicit price concessions); and

•our share of each facility’s net income (loss), which is computed by multiplying the facility’s net income (loss) times the percentage of each facility’s equity interests owned by ~~our USPI joint venture.~~USPI.

Our role as an owner and day-to-day manager provides us with significant influence over the operations of each facility. InFor many of the facilities our Ambulatory Care segment operates ~~(109~~(108 of ~~329~~399 facilities at ~~September 30, 2017)~~March 31, 2021), this influence does not represent control of the facility, so we account for our investment in the facility under the equity method for an unconsolidated affiliate. ~~Our~~ USPI ~~joint venture~~ controls ~~220~~291 of the facilities our Ambulatory Care segment operates, and we account for these investments as consolidated subsidiaries. Our net earnings from a facility are the same under either method, but the classification of those earnings differs. For consolidated subsidiaries, our financial statements reflect 100% of the revenues and expenses of the subsidiaries, after the elimination of intercompany amounts. The net profit attributable to owners other than ~~our~~ USPI ~~joint venture~~ is classified within “net income ~~attributable~~available to noncontrolling interests.”

For unconsolidated affiliates, our ~~consolidated~~ statements of operations reflect our earnings in two line items:

•equity in earnings of unconsolidated affiliates—our share of the net income (loss) of each facility, which is based on the facility’s net income (loss) and the percentage of the facility’s outstanding equity interests owned by ~~us;~~USPI; and

•management and administrative services revenues, which is included in our net operating revenues—income we earn in exchange for managing the day-to-day operations of each facility, usually quantified as a percentage of each facility’s net revenues less ~~bad debt expense.~~

implicit price concessions.

Our Ambulatory Care segment operating income is driven by the performance of all facilities ~~our~~ USPI ~~joint venture~~ operates and by ~~the joint venture’s~~USPI’s ownership interests in those facilities, but our individual revenue and expense line items contain only consolidated businesses, which represent ~~67%~~73% of those facilities. This translates to trends in consolidated operating income that often do not correspond with changes in consolidated revenues and ~~expenses.~~expenses, which is why we disclose certain statistical and financial data on a pro forma systemwide basis that includes both consolidated and unconsolidated (equity method) facilities.

Results of Operations

The following table summarizes certain ~~consolidated statements~~statement of operations items for the periods indicated:


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
Ambulatory Care Results of Operations	2017		2016		Increase (Decrease)		2017		2016		Increase (Decrease)		Ambulatory Care Results of Operations	2021		2020		Increase (Decrease)
Net operating revenues	$	468	$	448	4.5	%	$	1,395	$	1,319	5.8	%	Net operating revenues	$	646	$	490	31.8	%
Grant income													Grant income	$	7	$	—	N/A
Equity in earnings of unconsolidated affiliates	$	34	$	28	21.4	%	$	91	$	79	15.2	%	Equity in earnings of unconsolidated affiliates	$	38	$	26	46.2	%
Salaries, wages and benefits	$	155	$	144	7.6	%	$	458	$	437	4.8	%	Salaries, wages and benefits	$	174	$	162	7.4	%
Supplies	$	95	$	89	6.7	%	$	285	$	266	7.1	%	Supplies	$	157	$	112	40.2	%
Other operating expenses, net	$	93	$	86	8.1	%	$	267	$	263	1.5	%	Other operating expenses, net	$	103	$	86	19.8	%

Our Ambulatory Care net operating revenues increased by ~~$20 million and $76~~$156 million, or ~~4.5% and 5.8%~~31.8%, for the three and nine months ended September 30, 2017, respectively, compared to the three and nine months ended September 30, 2016, respectively. The growth in 2017 revenues was primarily driven by increases from acquisitions of $27 million and $78 million for the three and nine month periods, respectively. Our Ambulatory Care volumes and revenues induring the three months ended ~~September 30, 2017 were negatively affected by~~March 31, 2021 as compared to the same period in 2020 despite the severe weather impact of ~~Hurricane Harvey~~Winter Storm Uri in February 2021. The change was driven by an increase in same-facility net operating revenues of $44 million due primarily to higher patient volumes and ~~Hurricane Irma on~~acuity, incremental revenue from new service lines and improved terms of our ~~facilities~~managed care contracts, as

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well as an increase from acquisitions of $118 million. These increases were partially offset by a decrease of $6 million due to the closure or deconsolidation of facilities. Our Ambulatory Care segment also recognized income from federal grants totaling $7 million during the three months ended March 31, 2021, which is not included in ~~Texas, Florida and South Carolina.~~net operating revenues.

Salaries, wages and benefits expense increased by ~~$11 million and $21~~$12 million, or ~~7.6% and 4.8%~~7.4%, ~~for~~during the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2021 as compared to the ~~three~~same period in 2020. Salaries, wages and ~~nine months ended September 30, 2016, respectively. The 2017 increases were primarily driven~~benefits expense was impacted by an increase from acquisitions of $19 million, offset by a decrease in same-facility salaries, wages and benefits expense ~~from acquisitions~~ of $6$5 million due to expense management efforts and $2 million due to the closure or deconsolidation of facilities. Salaries, wages and benefits expense for three months ended March 31, 2021 and 2020 included stock-based compensation expense of $3 million and ~~$19~~$5 million, ~~for the three and nine month periods,~~ respectively.

Supplies expense increased by ~~$6 million and $19~~$45 million, or ~~6.7% and 7.1%~~40.2%, ~~for~~during the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2021 as compared to the ~~three and nine months ended September 30, 2016, respectively.~~same period in 2020. The ~~2017 increases were primarily~~change was driven by ~~supplies expense~~an increase from acquisitions of $6$37 million, as well as an increase in same‑facility supplies expense of $10 million due primarily to an increase in cases at our consolidated centers, higher costs driven by the higher level of patient acuity, and ~~$18~~higher pricing of certain supplies as a result of the COVID-19 pandemic, partially offset by a decrease of $2 million ~~for~~due to the ~~three and nine month periods, respectively.~~closure or deconsolidation of facilities.

Other operating expenses increased by ~~$7 million and $4~~$17 million, or ~~8.1% and 1.5%~~19.8%, ~~for the three and nine months ended September 30, 2017, respectively, compared to the three and nine months ended September 30, 2016, respectively. The change in other operating expenses for~~during the three months ended ~~September 30, 2017~~March 31, 2021 as compared to the same period in 2020. The change was driven by ~~other operating expenses~~an increase from ~~acquisitions of $4 million. For the nine months ended September 30, 2017, the increase was driven by~~ acquisitions of $13 million, ~~partially offset by decreases~~as well as an increase in same-facility other operating expenses of ~~$8 million.~~$5 million, partially offset by a decrease of $1 million due to the closure of facilities.

Facility Growth

The following table summarizes the changes in our same-facility revenue year-over-year on a pro forma systemwide basis, which includes both consolidated and unconsolidated (equity method) facilities. While we do not record the revenues of unconsolidated facilities, we believe this information is important in understanding the financial performance of our Ambulatory Care segment because these revenues are the basis for calculating our management services revenues and, together with the expenses of our unconsolidated facilities, are the basis for our equity in earnings of unconsolidated affiliates.

