UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q


☒ý			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended ~~June 30, 2021~~March 31, 2022


☐¨			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)			(IRS Employer Identification No.)

14201 Dallas Parkway

Dallas, TX 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 xý No ¨

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes xý 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

xý

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 ~~July 23, 2021,~~April 22, 2022, there were ~~107,053,834~~107,722,502 shares of the Registrant’s common stock 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)


		June 30,		December 31,			March 31,		December 31,
		2021		2020			2022		2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	2,194	$	2,446	Cash and cash equivalents	$	1,405	$	2,364
Accounts receivable	Accounts receivable	2,643		2,690		Accounts receivable	2,916		2,770
Inventories of supplies, at cost	Inventories of supplies, at cost	364		368		Inventories of supplies, at cost	391		384

Assets held for sale	Assets held for sale	828		140		Assets held for sale	19		—
Other current assets	Other current assets	1,388		1,503		Other current assets	1,397		1,557
Total current assets	Total current assets	7,417		7,147		Total current assets	6,128		7,075
Investments and other assets	Investments and other assets	2,525		2,534		Investments and other assets	3,385		3,254
Deferred income taxes	Deferred income taxes	276		325		Deferred income taxes	2		65
Property and equipment, at cost, less accumulated depreciation and amortization ($5,775 at June 30, 2021 and $6,043 at December 31, 2020)		6,166		6,692
Property and equipment, at cost, less accumulated depreciation and amortization ($6,083 at March 31, 2022 and $5,960 at December 31, 2021)						Property and equipment, at cost, less accumulated depreciation and amortization ($6,083 at March 31, 2022 and $5,960 at December 31, 2021)	6,296		6,427
Goodwill	Goodwill	8,659		8,808		Goodwill	9,352		9,261
Other intangible assets, at cost, less accumulated amortization ($1,285 at June 30, 2021 and $1,284 at December 31, 2020)		1,522		1,600
Other intangible assets, at cost, less accumulated amortization ($1,330 at March 31, 2022 and $1,374 at December 31, 2021)						Other intangible assets, at cost, less accumulated amortization ($1,330 at March 31, 2022 and $1,374 at December 31, 2021)	1,487		1,497
Total assets	Total assets	$	26,565	$	27,106	Total assets	$	26,650	$	27,579
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of long-term debt	Current portion of long-term debt	$	127	$	145	Current portion of long-term debt	$	132	$	135
Accounts payable	Accounts payable	1,084		1,207		Accounts payable	1,114		1,300
Accrued compensation and benefits	Accrued compensation and benefits	954		942		Accrued compensation and benefits	813		896
Professional and general liability reserves	Professional and general liability reserves	234		243		Professional and general liability reserves	272		254
Accrued interest payable	Accrued interest payable	220		248		Accrued interest payable	255		203
Liabilities held for sale		145		70