Ambulatory Care Facility Growth Three Months Ended
September 30, 2017 Nine Months Ended
September 30, 2017
Net revenues 0.9 % 3.5 %
Cases (2.4 )% (0.8 )%
Net revenue per case 3.4 % 4.3 %

Ambulatory Care Facility Growth

Three Months Ended
March 31, 2021

Net revenues

6.7%

Cases

2.6%

Net revenue per case

4.0%

Joint Ventures with ~~Healthcare~~Health System Partners

~~Our USPI joint venture’s~~USPI’s business model is to jointly own its facilities with local physicians and, ~~not-for-profit healthcare systems.~~in many of these facilities, a not‑for‑profit health system partner. Accordingly, as of ~~September 30, 2017,~~March 31, 2021, the majority of facilities in our Ambulatory Care segment are operated in this model.


Ambulatory Care Facilities				Three Months Ended March 31, 2021
Facilities:
With a health system partner				225
Without a health system partner				174
Total facilities operated				399

~~Ambulatory Care Facilities~~		~~Nine Months Ended~~ ~~September 30, 2017~~
~~Facilities:~~
~~With a healthcare system partner~~	~~192~~
~~Without a healthcare system partner~~	~~137~~
~~Total facilities operated~~	~~329~~
Change from December 31, ~~2016~~2020:
Acquisitions			7	4
De novo			1	1
Dispositions/Mergers			(2	)(2)
Total increase in number of facilities operated			6	3

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, we acquired controlling interests in ~~a single-specialty gastroenterology~~three ambulatory surgery ~~center~~centers in ~~each of Texas~~Maryland and ~~Arizona, a single-specialty ophthalmology surgery center~~one in ~~Florida, a single-specialty orthopedics surgery center in Colorado and an imaging center in California.~~Florida. We paid cash totaling approximately ~~$28~~$24 million for these acquisitions. ~~All five~~The Maryland facilities are jointly owned with ~~local physicians, and a healthcare system partner has an ownership interest in each of the Arizona, Colorado and~~physicians. The Florida surgery centers. During the nine months ended September 30, 2017, we acquired non-controlling interests in a surgical hospital in Texas and a multi-specialty surgery center in California. We paid cash totaling approximately $49 million for these ownership interests. Both facilities arefacility is jointly owned with ~~local physicians~~a health system partner and physicians. During the three months ended March 31, 2021, we deconsolidated two surgery centers in which we previously had a ~~healthcare~~controlling interest and sold ownership to a health care system ~~partner.~~for approximately $12 million.

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We also regularly engage in the purchase of equity interests with respect to our investments in unconsolidated affiliates and consolidated facilities that do not result in a change of control. These transactions are primarily the acquisitions of equity interests in ambulatory surgery centers and the investment of additional cash in facilities that need capital for acquisitions, new construction or other business growth opportunities. During the three months ended March 31, 2021, we invested approximately $1 million in such transactions.

ConiferSegment

Our Conifer segment generated net operating revenues of ~~$401~~$310 million and ~~$398~~$332 million during the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively, and $1.203 billion and $1.169 billion during the nine months ended September 30, 2017 and 2016,~~2020, respectively, a portion of which was eliminated in consolidation as described in Note 1618 to the accompanying Condensed Consolidated Financial Statements. ~~The increases in~~Conifer revenues from third-party customers, ~~of $13 million and $59 million for the three and nine month periods ended September 30, 2017, respectively,~~ which are not eliminated in consolidation, ~~are primarily due~~decreased $8 million, or 4.1%, for the three months ended March 31, 2021 compared to the 2020 period. These decreases were attributable to expected client attrition, partially offset by new ~~clients.~~business expansion.

Salaries, wages and benefits expense for Conifer decreased ~~$10~~$9 million, or ~~4.2%~~5.0%, in the three months ended ~~September 30, 2017~~March 31, 2021 compared to the three months ended ~~September 30, 2016~~March 31, 2020 primarily due to ~~lower incentive compensation expense.~~continued expense discipline and cost savings realized through our Global Business Center (“GBC”) in the Philippines. Salaries, wages and benefits expense ~~for Conifer increased $13 million, or 1.8%,~~ in the ~~nine~~three months ended ~~September 30, 2017 compared to the nine months ended September 30, 2016 due to an increase~~March 31, 2021 and 2020 included stock-based compensation expense of $1 million in ~~staffing as a result of the growth in Conifer’s business primarily attributable to new clients, partially offset by lower incentive compensation expense.~~both periods.

Other operating expenses for Conifer ~~increased~~decreased $12 million, or ~~15.2%~~18.5%, in the three months ended ~~September 30, 2017~~March 31, 2021 compared to the three months ended ~~September 30, 2016,~~March 31, 2020.

In March 2021, we entered into the Amended RCM Agreement effective January 1, 2021. The Amended RCM Agreement updates certain terms and ~~increased $19 million, or 7.7%,~~conditions related to the revenue cycle management services Conifer provides to Tenet hospitals. Conifer’s contract with Tenet represented 39.4% of the net operating revenues Conifer recognized in the ~~nine~~three months ended September 30, 2017 compared to the nine months ended September 30, 2016, in both cases primarily due to the growth in Conifer’s business primarily attributable to new clients. Conifer typically incurs start-up and other transition costs during the initial period of new client contracts. March 31, 2021.

Consolidated

Impairment and Restructuring Charges, and Acquisition-Related Costs

During the three months ended ~~September 30, 2017,~~ March 31, 2021, we recorded impairment and restructuring charges and ~~acquisition-related~~acquisition‑related costs of ~~$329~~$20 million, ~~primarily~~consisting of $16 million of restructuring charges and $4 million of acquisition-related costs. Restructuring charges consisted of $4 million of employee severance costs, $6 million related to the transition of various administrative functions to our GBC and $6 million of other restructuring costs. Acquisition‑related costs consisted of $4 million of transaction costs. Our impairment and restructuring charges and acquisition‑related costs for the three months ended March 31, 2021 were comprised of $10 million from our Hospital Operations segment, $4 million from our Ambulatory Care segment and ~~other segment,~~$6 million from our Conifer segment.

During the three months ended March 31, 2020, we recorded impairment and restructuring charges and acquisition‑related costs of $55 million, consisting of ~~approximately $294~~$54 million of restructuring charges ~~to write-down assets held for sale to their estimated fair value, less estimated costs to sell, for our Aspen~~ and ~~Philadelphia-area facilities, $14~~$1 million of ~~impairment~~acquisition-related costs. Restructuring charges consisted of ~~two equity method investments,~~ $10 million of employee severance costs, $15 million related to the transition of various administrative functions to our GBC, $23 million of charges due to the termination of USPI’s previous management equity plan, $1 million of contract and lease termination fees, ~~$1 million to write-down intangible assets, $6~~and $5 million of other restructuring costs. Acquisition-related costs ~~and $3~~consisted of $1 million ~~in acquisition-related~~of transaction costs.

~~During the three months ended September 30, 2016, we recorded~~ Our impairment and restructuring charges and acquisition-related costs for the three months ended March 31, 2020 were comprised of ~~$31~~$18 million ~~primarily related to~~from our Hospital Operations ~~and other~~ segment, ~~consisting of approximately $9~~$24 million ~~of employee severance costs, $3 million of contract~~from our Ambulatory Care segment and lease termination fees, $7 million of other restructuring costs, and $12 million in acquisition-related costs, which include $2 million of transaction costs and $10 million of acquisition integration charges.

During the nine months ended September 30, 2017, we recorded impairment and restructuring charges and acquisition-related costs of $403 million primarily related to our Hospital Operations and other segment, consisting of approximately $294 million of charges to write-down assets held for sale to their estimated fair value, less estimated costs to sell, for our Aspen and Philadelphia-area facilities, $29 million of impairment of two equity method investments, $40 million of employee severance costs, $8 million of contract and lease termination fees, $3 million to write-down intangible assets, $13 million ~~of other restructuring costs, and $16 million in acquisition-related costs, which include $5 million of transaction costs and $11 million of acquisition integration charges.~~from our Conifer segment.

Litigation and Investigation Costs

Litigation and investigation costs for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 were $6$13 million and $4$2 million, respectively.

Litigation and investigation costs for the nine months ended September 30, 2017 and 2016 were $12 million and $291 million, respectively. The costs in the 2016 period include reserves we recorded for a regulatory investigation that was settled in October 2016.

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Net Gains on Sales, Consolidation and Deconsolidation of Facilities

During the three months ended ~~September 30, 2017,~~March 31, 2020, we recorded net gains on sales, consolidation and deconsolidation of facilities of approximately ~~$104~~$2 million, primarily comprised of aggregate gains of $11 million related to consolidation changes of certain USPI businesses due to ownership changes, partially offset by a ~~$111~~loss of $6 million ~~gain from~~related to post-closing adjustments on the 2019 sale of three of our hospitals ~~physician practices~~in the Chicago area and ~~related assets in Houston, Texas and the surrounding area.~~

~~During the three months ended September 30, 2016, we recorded gains on sales, consolidation and deconsolidation~~a loss of ~~facilities of approximately~~ $3 million ~~primarily comprised of gains~~ related to post-closing adjustments on the ~~consolidation and deconsolidation of certain businesses of our USPI joint venture due to ownership changes.~~

During the nine months ended September 30, 2017, we recorded gains on sales, consolidation and deconsolidation of facilities of approximately $142 million, primarily comprised of a $111 million gain from the2018 sale of our hospitals, physician practices and related assets in Houston, Texas and the surrounding area, $13 million from the sale of one of our health plans in Arizona, $10 million from the sale of our health plan in Texas and $3 million from the sale of our health plan in Michigan. MacNeal Hospital.

During the nine months ended September 30, 2016, we recorded gains on sales, consolidation and deconsolidation of facilities of approximately $151 million, primarily comprised of a $113 million gain from the sale of our Atlanta-area facilities and $33 million of gains related to the consolidation and deconsolidation of certain businesses of our USPI joint venture due to ownership changes.

Interest Expense

Interest expense for the three months ended ~~September 30, 2017~~March 31, 2021 was ~~$257~~$240 million compared to $243 million for the same period in ~~2016. Interest expense for the nine months ended September 30, 2017~~2020.

Loss from Early Extinguishment of Debt

Loss from early extinguishment of debt was ~~$775 million compared to $730~~$23 million for the ~~same period~~three months ended March 31, 2021 related to the retirement of our 2025 Senior Notes in ~~2016. These increases are attributable~~advance of their maturity date, as described in Note 6 to ~~additional senior notes issued since~~ the ~~2016 period, partially offset by the impact of the redemption of other senior notes since the 2016 period.~~accompanying Condensed Consolidated Financial Statements.

Income Tax Expense


	Three Months Ended March 31,
	2021		2020
Tax expense at statutory federal rate of 21%	$	56	$	18
State income taxes, net of federal income tax benefit	13		5
Tax benefit attributable to noncontrolling interests	(25)		(14)


Nontaxable gains	—		3

Stock-based compensation	(1)		—
Change in valuation allowance	—		(90)

Other items	2		3
Income tax expense (benefit)	$	45	$	(75)

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Tax expense (benefit) at statutory federal rate of 35% $ (122 ) $ 31
$ (114 ) $ 77
State income taxes, net of federal income tax benefit 8
3
13
10
Tax benefit attributable to noncontrolling interests (25 ) (28 ) (79 ) (75 )
Nondeductible goodwill 104
—
104
29
Nontaxable gains —
(1 ) —
(18 )
Nondeductible litigation —
4
—
37
Change in tax contingency reserves, including interest (1 ) (1 ) (3 ) (4 )
Stock-based compensation —
—
9
—
Change in indefinite reinvestment assertion (30 ) —
(30 ) —
Change in valuation allowance (5 ) —
(5 ) —
Other items 11
2
—
5
$ (60 ) $ 10
$ (105 ) $ 61

The Committee on Ways and Means of the U.S. House of Representatives recently introduced tax reform legislation that would make significant changes to income taxation of individuals, corporations and estates. The proposed corporate income tax changes include a reduction in the corporate tax rate, a limitation on the deductibility of net interest expense, and a provision to allow for current expensing of certain capital expenditures. If enacted, we would be required to record the impact of the corporate tax rate change on our deferred tax assets and liabilities in the reporting period in which the legislation is signed into law. At this time, we are unable to predict whether any of these proposed corporate tax changes will be enacted, however; if enacted, certain provisions could have a material adverse impact on our financial condition and results of operations.

Net Income ~~Attributable~~Available to Noncontrolling Interests

Net income ~~attributable~~available to noncontrolling interests was ~~$78~~$125 million for the three months ended ~~September 30, 2017~~March 31, 2021 compared to ~~$88~~$66 million for the three months ended ~~September 30, 2016.~~March 31, 2020. Net income ~~attributable~~ available to noncontrolling interests for the ~~three months ended September 30, 2017~~2021 period was comprised of $2$17 million related to our Hospital Operations ~~and other~~ segment, ~~$61~~$92 million related to our Ambulatory Care segment and ~~$15~~$16 million related to our Conifer segment. Of the portion related to our Ambulatory Care segment, $6$4 million ~~was~~ related to the minority interests in ~~our USPI joint venture.~~USPI.

Net income attributable to noncontrolling interests was $254 million for the nine months ended September 30, 2017 compared to $266 million for the nine months ended September 30, 2016. Net income attributable to noncontrolling interests for the nine months ended September 30, 2017 was comprised of $23 million related to our Hospital Operations and other segment, $193 million related to our Ambulatory Care segment and $38 million related to our Conifer segment. Of the portion related to our Ambulatory Care segment, $27 million was related to the minority interests in our USPI joint venture.

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. We use this information in our analysis of the performance of our business, excluding items we do not consider relevant to the performance of our continuing operations. 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 ~~defined by the Company~~we define as net income available (loss attributable) to Tenet Healthcare Corporation common shareholders before (1) the cumulative effect of changes in accounting principle, (2) net loss ~~(income)~~ attributable (income available) to noncontrolling interests, (3) income (loss) from discontinued operations, net of tax, (4) income tax benefit

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(expense), (5) ~~other non-operating income (expense), net, (6)~~ gain (loss) from early extinguishment of debt, (6) other non-operating income (expense), net, (7) interest expense, (8) litigation and investigation (costs) benefit, net of insurance recoveries, (9) net gains (losses) on sales, consolidation and deconsolidation of facilities, (10) impairment and restructuring charges and acquisition-related costs, (11) depreciation and amortization, and (12) income (loss) from divested ~~operations~~ and closed businesses (i.e., our health plan businesses). Litigation and investigation costs do not include ordinary course of business malpractice and other litigation and related expense.