Contract liabilities	Contract liabilities	1,055		659		Contract liabilities	776		959
Other current liabilities	Other current liabilities	1,252		1,333		Other current liabilities	1,306		1,362
Total current liabilities	Total current liabilities	5,071		4,847		Total current liabilities	4,668		5,109
Long-term debt, net of current portion	Long-term debt, net of current portion	15,091		15,574		Long-term debt, net of current portion	14,719		15,511
Professional and general liability reserves	Professional and general liability reserves	782		735		Professional and general liability reserves	803		791
Defined benefit plan obligations	Defined benefit plan obligations	459		497		Defined benefit plan obligations	414		421
Deferred income taxes	Deferred income taxes	29		29		Deferred income taxes	36		36
Contract liabilities – long-term	Contract liabilities – long-term	351		918		Contract liabilities – long-term	14		15
Other long-term liabilities	Other long-term liabilities	1,579		1,617		Other long-term liabilities	1,582		1,439
Total liabilities	Total liabilities	23,362		24,217		Total liabilities	22,236		23,322
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0
Redeemable noncontrolling interests in equity of consolidated subsidiaries	Redeemable noncontrolling interests in equity of consolidated subsidiaries	2,034		1,952		Redeemable noncontrolling interests in equity of consolidated subsidiaries	2,358		2,203
Equity:	Equity:					Equity:
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Common stock, $0.05 par value; authorized 262,500,000 shares; 155,201,582 shares issued at June 30, 2021 and 154,407,524 shares issued at December 31, 2020		8		7
Common stock, $0.05 par value; authorized 262,500,000 shares; 156,019,148 shares issued at March 31, 2022 and 155,520,691 shares issued at December 31, 2021						Common stock, $0.05 par value; authorized 262,500,000 shares; 156,019,148 shares issued at March 31, 2022 and 155,520,691 shares issued at December 31, 2021	8		8
Additional paid-in capital	Additional paid-in capital	4,854		4,844		Additional paid-in capital	4,765		4,877
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(277)		(281)		Accumulated other comprehensive loss	(233)		(233)
Accumulated deficit	Accumulated deficit	(1,912)		(2,128)		Accumulated deficit	(1,074)		(1,214)
Common stock in treasury, at cost, 48,334,331 shares at June 30, 2021 and 48,337,947 shares at December 31, 2020		(2,412)		(2,414)
Common stock in treasury, at cost, 48,331,319 shares at March 31, 2022 and 48,331,649 shares at December 31, 2021						Common stock in treasury, at cost, 48,331,319 shares at March 31, 2022 and 48,331,649 shares at December 31, 2021	(2,410)		(2,410)
Total shareholders’ equity	Total shareholders’ equity	261		28		Total shareholders’ equity	1,056		1,028
Noncontrolling interests	Noncontrolling interests	908		909		Noncontrolling interests	1,000		1,026
Total equity	Total equity	1,169		937		Total equity	2,056		2,054
Total liabilities and equity	Total liabilities and equity	$	26,565	$	27,106	Total liabilities and equity	$	26,650	$	27,579

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 June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Net operating revenues	Net operating revenues	$	4,954	$	3,648	$	9,735	$	8,168	Net operating revenues	$	4,745	$	4,781
Grant income	Grant income	19		511		50		511		Grant income	6		31
Equity in earnings of unconsolidated affiliates	Equity in earnings of unconsolidated affiliates	54		31		96		59		Equity in earnings of unconsolidated affiliates	46		42
Operating expenses:	Operating expenses:									Operating expenses:
Salaries, wages and benefits	Salaries, wages and benefits	2,280		1,864		4,481		4,051		Salaries, wages and benefits	2,182		2,201
Supplies	Supplies	859		611		1,663		1,374		Supplies	785		804
Other operating expenses, net	Other operating expenses, net	1,054		983		2,126		1,996		Other operating expenses, net	942		1,072
Depreciation and amortization	Depreciation and amortization	221		206		445		409		Depreciation and amortization	203		224
Impairment and restructuring charges, and acquisition-related costs	Impairment and restructuring charges, and acquisition-related costs	20		54		40		109		Impairment and restructuring charges, and acquisition-related costs	16		20
Litigation and investigation costs	Litigation and investigation costs	22		2		35		4		Litigation and investigation costs	20		13
Net gains on sales, consolidation and deconsolidation of facilities		(15)		(1)		(15)		(3)
Net losses on sales, consolidation and deconsolidation of facilities										Net losses on sales, consolidation and deconsolidation of facilities	1		—
Operating income	Operating income	586		471		1,106		798		Operating income	648		520
Interest expense	Interest expense	(235)		(255)		(475)		(498)		Interest expense	(227)		(240)
Other non-operating income (expense), net		(1)		2		9		3
Other non-operating income, net										Other non-operating income, net	—		10
Loss from early extinguishment of debt	Loss from early extinguishment of debt	(31)		(4)		(54)		(4)		Loss from early extinguishment of debt	(43)		(23)
Income from continuing operations, before income taxes	Income from continuing operations, before income taxes	319		214		586		299		Income from continuing operations, before income taxes	378		267
Income tax benefit (expense)		(61)		(45)		(106)		30
Income tax expense										Income tax expense	(99)		(45)
Income from continuing operations, before discontinued operations	Income from continuing operations, before discontinued operations	258		169		480		329		Income from continuing operations, before discontinued operations	279		222
Discontinued operations:	Discontinued operations:									Discontinued operations:
Loss from operations		(1)		0		(1)		(1)
Income from operations										Income from operations	1		—