~~The Company believes~~We believe the foregoing non-GAAP measure is useful to investors and analysts because it presents additional information ~~on the Company’s~~about our financial performance. Investors, analysts, ~~Company~~company management and ~~the Company’s Board~~our board of ~~Directors~~directors utilize this non-GAAP measure, in addition to GAAP measures, to track ~~the Company’s~~our financial and operating performance and compare ~~the Company’s~~that performance to peer companies, which utilize similar ~~non-GAAP~~non‑GAAP measures in their presentations. The ~~Human Resources Committee~~human resources committee of ~~the Company’s Board~~our board of ~~Directors~~directors also uses certain ~~non-GAAP~~non‑GAAP measures to evaluate management’s performance for the purpose of determining incentive compensation. ~~The Company believes~~We believe that Adjusted EBITDA is a useful measure, in part, because certain investors and analysts use both historical and projected Adjusted EBITDA, in addition to GAAP and other non-GAAP measures, as factors in determining the estimated fair value of shares of ~~the Company’s~~our common stock. Company management also regularly reviews the Adjusted EBITDA performance for each operating segment. ~~The Company does~~We do not use Adjusted EBITDA to measure liquidity, but instead to measure operating performance. The non-GAAP Adjusted EBITDA measure ~~the Company utilizes~~we utilize may not be comparable to similarly titled measures reported by other companies. Because this measure excludes many items that are included in our financial statements, it does not provide a complete measure of our operating performance. Accordingly, investors are encouraged to use GAAP measures when evaluating ~~the Company’s~~our financial performance.

The following table ~~below~~ shows the reconciliation of Adjusted EBITDA to net income available ~~(loss attributable)~~ to Tenet Healthcare Corporation common shareholders (the most comparable GAAP term) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016:~~2020:


	Three Months Ended March 31,
	2021			2020
Net income available to Tenet Healthcare Corporation common shareholders	$	97		$	93
Less: Net income available to noncontrolling interests	(125)			(66)
Loss from discontinued operations, net of tax	—			(1)
Income from continuing operations	222			160
Income tax benefit (expense)	(45)			75
Loss from early extinguishment of debt	(23)			—
Other non-operating income, net	10			1
Interest expense	(240)			(243)
Operating income	520			327
Litigation and investigation costs	(13)			(2)
Net gains on sales, consolidation and deconsolidation of facilities	—			2
Impairment and restructuring charges, and acquisition-related costs	(20)			(55)
Depreciation and amortization	(224)			(203)

Adjusted EBITDA	$	777		$	585

Net operating revenues	$	4,781		$	4,520



Net income available to Tenet Healthcare Corporation common shareholders as a % of net operating revenues	2.0		%	2.1		%

Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin)	16.3		%	12.9		%

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Net loss attributable to Tenet Healthcare Corporation common shareholders $ (367 ) $ (8 ) $ (475 ) $ (113 )
Less: Net income attributable to noncontrolling interests (78 ) (88 ) (254 ) (266 )
Net income (loss) from discontinued operations, net of tax (1 ) 1
(1 ) (5 )
Net income (loss) from continuing operations (288 ) 79
(220 ) 158
Income tax benefit (expense) 60
(10 ) 105
(61 )
Loss from early extinguishment of debt (138 ) —
(164 ) —
Other non-operating expense, net (4 ) (7 ) (14 ) (18 )
Interest expense (257 ) (243 ) (775 ) (730 )
Operating income 51
339
628
967
Litigation and investigation costs (6 ) (4 ) (12 ) (291 )
Gains on sales, consolidation and deconsolidation of facilities 104
3
142
151
Impairment and restructuring charges, and acquisition-related costs (329 ) (31 ) (403 ) (81 )
Depreciation and amortization (219 ) (205 ) (662 ) (632 )
Loss from divested and closed businesses
(i.e., the Company’s health plan businesses) (6 ) (6 ) (41 ) (8 )
Adjusted EBITDA $ 507
$ 582
$ 1,604
$ 1,828

Net operating revenues $ 4,586
$ 4,849
$ 14,201
$ 14,761
Less: Net operating revenues from health plans 10
122
100
385
Adjusted net operating revenues $ 4,576
$ 4,727
$ 14,101
$ 14,376

Net loss attributable to Tenet Healthcare Corporation common shareholders as a % of net operating revenues (8.0 )% (0.2 )% (3.3 )% (0.8 )%

Adjusted EBITDA as % of adjusted net operating revenues (Adjusted EBITDA margin)
11.1 % 12.3 % 11.4 % 12.7 %

LIQUIDITY AND CAPITAL RESOURCES

CASH REQUIREMENTS

There have been no material changes to our obligations to make future cash payments under contracts, such as debt and lease agreements, and under contingent commitments, such as standby letters of credit and minimum revenue guarantees, as disclosed in our Annual Report, except for additional lease obligations and the ~~refinancing of~~ long-term debt ~~as discussed~~transactions disclosed in ~~Note 5 to our accompanying Condensed Consolidated Financial Statements,~~Notes 1 and ~~the renegotiation of the Put/Call Agreement, as discussed in Note 11~~6, respectively, to our accompanying Condensed Consolidated Financial Statements.

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. We continue to seek further initiatives to increase the efficiency of our balance sheet by generating incremental cash, including by means of the sale of underutilized or inefficient assets.

At ~~September 30, 2017,~~March 31, 2021, 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 ~~6.4x.~~3.92x. This ratio ~~has been negatively~~at March 31, 2021 was temporarily impacted by the increase in ~~2017 by our inability to recognize any California provider fee program revenues this year because CMS has not yet approved the 2017 program. In general, we~~cash received from advances from Medicare. We anticipate this ratio will fluctuate from quarter to quarter based on

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earnings performance and other factors, including the use of our revolving credit facility as a source of liquidity, repayment of Medicare advances in 2021 and 2022 and acquisitions that involve the assumption of long-term debt. We ~~intend~~seek to manage this ratio and increase the efficiency of our balance sheet by following our business plan and managing our cost structure, including through possible asset divestitures, and through other changes in our capital structure. As part of our long-term objective to manage our capital structure, ~~including, if appropriate, the issuance~~we may seek to retire, purchase, redeem or refinance some of our outstanding debt or issue equity or convertible

~~securities.~~ securities, in each case subject to prevailing market conditions, our liquidity requirements, operating results, contractual restrictions and other factors. 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 Part I of our Annual 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 replacements, introduction of new medical technologies, design and construction of new buildings, and various other capital improvements, as well as commitments to make capital expenditures in connection with ~~the~~ acquisitions of businesses. Capital expenditures were ~~$492~~$121 million and ~~$614~~$182 million in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively. We anticipate that our capital expenditures for continuing operations for the year ending December 31, ~~2017~~2021 will total approximately ~~$675~~$700 million to ~~$725~~$750 million, including ~~$179~~$93 million that was accrued as a liability at December 31, ~~2016.~~2020.

Interest payments, net of capitalized interest, were ~~$617~~$190 million and ~~$596~~$172 million in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively.