Loss from discontinued operations		(1)		0		(1)		(1)
Income from discontinued operations										Income from discontinued operations	1		—
Net income	Net income	257		169		479		328		Net income	280		222
Less: Net income available to noncontrolling interests	Less: Net income available to noncontrolling interests	138		81		263		147		Less: Net income available to noncontrolling interests	140		125
Net income available to Tenet Healthcare Corporation common shareholders	Net income available to Tenet Healthcare Corporation common shareholders	$	119	$	88	$	216	$	181	Net income available to Tenet Healthcare Corporation common shareholders	$	140	$	97
Amounts available (attributable) to Tenet Healthcare Corporation common shareholders
Amounts available to Tenet Healthcare Corporation common shareholders										Amounts available to Tenet Healthcare Corporation common shareholders
Income from continuing operations, net of tax	Income from continuing operations, net of tax	$	120	$	88	$	217	$	182	Income from continuing operations, net of tax	$	139	$	97
Loss from discontinued operations, net of tax		(1)		0		(1)		(1)
Income from discontinued operations, net of tax										Income from discontinued operations, net of tax	1		—
Net income available to Tenet Healthcare Corporation common shareholders	Net income available to Tenet Healthcare Corporation common shareholders	$	119	$	88	$	216	$	181	Net income available to Tenet Healthcare Corporation common shareholders	$	140	$	97
Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders:
Earnings per share available to Tenet Healthcare Corporation common shareholders:										Earnings per share available to Tenet Healthcare Corporation common shareholders:
Basic	Basic									Basic
Continuing operations	Continuing operations	$	1.12	$	0.84	$	2.04	$	1.74	Continuing operations	$	1.29	$	0.91
Discontinued operations	Discontinued operations	(0.01)		0		(0.01)		(0.01)		Discontinued operations	0.01		—
		$	1.11	$	0.84	$	2.03	$	1.73		$	1.30	$	0.91
Diluted	Diluted									Diluted
Continuing operations	Continuing operations	$	1.11	$	0.83	$	2.00	$	1.72	Continuing operations	$	1.27	$	0.90
Discontinued operations	Discontinued operations	(0.01)		0		(0.01)		(0.01)		Discontinued operations	0.01		—
		$	1.10	$	0.83	$	1.99	$	1.71		$	1.28	$	0.90
Weighted average shares and dilutive securities outstanding (in thousands):	Weighted average shares and dilutive securities outstanding (in thousands):									Weighted average shares and dilutive securities outstanding (in thousands):
Basic	Basic	106,822		104,794		106,566		104,574		Basic	107,483		106,309
Diluted	Diluted	108,569		105,578		108,317		105,656		Diluted	112,020		108,065

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME

Dollars in Millions

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Net income	Net income	$	257	$	169	$	479	$	328	Net income	$	280	$	222
Other comprehensive income:	Other comprehensive income:									Other comprehensive income:
Amortization of net actuarial loss included in other non-operating income (expense), net		3		2		6		4
Unrealized gains on debt securities held as available-for-sale		0		0		0		1
Amortization of net actuarial loss included in other non-operating income, net										Amortization of net actuarial loss included in other non-operating income, net	2		3
Unrealized losses on debt securities held as available-for-sale										Unrealized losses on debt securities held as available-for-sale	(2)		—

Other comprehensive income before income taxes	Other comprehensive income before income taxes	3		2		6		5		Other comprehensive income before income taxes	—		3
Income tax benefit (expense) related to items of other comprehensive income		2		(1)		(2)		(3)
Total other comprehensive income, net of tax		5		1		4		2
Income tax expense related to items of other comprehensive income										Income tax expense related to items of other comprehensive income	—		(4)
Total other comprehensive loss, net of tax										Total other comprehensive loss, net of tax	—		(1)
Comprehensive net income	Comprehensive net income	262		170		483		330		Comprehensive net income	280		221
Less: Comprehensive income available to noncontrolling interests	Less: Comprehensive income available to noncontrolling interests	138		81		263		147		Less: Comprehensive income available to noncontrolling interests	140		125
Comprehensive income available to Tenet Healthcare Corporation common shareholders	Comprehensive income available to Tenet Healthcare Corporation common shareholders	$	124	$	89	$	220	$	183	Comprehensive income available to Tenet Healthcare Corporation common shareholders	$	140	$	96