Income tax payments, net of tax refunds, were ~~approximately $54 million and $33~~$2 million in the ~~nine~~three months ended ~~September 30, 2017 and 2016, respectively.~~March 31, 2021 compared to $3 million in the three months ended March 31, 2020.

SOURCES AND USES OF CASH

Our liquidity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 was primarily derived from net cash provided by operating activities, cash on hand and borrowings under our revolving credit facility. During the three months ended March 31, 2021, we also received supplemental funds from federal, state and local grants provided under COVID-19 relief legislation. We had ~~approximately $429 million~~$2.141 billion of cash and cash equivalents on hand at ~~September 30, 2017~~March 31, 2021 to fund our operations and capital expenditures, and our borrowing availability under our credit facility was ~~$998 million~~$1.900 billion based on our borrowing base calculation at ~~September 30, 2017.~~March 31, 2021.

~~Our~~When operating under normal conditions, 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~~as well as levels of ~~bad debt~~implicit price concessions, due to shifts in payer mix and other factors.

~~Decreased~~•An increase in net income ~~from continuing~~before interest, taxes, discontinued operations before income taxes of $224 million, excluding other non-operating expense, net, gain (loss) from early extinguishment of debt, interest expense, gains on sales, consolidation and deconsolidation of facilities, litigation and investigation costs, impairment and restructuring charges, ~~and~~ acquisition-related costs, ~~depreciation~~ and ~~amortization,~~litigation costs and ~~income (loss)~~settlements of $192 (including $31 million of cash received from ~~divested operations~~federal and ~~closed businesses (i.e., our health plan businesses)~~state grants in the ~~nine months ended September 30, 2017 compared~~2021 period);

•Additional cash inflows of $54 million related to ~~the nine months ended September 30, 2016;~~supplemental Medicaid programs in California and Texas;

•Reduced cash outflows of $67 million attributable to a decrease in malpractice claim payments;

•Additional cash outflows of $79 million due to an increase in our annual 401(k) match funding;

•A ~~$44~~decrease of $17 million ~~decrease~~ in payments on reserves for restructuring charges, acquisition-related costs, and litigation costs and settlements; and

•The timing of other working capital ~~items.~~items, including improved patient accounts receivable collection performance.

Net ~~cash provided by investing activities was $227 million for the nine months ended September 30, 2017 compared to net~~ cash used in investing activities ~~of $150~~was $145 million for the ~~nine~~three months ended ~~September 30, 2016. The primary reason~~March 31, 2021 compared to $204 million for the ~~increase was due~~three months ended March 31, 2020. The 2021 amount included a decrease in investments for purchases of businesses or joint venture interests of $30 million compared to ~~proceeds from sales of facilities~~the 2020 period. Capital expenditures were $121 million and ~~other assets of $826~~$182 million in the 2017 period when we completed the sale of our hospitals, physician practices and related assets in Houston, Texas and the surrounding area compared to $573 million in the 2016 period when we completed the sale of five Georgia facilities. Capital expenditures were $492 million and $614 million in the ninethree months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively.

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Net cash used in financing activities was ~~$1.223 billion and $408~~$694 million for the ~~nine~~three months ended ~~September 30, 2017 and 2016, respectively.~~March 31, 2021 compared to net cash provided by financing activities of $426 million for the three months ended March 31, 2020. The ~~2017~~2021 amount included ~~$722~~payments of $541 million ~~related~~ to ~~purchases~~reduce our long-term debt, including a payment of $495 million to retire our 2025 Senior Notes, and distributions to noncontrolling interests ~~primarily~~of $119 million. The 2020 amount included borrowings, net of repayments, of $500 million under our purchase of an additional 23.7% of our USPI joint venture, which increased our ownership interest in the USPI joint venture to 80.0%, compared to $180 million in the 2016 period, when we paid $127 million to increase our ownership interest in the USPI joint venture from 50.1% to approximately 56.3%. The 2017 amount also included our

redemption of $250 million aggregate principal amount of our 8.000% senior unsecured notes due 2020 using cash on hand, and our purchase of the land and improvements associated with our Palm Beach Gardens Medical Center, which we previously leased under a capital lease, by retiring the lease obligation for approximately $44 million.credit facility.

We record our ~~investments that are~~equity securities and our debt securities classified as available-for-sale at fair market value. ~~As shown in Note 14 to our Condensed Consolidated Financial Statements, the~~The majority of our investments are valued based on quoted market prices or other observable inputs. We have no investments that we expect will be negatively affected by the current economic conditions such that they will materially impact our financial condition, results of operations or cash flows.

DEBT INSTRUMENTS, GUARANTEES AND RELATED COVENANTS

~~Senior Secured and Senior Unsecured Note Refinancing Transactions—~~On June 14, 2017, we sold $830 million aggregate principal amount of our 4.625% senior secured first lien notes, which will mature on July 15, 2024 (the “2024 Secured First Lien Notes”). We will pay interest on the 2024 Secured First Lien Notes semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2018. The proceeds from the sale of the 2024 Secured First Lien Notes were used, after payment of fees and expenses, together with cash on hand, to deposit with the trustee an amount sufficient to fund the redemption of all $900 million in aggregate principal amount of our floating rate senior secured notes due 2020 (the “2020 Floating Rate Notes”) on July 14, 2017, thereby fully discharging the 2020 Floating Rate Notes as of June 14, 2017. In connection with the redemption, we recorded a loss from early extinguishment of debt of approximately $26 million in the three months ended June 30, 2017, 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.

Also on June 14, 2017, THC Escrow Corporation III (“Escrow Corp.”), a Delaware corporation established for the purpose of issuing the securities referred to in this paragraph, issued $1.040 billion in aggregate principal amount of 4.625% senior secured first lien notes due 2024 (the “Escrow Secured First Lien Notes”), $1.410 billion in aggregate principal amount of 5.125% senior secured second lien notes due 2025 (the “Escrow Secured Second Lien Notes”) and $500 million in aggregate principal amount of 7.000% senior unsecured notes due 2025 (the “Escrow Unsecured Notes”).

~~On September 11, 2017, we redeemed the remaining $250 million aggregate principal amount of our 8.000% senior unsecured notes due 2020 using cash on hand.~~

Credit ~~Agreement.~~Agreement—We have a senior secured revolving credit facility ~~(as amended, the “Credit Agreement”)~~ that, ~~provides, subject to borrowing availability,~~at March 31, 2021, provided for revolving loans in an aggregate principal amount of up to $1$1.900 billion with a ~~$300~~$200 million subfacility for standby letters of credit. ~~Obligations~~At March 31, 2021, we had no cash borrowings outstanding under the ~~Credit Agreement, which has a scheduled maturity date~~revolving credit facility, and we had less than $1 million of standby letters of ~~December 4, 2020, are guaranteed by substantially all of~~credit outstanding. Based on our ~~domestic wholly owned hospital subsidiaries and are secured by a first-priority lien on~~eligible receivables, $1.900 billion was available for borrowing under the ~~accounts receivable owned by us and the subsidiary guarantors.~~revolving credit facility at March 31, 2021. At ~~September 30, 2017,~~March 31, 2021, we were in compliance with all covenants and conditions in our ~~Credit Agreement. At September 30, 2017,~~senior secured revolving credit facility.

On April 24, 2020, we ~~had no cash borrowings outstanding under~~amended our credit agreement (as amended to date, the “Credit Agreement”) to, among other things, (i) increase the aggregate revolving credit commitments from $1.500 billion to $1.900 billion (the “Increased Commitments”), subject to borrowing availability, and (ii) increase the advance rate and raise limits on certain eligible accounts receivable in the calculation of the borrowing base, in each case, for an incremental period of 364 days. In April 2021, we further amended the Credit Agreement to, among other things, extend the availability of the Increased Commitments through April 22, 2022 and ~~we had approximately $2 million of standby letters of credit outstanding. Based on~~reduce the interest rate margins. See Note 6 to the accompanying Condensed Consolidated Financial Statements for additional information about our ~~eligible receivables, approximately $998 million was available for borrowing under the~~ Credit ~~Agreement at September 30, 2017.~~ Facility and related amendments.

Letter of Credit ~~Facility.~~ ~~We have a~~Facility—In March 2020, we amended our letter of credit facility (as amended, the “LC Facility”) ~~that provides for~~to extend the ~~issuance~~scheduled maturity date of the LC Facility from March 7, 2021 to September 12, 2024 and to increase the aggregate principal amount of standby and documentary letters of credit that from time to time ~~in an aggregate principal amount of~~may be issued thereunder from $180 million to $200 million. On July 29, 2020, we further amended the LC Facility to incrementally increase the maximum secured debt covenant from 4.25 to 1.00 on a quarterly basis up to ~~$180 million (subject~~6.00 to ~~increase to up to $200 million).~~1.00 for the quarter ended March 31, 2021, which maximum ratio will step down incrementally on a quarterly basis through the quarter ending December 31, 2021. Obligations under the LC Facility are guaranteed and secured by a ~~first-priority~~first‑priority pledge of the capital stock and other ownership interests of certain of our wholly owned domestic hospital subsidiaries on an equal ranking basis with our senior secured first lien notes. At ~~September 30, 2017,~~March 31, 2021, we were in compliance with all covenants and conditions in ~~our~~the LC Facility. At ~~September 30, 2017,~~March 31, 2021, we had ~~approximately $105~~$92 million of standby letters of credit outstanding under the LC Facility.

Senior Unsecured and Senior Secured Notes—In March 2021, we retired approximately $478 million aggregate principal amount of our 2025 Senior Notes in advance of their maturity date. We paid approximately $495 million from cash on hand to retire the notes. In connection with the retirement, we recorded a loss from early extinguishment of debt of $23 million in the three months ended March 31, 2021, primarily related to the difference between the purchase price and the par value of the notes, as well as the write-off of associated unamortized issuance costs.

For additional information regarding our long-term debt, ~~and capital lease obligations,~~ see ~~Notes 5 and 18~~Note 6 to ~~our~~the accompanying Condensed Consolidated Financial Statements and Note 68 to the ~~Consolidated~~Consolidated Financial Statements included in our Annual Report.

LIQUIDITY

Broad economic factors resulting from the COVID-19 pandemic, including increased unemployment rates and reduced consumer spending, are impacting our service mix, revenue mix and patient volumes. Business closings and layoffs in the areas we operate have led to increases in the uninsured and underinsured populations and adversely affect demand for our services, as well as the ability of patients to pay for services as rendered. Any increase in the amount of or deterioration in the collectability of patient accounts receivable could adversely affect our cash flows and results of operations. If general economic conditions continue to deteriorate or remain uncertain for an extended period of time, our liquidity and ability to repay our outstanding debt may be impacted.

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While demand for our services is expected to further rebound in the future, we have taken, and continue to take, various actions to increase our liquidity and mitigate the impact of reductions in our patient volumes and operating revenues from the pandemic. These actions included the sale and redemption of various senior unsecured and senior secured notes, which eliminated any significant debt maturities until June 2023 and will reduce our future annual cash interest expense payments. In April 2021, we further amended our Credit Agreement to extend the availability of the Incremental Amounts through April 22, 2022. Additionally, we have continued cost efficiency initiatives, as well as necessary cost reductions due to the decline in patient volumes associated with the COVID-19 pandemic, to substantially offset incremental costs, including temporary staffing and premium pay, as well as higher supply costs for PPE. We have also sought to compensate for the COVID-19 pandemic’s disruption of our patient volumes and mix by growing our services for which demand has been more resilient, including our higher-acuity service lines. While the length of time that will be required for our patient volumes and mix to return to pre-pandemic levels is unknown, especially demand for lower-acuity services, we believe demand for our higher-acuity service lines will continue to grow. We believe these actions, together with government relief packages, to the extent available to us, will help us to continue operating during the uncertainty caused by the COVID-19 pandemic.

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 provide 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 payments and income tax ~~payments.~~payments, as well as cash disbursements required to respond to the COVID-19 pandemic. Cash flows from operating activities in the first quarter of the calendar year are usually lower than in subsequent quarters of the year, primarily due to the timing of certain working capital requirements during the first quarter, including our annual 401(k) matching contributions and annual incentive compensation payouts. These fluctuations result in material intra-quarter net operating and investing uses of cash that have caused, and in the future ~~could~~will cause, us to use our Credit Agreement as a source of liquidity. We believe that existing cash and cash equivalents on hand, borrowing availability under our Credit Agreement, anticipated future cash provided by our operating activities and ~~our investments in marketable securities of our captive insurance companies classified as noncurrent investments on our balance sheet~~possible additional government relief packages should be adequate to meet our current cash needs. These sources of liquidity, in combination with any potential future debt incurrence, should also be adequate to finance planned capital expenditures, payments on the current portion of our long-term debt, payments to joint venture partners, including those related to put and call arrangements and other presently known operating needs.

Long-term liquidity for debt service and other purposes will be dependent on the amount of cash provided by operating activities and, subject to favorable market and other conditions, the successful completion of future borrowings and potential refinancings. However, our cash requirements could be materially affected by the use of cash in acquisitions of businesses, repurchases of securities, the exercise of put rights or other exit options by our joint venture partners, and contractual commitments to fund capital expenditures in, or intercompany borrowings to, businesses we own. In addition, liquidity could be adversely affected by a deterioration in our results of operations, including our ability to generate sufficient cash from operations, as well as by the various risks and uncertainties discussed in this section, ~~and~~ other sections of this report and in our Annual Report, including any costs associated with legal proceedings and government investigations.

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.~~sheet. In addition, we do not have significant exposure to floating interest rates given that all of our current long-term indebtedness has fixed rates of ~~interest.~~interest except for borrowings under our Credit Agreement.

OFF-BALANCE SHEET ARRANGEMENTS

We have no 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 ~~$146~~$187 million of standby letters of credit outstanding and guarantees at ~~September 30, 2017.~~March 31, 2021.

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.

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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 following table ~~below~~ presents information about certain of our market-sensitive financial instruments at ~~September 30, 2017.~~March 31, 2021. The fair values were determined based on quoted market prices for the same or similar instruments. The average effective interest rates presented are based on the rate in effect at the reporting date. The effects of unamortized ~~premiums,~~ discounts and issue costs are excluded from the table.