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)


		Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Net income	Net income	$	479	$	328	Net income	$	280	$	222
Adjustments to reconcile net income to net cash provided by operating activities:	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	Depreciation and amortization	445		409		Depreciation and amortization	203		224
Deferred income tax expense (benefit)		48		(49)
Deferred income tax expense						Deferred income tax expense	63		24
Stock-based compensation expense	Stock-based compensation expense	30		27		Stock-based compensation expense	16		14
Impairment and restructuring charges, and acquisition-related costs	Impairment and restructuring charges, and acquisition-related costs	40		109		Impairment and restructuring charges, and acquisition-related costs	16		20
Litigation and investigation costs	Litigation and investigation costs	35		4		Litigation and investigation costs	20		13
Net gains on sales, consolidation and deconsolidation of facilities		(15)		(3)
Net losses on sales, consolidation and deconsolidation of facilities						Net losses on sales, consolidation and deconsolidation of facilities	1		—
Loss from early extinguishment of debt	Loss from early extinguishment of debt	54		4		Loss from early extinguishment of debt	43		23
Equity in earnings of unconsolidated affiliates, net of distributions received	Equity in earnings of unconsolidated affiliates, net of distributions received	10		(39)		Equity in earnings of unconsolidated affiliates, net of distributions received	21		28
Amortization of debt discount and debt issuance costs	Amortization of debt discount and debt issuance costs	17		20		Amortization of debt discount and debt issuance costs	8		9
Pre-tax loss from discontinued operations		1		1
Pre-tax income from discontinued operations						Pre-tax income from discontinued operations	(1)		—
Other items, net	Other items, net	(22)		(3)		Other items, net	(64)		(7)
Changes in cash from operating assets and liabilities:	Changes in cash from operating assets and liabilities:					Changes in cash from operating assets and liabilities:
Accounts receivable	Accounts receivable	(101)		317		Accounts receivable	(151)		(53)
Inventories and other current assets	Inventories and other current assets	56		44		Inventories and other current assets	181		130
Income taxes	Income taxes	25		14		Income taxes	29		19
Accounts payable, accrued expenses, contract liabilities and other current liabilities	Accounts payable, accrued expenses, contract liabilities and other current liabilities	(232)		1,209		Accounts payable, accrued expenses, contract liabilities and other current liabilities	(360)		(87)
Other long-term liabilities	Other long-term liabilities	(6)		90		Other long-term liabilities	(21)		6
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements	Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements	(85)		(114)		Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements	(56)		(51)

Net cash provided by operating activities	Net cash provided by operating activities	779		2,368		Net cash provided by operating activities	228		534
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment	(243)		(288)		Purchases of property and equipment	(155)		(121)
Purchases of businesses or joint venture interests, net of cash acquired	Purchases of businesses or joint venture interests, net of cash acquired	(64)		(56)		Purchases of businesses or joint venture interests, net of cash acquired	(40)		(25)
Proceeds from sales of facilities and other assets	Proceeds from sales of facilities and other assets	124		12		Proceeds from sales of facilities and other assets	148		13

Proceeds from sales of marketable securities, long-term investments and other assets	Proceeds from sales of marketable securities, long-term investments and other assets	18		35		Proceeds from sales of marketable securities, long-term investments and other assets	6		6
Purchases of marketable securities and equity investments	Purchases of marketable securities and equity investments	(19)		(10)		Purchases of marketable securities and equity investments	(19)		(11)

Other items, net	Other items, net	(11)		18		Other items, net	—		(7)
Net cash used in investing activities	Net cash used in investing activities	(195)		(289)		Net cash used in investing activities	(60)		(145)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Repayments of borrowings under credit facility		0		(740)
Proceeds from borrowings under credit facility		0		740
Repayments of other borrowings		(2,012)		(229)
Proceeds from other borrowings		1,409		1,312