Maturity Date, Years Ending December 31,
2017 2018 2019 2020 2021 Thereafter Total Fair Value
(Dollars in Millions)
Fixed rate long-term debt $ 87
$ 93
$ 572
$ 2,644
$ 1,928
$ 9,798
$ 15,122
$ 15,211
Average effective interest rates 5.8 % 5.3 % 5.9 % 6.2 % 4.7 % 7.0 % 6.5 %

At September 30, 2017, 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.


	Maturity Date, Years Ending December 31,
	2021			2022			2023			2024			2025			Thereafter			Total			Fair Value

	(Dollars in Millions)
Fixed rate long-term debt	$	113		$	103		$	1,930		$	2,495		$	2,131		$	8,625		$	15,397		$	16,081
Average effective interest rates	4.4		%	4.7		%	6.7		%	4.6		%	5.9		%	5.6		%	5.6		%

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. As a result, 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 the design and operation 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 (the “Exchange Act”), as of the end of the period covered by this ~~report.~~report with respect to our operations that existed prior to the acquisition of controlling ownership interests in the SCD Centers by USPI’s subsidiaries in December 2020. 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, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective at March 31, 2021 to ensure that material information is recorded, processed, summarized and reported by management on a timely basis in order to comply with our disclosure obligations under the Exchange Act and the SEC rules thereunder.

There were no changes in our internal control over financial reporting during the quarter ended ~~September 30, 2017~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. 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 1012 to our accompanying Condensed Consolidated Financial Statements, which is incorporated by reference.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2016, except that the following is added as a new paragraph to the end of the Risk Factor entitled “The utilization of our tax losses could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code.”2020.

In August 2017, the Company’s Board of Directors adopted a rights agreement as a measure intended to deter the above-referenced ownership changes in order to preserve the Company’s NOL carryforwards. The rights agreement may not prevent an ownership change, however. In addition, while the rights agreement is in effect, it could discourage or prevent a merger, tender offer, proxy contest or accumulations of substantial blocks of shares for which some shareholders might receive a premium above market value. It could also adversely affect the liquidity of the market for the Company’s common stock.

ITEM 6. EXHIBITS

Unless otherwise indicated, the following exhibits are filed with this report:

)

~~Articles of Incorporation and Bylaws~~

~~(a)~~

Certificate of Designation of Series R Preferred Stock, par value $0.15 per share, dated August 31, 2017 (Incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed September 1, 2017)

)

~~Instruments Defining the Rights of Security Holders, Including Indentures~~

(10)

Material Contracts

(a)

~~Supplemental Indenture,~~Amendment No. 6, dated as of ~~July 14, 2017, among the Registrant,~~April 19 , 2021, to that certain ~~of its subsidiaries~~Amended and The Bank of New York Mellon Trust Company, N.A. relating to 5.125% Senior Secured Second Lien Notes Due 2025 (Incorporated by reference to Exhibit 4.4 to Registrant’s Current Report on Form 8-K filed July 17, 2017)

~~(b)~~

Supplemental Indenture, dated as of August 1, 2017, among the Registrant and The Bank of New York Mellon Trust Company, N.A. relating to 7.000% Senior Notes Due 2025 (Incorporated by reference to Exhibit 4.5 to Registrant’s Current Report on Form 8-K filed August 2, 2017)

~~(c)~~

~~Rights~~Restated Credit Agreement, dated as of August 31, 2017, between the Registrant and Computershare Trust Company, N.A., as Rights Agent (Incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed September 1, 2017)

~~(10)~~

~~Material Contracts~~

~~(a)~~

~~Exchange and Registration Rights Agreement, dated as of July 14, 2017,~~October 19, 2010, among the Registrant, ~~certain of its subsidiaries~~the lenders and ~~Barclays Capital~~issuers party thereto and Citicorp USA, Inc., as ~~representative of the other initial purchasers of the Notes named therein~~administrative agent (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed ~~July 17, 2017)~~April 23 , 2021)

(31)

~~(b)~~

Exchange and Registration Rights Agreement, dated as of August 1, 2017, among the Registrant and Barclays Capital Inc. as representative of the other initial purchasers of the Notes named therein (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed August 2, 2017)

~~(c)~~

Terms and Conditions of Non-Qualified Stock Option Performance Awards Granted to Ronald A. Rittenmeyer under the Tenet Healthcare 2008 Stock Incentive Plan*

~~(d)~~

Separation Agreement and Release between the Registrant and Trevor Fetter (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed October 23, 2017)*

~~(31)~~

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

(a)

Certification of Ronald A. Rittenmeyer, Executive Chairman and Chief Executive Officer

(b)

Certification of Daniel J. Cancelmi, Executive Vice President and Chief Financial Officer

(32)

Section 1350 ~~Certification~~Certifications of Ronald A. Rittenmeyer, Executive Chairman and Chief Executive Officer, and Daniel J. Cancelmi, Executive Vice President and Chief Financial Officer

~~(101 INS)~~

~~XBRL Instance Document~~

(101 SCH)

Inline XBRL Taxonomy Extension Schema Document

(101 CAL)

Inline XBRL Taxonomy Extension Calculation Linkbase Document

(101 DEF)

Inline XBRL Taxonomy Extension Definition Linkbase Document

(101 LAB)

Inline XBRL Taxonomy Extension Label Linkbase Document

(101 PRE)

Inline XBRL Taxonomy Extension Presentation Linkbase Document

* Management contract or compensatory plan or arrangement.(101 INS)

Inline XBRL Taxonomy Extension Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

(104)

Cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 formatted in Inline XBRL (included in Exhibit 101)

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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 6, 2017~~April 30, 2021	By:	/s/ R. SCOTT RAMSEY
		R. Scott Ramsey
		Senior Vice President, ~~and~~ Controller
		(Principal Accounting Officer)