Repayments of borrowings						Repayments of borrowings	(879)		(541)
Proceeds from borrowings						Proceeds from borrowings	2		4
Debt issuance costs	Debt issuance costs	(15)		(22)		Debt issuance costs	(3)		—
Distributions paid to noncontrolling interests	Distributions paid to noncontrolling interests	(212)		(100)		Distributions paid to noncontrolling interests	(135)		(119)
Proceeds from sale of noncontrolling interests	Proceeds from sale of noncontrolling interests	12		5		Proceeds from sale of noncontrolling interests	4		6
Purchases of noncontrolling interests	Purchases of noncontrolling interests	(5)		0		Purchases of noncontrolling interests	(14)		(2)
Proceeds from exercise of stock options and employee stock purchase plan		9		5

Medicare advances and grants received by unconsolidated affiliates, net of recoupment	Medicare advances and grants received by unconsolidated affiliates, net of recoupment	6		142		Medicare advances and grants received by unconsolidated affiliates, net of recoupment	—		19
Other items, net	Other items, net	(28)		60		Other items, net	(102)		(61)
Net cash provided by (used in) financing activities		(836)		1,173
Net increase (decrease) in cash and cash equivalents		(252)		3,252
Net cash used in financing activities						Net cash used in financing activities	(1,127)		(694)
Net decrease in cash and cash equivalents						Net decrease in cash and cash equivalents	(959)		(305)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	2,446		262		Cash and cash equivalents at beginning of period	2,364		2,446
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	2,194	$	3,514	Cash and cash equivalents at end of period	$	1,405	$	2,141
Supplemental disclosures:	Supplemental disclosures:					Supplemental disclosures:
Interest paid, net of capitalized interest	Interest paid, net of capitalized interest	$	(486)	$	(465)	Interest paid, net of capitalized interest	$	(166)	$	(190)
Income tax payments, net	Income tax payments, net	$	(34)	$	(5)	Income tax payments, net	$	(8)	$	(2)

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,” “our”~~“we” or “us”) is a diversified healthcare services company headquartered in Dallas, Texas. ~~Through an expansive~~Our care delivery network ~~that~~ includes our subsidiary USPI Holding Company, Inc. (“USPI”), ~~at June 30, 2021 we~~which operated ~~65 hospitals and~~or had ownership interests in over ~~460 other healthcare facilities, including surgical hospitals,~~400 ambulatory surgery centers ~~imaging centers,~~ and ~~other care sites and clinics.~~24 surgical hospitals at March 31, 2022. We hold noncontrolling interests in 167 of these facilities, which are recorded using the equity method of accounting. At March 31, 2022, we held an ownership interest in USPI of approximately 95%. We also operated 60 acute care and specialty hospitals, over 110 other outpatient facilities, a network of employed physicians and a Global Business Center (“GBC”) in Manila, Philippines at March 31, 2022. In addition, we operate Conifer Health Solutions, LLC through our Conifer Holdings, Inc. subsidiary (“Conifer”) ~~subsidiary,~~. We owned an interest of approximately 76% in Conifer Health Solutions, LLC at March 31, 2022.

This quarterly report supplements our Annual Report on Form ~~10-K~~10‑K for the year ended December 31, ~~2020~~2021 (“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~~per‑share amounts).

Effective January 1, 2022, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”) using the modified retrospective method. Among other amendments, ASU 2020-06 changed the accounting for diluted earnings‑per‑share for convertible instruments and contracts that may be settled in cash or stock. ASU 2020-06 eliminated an entity’s ability to rebut the presumption of share settlement for convertible instruments and contracts that can be partially or fully settled in cash at the issuer’s election. Additionally, ASU 2020-06 requires that the if‑converted method, which is more dilutive than the treasury stock method, be used for all convertible instruments. As a result of our adoption of ASU 2020-06, diluted weighted average shares outstanding increased by 3000000 shares and diluted earnings per share available to Tenet common shareholders decreased $0.01 per share for the three months ended March 31, 2022.

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 six-month periods~~three‑month period ended ~~June 30, 2021~~March 31, 2022 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~~COVID‑19 pandemic on our operations, business, financial condition and cash flows; the impact of the demand for, and availability of, qualified medical personnel on compensation costs; 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; trends in patient accounts receivable collectability and associated implicit

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price concessions; fluctuations in interest rates; levels of malpractice insurance expense and settlement trends; impairment of ~~long-lived~~long‑lived assets and goodwill; restructuring charges; losses, costs and insurance recoveries related to natural disasters and other ~~weather-related~~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 (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; 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; and changing consumer behavior, including with respect to the timing of elective procedures. These considerations apply to ~~year-to-year~~year‑to‑year comparisons as well.