6055



		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	2625

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5753

Item 4.	Controls and Procedures	5753



PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	5854

Item 1A.	Risk Factors	5854



Item 6.	Exhibits	5954



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net operating revenues:
Net operating revenues before provision for doubtful accounts	$	4,941		$	5,216		$	15,310		$	15,856
Less: Provision for doubtful accounts	355			367			1,109			1,095
Net operating revenues	4,586			4,849			14,201			14,761
Equity in earnings of unconsolidated affiliates	38			31			95			85
Operating expenses:
Salaries, wages and benefits	2,264			2,308			6,990			7,012
Supplies	740			767			2,285			2,351
Other operating expenses, net	1,120			1,231			3,466			3,686
Electronic health record incentives	(1		)	(2		)	(8		)	(23		)
Depreciation and amortization	219			205			662			632
Impairment and restructuring charges, and acquisition-related costs	329			31			403			81
Litigation and investigation costs	6			4			12			291
Gains on sales, consolidation and deconsolidation of facilities	(104		)	(3		)	(142		)	(151		)
Operating income	51			339			628			967
Interest expense	(257		)	(243		)	(775		)	(730		)
Other non-operating expense, net	(4		)	(7		)	(14		)	(18		)
Loss from early extinguishment of debt	(138		)	—			(164		)	—
Net income (loss) from continuing operations, before income taxes	(348		)	89			(325		)	219
Income tax benefit (expense)	60			(10		)	105			(61		)
Net income (loss) from continuing operations, before discontinued operations	(288		)	79			(220		)	158
Discontinued operations:
Income (loss) from operations	(1		)	2			(1		)	(5		)
Income tax benefit (expense)	—			(1		)	—			—
Net income (loss) from discontinued operations	(1		)	1			(1		)	(5		)
Net income (loss)	(289		)	80			(221		)	153
Less: Net income attributable to noncontrolling interests	78			88			254			266
Net loss attributable to Tenet Healthcare Corporation common shareholders	$	(367	)	$	(8	)	$	(475	)	$	(113	)
Amounts attributable to Tenet Healthcare Corporation common shareholders
Net loss from continuing operations, net of tax	$	(366	)	$	(9	)	$	(474	)	$	(108	)
Net income (loss) from discontinued operations, net of tax	(1		)	1			(1		)	(5		)
Net loss attributable to Tenet Healthcare Corporation common shareholders	$	(367	)	$	(8	)	$	(475	)	$	(113	)
Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations	$	(3.63	)	$	(0.09	)	$	(4.72	)	$	(1.09	)
Discontinued operations	(0.01		)	0.01			(0.01		)	(0.05		)
	$	(3.64	)	$	(0.08	)	$	(4.73	)	$	(1.14	)
Diluted
Continuing operations	$	(3.63	)	$	(0.09	)	$	(4.72	)	$	(1.09	)
Discontinued operations	(0.01		)	0.01			(0.01		)	(0.05		)
	$	(3.64	)	$	(0.08	)	$	(4.73	)	$	(1.14	)
Weighted average shares and dilutive securities outstanding (in thousands):
Basic	100,812			99,523			100,475			99,210
Diluted	100,812			99,523			100,475			99,210



			Three Months Ending		Years Ending								Later Years
			December 31,
	Total		2017		2018		2019		2020		2021
Amortization of intangible assets	$	1,097	$	47	$	152	$	135	$	104	$	92	$	567



	September 30, 2017			December 31, 2016
Senior unsecured notes:
5.000% due 2019	$	—		$	1,100
5.500% due 2019	500			500
6.750% due 2020	300			300
8.000% due 2020	—			750
8.125% due 2022	2,800			2,800
6.750% due 2023	1,900			1,900
7.000% due 2025	500			—
6.875% due 2031	430			430
Senior secured notes:
6.250% due 2018	—			1,041
4.750% due 2020	500			500
6.000% due 2020	1,800			1,800
Floating % due 2020	—			900
4.500% due 2021	850			850
4.375% due 2021	1,050			1,050
7.500% due 2022	750			750
4.625% due 2024	1,870			—
5.125% due 2025	1,410			—
Capital leases	377			735
Mortgage notes	85			84
Unamortized issue costs, note discounts and premiums	(241		)	(235		)
Total long-term debt	14,881			15,255
Less current portion	140			191
Long-term debt, net of current portion	$	14,741		$	15,064



Investments	September 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Marketable debt securities — noncurrent	$	54	$	40	$	14	$	—
	$	54	$	40	$	14	$	—



	Three Months Ended September 30,						Nine Months Ended September 30,
Net Patient Revenues from:	2017		2016		Increase (Decrease) (1)		2017		2016		Increase (Decrease) (1)
Medicare	20.0	%	19.9	%	0.1	%	20.4	%	20.5	%	(0.1	)%
Medicaid	6.5	%	8.4	%	(1.9	)%	6.7	%	8.2	%	(1.5	)%
Managed care	62.5	%	64.0	%	(1.5	)%	62.4	%	61.5	%	0.9	%
Indemnity, self-pay and other	11.0	%	7.7	%	3.3	%	10.5	%	9.8	%	0.7	%



	Three Months Ended September 30,				Nine Months Ended September 30,
Revenue Descriptions	2017		2016		2017		2016
Medicare severity-adjusted diagnosis-related group — operating	$	388	$	402	$	1,248	$	1,291
Medicare severity-adjusted diagnosis-related group — capital	37		38		115		119
Outliers	21		20		64		58
Outpatient	221		221		686		695
Disproportionate share	65		74		204		224
Direct Graduate and Indirect Medical Education(1)	63		62		194		187
Other(2)	5		15		17		42
Adjustments for prior-year cost reports and related valuation allowances	9		12		35		42
Total Medicare net patient revenues	$	809	$	844	$	2,563	$	2,658



	September 30, 2017								December 31, 2016
	Accounts Receivable Before Allowance for Doubtful Accounts			Allowance for Doubtful Accounts		Net			Accounts Receivable Before Allowance for Doubtful Accounts			Allowance for Doubtful Accounts		Net
Medicare	$	264		$	—	$	264		$	294		$	—	$	294
Medicaid	96			—		96			125			—		125
Net cost report settlements payable and valuation allowances	(2		)	—		(2		)	(14		)	—		(14		)
Managed care	1,687			178		1,509			1,911			190		1,721
Self-pay uninsured	416			363		53			479			412		67
Self-pay balance after insurance	265			165		100			226			147		79
Estimated future recoveries	130			—		130			141			—		141
Other payers	451			185		266			537			239		298
Total Hospital Operations and other	3,307			891		2,416			3,699			988		2,711
Ambulatory Care	192			43		149			227			43		184
Total discontinued operations	2			—		2			2			—		2
	$	3,501		$	934	$	2,567		$	3,928		$	1,031	$	2,897



Ambulatory Care Facility Growth	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017
Net revenues	0.9	%	3.5	%
Cases	(2.4	)%	(0.8	)%
Net revenue per case	3.4	%	4.3	%



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Net loss attributable to Tenet Healthcare Corporation common shareholders	$	(367	)	$	(8	)	$	(475	)	$	(113	)
Less: Net income attributable to noncontrolling interests	(78		)	(88		)	(254		)	(266		)
Net income (loss) from discontinued operations, net of tax	(1		)	1			(1		)	(5		)
Net income (loss) from continuing operations	(288		)	79			(220		)	158
Income tax benefit (expense)	60			(10		)	105			(61		)
Loss from early extinguishment of debt	(138		)	—			(164		)	—
Other non-operating expense, net	(4		)	(7		)	(14		)	(18		)
Interest expense	(257		)	(243		)	(775		)	(730		)
Operating income	51			339			628			967
Litigation and investigation costs	(6		)	(4		)	(12		)	(291		)
Gains on sales, consolidation and deconsolidation of facilities	104			3			142			151
Impairment and restructuring charges, and acquisition-related costs	(329		)	(31		)	(403		)	(81		)
Depreciation and amortization	(219		)	(205		)	(662		)	(632		)
Loss from divested and closed businesses (i.e., the Company’s health plan businesses)	(6		)	(6		)	(41		)	(8		)
Adjusted EBITDA	$	507		$	582		$	1,604		$	1,828

Net operating revenues	$	4,586		$	4,849		$	14,201		$	14,761
Less: Net operating revenues from health plans	10			122			100			385
Adjusted net operating revenues	$	4,576		$	4,727		$	14,101		$	14,376

Net loss attributable to Tenet Healthcare Corporation common shareholders as a % of net operating revenues	(8.0		)%	(0.2		)%	(3.3		)%	(0.8		)%

Adjusted EBITDA as % of adjusted net operating revenues (Adjusted EBITDA margin)	11.1		%	12.3		%	11.4		%	12.7		%