~~Certain prior-year amounts have been reclassified to conform to the current year presentation. In the accompanying Condensed Consolidated Balance Sheets, income tax receivable~~COVID‑19 Pandemic

The COVID‑19 pandemic has ~~been reclassified to other current assets,~~impacted all 3 segments of our business, as ~~it is no longer significant enough to present separately. In the accompanying Condensed Consolidated Statements of Cash Flows, long‑term~~

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~~assets has been combined with other items, net,~~well as ~~it is no longer significant enough to present separately, but it remains located within cash flows from investing activities.~~

~~COVID-19 Pandemic~~

~~During 2020,~~our patients, communities and employees, in varying degrees since March 2020. Throughout this time, federal, state and local authorities ~~undertook~~have undertaken several actions designed to assist healthcare providers in providing care to ~~COVID-19~~COVID‑19 and other patients and to mitigate the adverse economic impact of the ~~COVID-19~~COVID‑19 pandemic. ~~Legislative actions taken by the~~Among other things, 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, 2021legislation (collectively, the “COVID Acts”)~~. With the COVID Acts, the federal government~~ authorized ~~funding~~aggregate grant payments of $178 billion to be distributed through the Public Health and Social Services Emergency Fund (“~~Provider Relief Fund” or “PRF”~~PRF”)~~. In June 2021, the U.S. Department of Health~~ to healthcare providers who experienced lost revenues and ~~Human Services (“HHS”) established new deadlines for when recipients of PRF grants must use the funding received, generally 12 to 18 months after receipt~~increased expenses as a result of the ~~grant funds. HHS will recoup PRF grant funds not utilized by the established deadlines.~~pandemic. The COVID Acts also revised the Medicare accelerated payment program ~~in an attempt to disburse payments to hospitals and other care providers more quickly~~(“MAPP”) and permitted employers to defer ~~payment of the 6.2% employer~~ Social Security tax ~~beginning March 27, 2020 through December 31,~~payments in 2020. Our participation in these programs and the related accounting policies are summarized below.

Grant ~~Income~~Income–. During the three ~~and six~~ months ended ~~June 30,~~March 31, 2022, we received cash payments of $5 million from the PRF, included in cash flows from operating activities. During the three months ended March 31, 2021, we received cash payments of $4$31 million, included in cash flows from operating activities, and ~~$63 million, respectively, from the Provider Relief Fund and state and local grant programs, including $27~~$28 million received by our unconsolidated affiliates, ~~during the six-month period. During the three and six months ended June 30, 2020, we received~~included in cash ~~payments of $712 million~~flows from financing activities, from the ~~Provider Relief Fund~~PRF and state and local grant ~~programs,~~programs. As a condition to receiving distributions, providers must agree to certain terms and conditions, including, ~~$38 million~~among other things, that the funds are being used for lost revenues and unreimbursed COVID‑related costs as defined by the U.S. Department of Health and Human Services (“HHS”), and that the providers will not seek collection of out‑of‑pocket payments from a COVID‑19 patient that are greater than what the patient would have otherwise been required to pay if the care had been provided by an in‑network provider. All recipients of PRF payments are required to comply with the reporting requirements described in the terms and conditions and as determined by the Secretary of HHS. PRF funds not utilized by the established deadlines, generally 12 to 18 months after receipt of the grant funds, will be recouped by HHS.

The table below summarizes grant funds received by our Hospital Operations and Ambulatory Care segments and by our unconsolidated ~~affiliates.~~ affiliates for which we provide cash management services during the three months ended March 31, 2022 and 2021, and their location in the accompanying Condensed Consolidated Statements of Cash Flows.


	Three Months Ended March 31,
	2022		2021
Grant payments received from COVID-19 relief programs:
Included in cash flows from operating activities:
Hospital Operations	$	4	$	22
Ambulatory Care	1		9
	$	5	$	31

Included in cash flows from financing activities:
Unconsolidated affiliates for which we provide cash management services	$	—	$	28

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We recognize grant payments as income when there is reasonable assurance that we have complied with the conditions associated with the grant. ~~Our~~The estimates we use to recognize grant income could change materially in the future based on our operating performance or ~~COVID-19 activities,~~fluctuations in the severity of COVID‑19 outbreaks at individual locations, as well as the government’s grant compliance guidance. Grant income recognized by our Hospital Operations ~~and other (“Hospital Operations”)~~ and Ambulatory Care segments is presented in grant income and grant income ~~recognized~~recognized through our unconsolidated affiliates is presented in equity in earnings of ~~unconsolidated~~unconsolidated affiliates in our ~~statement~~condensed consolidated statements of operations. ~~During the three and six months ended June 30, 2021, we recognized~~

The table below summarizes grant income ~~of $4 million and $28 million, respectively, in~~recognized by our Hospital Operations ~~segment,~~ and ~~$15 million and $22 million, respectively, in our~~ Ambulatory Care ~~segment. We recognized an additional $5 million and $11 million of Provider Relief Fund income~~segments during ~~these periods, which was classified as equity in earnings of unconsolidated affiliates in the accompanying Condensed Consolidated Statements of Operations for~~ the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~respectively. During~~as well as the ~~three and six months ended June 30, 2020, we recognized~~ grant income ~~of $474 million in~~recognized by our ~~Hospital Operations segment and $37 million in our Ambulatory Care segment. Additionally, we recognized $12 million of grant income as equity in earnings of~~ unconsolidated affiliates during the ~~three and six months ended June 30, 2020.~~ same periods.


	Three Months Ended March 31,
	2022		2021









Grant income recognized from COVID-19 relief programs:
Included in grant income:
Hospital Operations	$	4	$	24
Ambulatory Care	2		7
	$	6	$	31

Included in equity in earnings of unconsolidated affiliates:
Unconsolidated affiliates	$	—	$	6

At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had remaining deferred grant ~~payments remaining~~payment balances of $4$3 million and ~~$18~~$5 million, respectively, which amounts were recorded in other current liabilities in the accompanying Condensed Consolidated Balance Sheets for those periods.

Medicare Accelerated Payment ~~Program~~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.~~MAPP. The COVID Acts revised the ~~Medicare accelerated payment program in an attempt~~MAPP to disburse payments to healthcare providers more quickly. Recipients may retain the accelerated payments for one year from the date of receipt before recoupment commences, which is effectuated by a 25% offset of claims payments for 11 months, followed by a 50% offset for the succeeding six months. At the end of the ~~29-month~~29‑month period, interest on the ~~unpaid~~unrecouped balance will be assessed at 4.00% per annum. The initial ~~11-month~~11‑month recoupment period began in April 2021.

Our Hospital Operations and Ambulatory Care segments ~~both received~~did not receive any additional advance payments from the ~~Medicare accelerated payment program during 2020. No additional advances were received in the six months ended June 30, 2021. The recoupment period for the advances we received~~MAPP during the three months ended ~~June 30, 2020 commenced during~~March 31, 2022 or 2021. During the three months ended ~~June 30, 2021. During this period, $141 million and $11~~March 31, 2022, $194 million of advances received in prior periods by our Hospital Operations segment and less than $1 million of advances received in prior periods by our Ambulatory Care ~~segments, respectively,~~segment were recouped through a reduction of our Medicare claims payments. ~~In addition, $12 million of~~No advances ~~received by unconsolidated affiliates for which we provide cash management services~~ were recouped ~~through a reduction of those affiliates’ Medicare claims payments~~ during the three months ended ~~June 30,~~March 31, 2021. ~~Advances~~In the accompanying Condensed Consolidated Balance Sheets, advances totaling ~~$997~~$686 million and ~~$603~~$880 million were included in contract liabilities ~~and advances totaling $335 million and $902 million were included in contract liabilities – long term in the accompanying Condensed Consolidated Balance Sheets~~ at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

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Deferral of ~~Employer Payroll~~Employment Tax ~~Match Payments.~~ Payments–The COVID Acts permitted employers to defer payment of the 6.2% employer Social Security ~~taxes deferred under the COVID Acts~~tax beginning March 27, 2020 through December 31, 2020. Deferred tax amounts are required to be paid in equal amounts over two years, with payments due in December 2021 and December 2022. ~~We had~~At both March 31, 2022 and December 31, 2021, deferred Social Security tax payments totaling ~~$130~~$128 million were included in accrued compensation and benefits ~~and $130 million included in other long‑term liabilities~~ in the accompanying Condensed Consolidated Balance ~~Sheets at both June 30, 2021 and December 31, 2020.~~Sheets.

Leases

During the three months ended March 31, 2022, we sold several medical office buildings held in our Hospital Operations segment for net cash proceeds of $147 million and concurrently entered into operating lease agreements to continue use of the facilities. We recognized a gain of $69 million from the sale of these buildings, presented in other operating expenses, net in the accompanying Condensed Consolidated Statement of Operations, and we recognized right-of-use assets and lease-related obligations of $109 million related to the leases, in each case in the three months ended March 31, 2022.

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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 ~~$2.194~~$1.405 billion and ~~$2.446~~$2.364 billion at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, our book overdrafts were ~~$185~~$175 million and ~~$154~~$226 million, respectively, which were classified as accounts payable.

At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020, $173~~2021, $176 million and ~~$166~~$188 million, respectively, of total cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets were intended for the operations of our ~~captive insurance~~insurance‑related subsidiaries.

Also at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had ~~$50~~$66 million and ~~$93~~$95 million, respectively, of property and equipment purchases accrued for items received but not yet paid. Of these amounts, ~~$44~~$53 million and ~~$85~~$88 million, respectively, were included in accounts payable.

During the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we recorded ~~right-of-use~~right‑of‑use assets related to non‑cancellable finance leases of ~~$40~~$18 million and ~~$43~~$11 million, respectively, and related to ~~non-cancellable~~non‑cancellable operating leases of ~~$96~~$187 million and ~~$88~~$46 million, respectively.

Other Intangible Assets

The following tables provide information regarding other intangible assets, which were included in the accompanying Condensed Consolidated Balance Sheets at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


		Gross Carrying Amount		Accumulated Amortization		Net Book Value			Gross Carrying Amount		Accumulated Amortization		Net Book Value
At June 30, 2021:
At March 31, 2022:								At March 31, 2022:
Other intangible assets with finite useful lives:								Other intangible assets with finite useful lives:
Capitalized software costs	Capitalized software costs	$	1,733	$	(1,087)	$	646	Capitalized software costs	$	1,714	$	(1,119)	$	595
Contracts								Contracts	295		(133)		162
Other								Other	96		(78)		18
Total other intangible assets with finite lives								Total other intangible assets with finite lives	2,105		(1,330)		775

Other intangible assets with indefinite useful lives:								Other intangible assets with indefinite useful lives:
Trade names	Trade names	102		0		102		Trade names	102		—		102
Contracts	Contracts	871		(120)		751		Contracts	604		—		604
Other	Other	101		(78)		23		Other	6		—		6
Total		$	2,807	$	(1,285)	$	1,522
Total other intangible assets with indefinite lives								Total other intangible assets with indefinite lives	712		—		712
Total other intangible assets								Total other intangible assets	$	2,817	$	(1,330)	$	1,487


		Gross Carrying Amount		Accumulated Amortization		Net Book Value			Gross Carrying Amount		Accumulated Amortization		Net Book Value
At December 31, 2020:
At December 31, 2021:								At December 31, 2021:
Other intangible assets with finite useful lives:								Other intangible assets with finite useful lives:
Capitalized software costs	Capitalized software costs	$	1,800	$	(1,084)	$	716	Capitalized software costs	$	1,770	$	(1,165)	$	605
Contracts								Contracts	295		(128)		167
Other								Other	95		(81)		14
Total other intangible assets with finite lives								Total other intangible assets with finite lives	2,160		(1,374)		786

Other intangible assets with indefinite useful lives:								Other intangible assets with indefinite useful lives:
Trade names	Trade names	102		0		102		Trade names	102		—		102
Contracts	Contracts	872		(111)		761		Contracts	602		—		602
Other	Other	110		(89)		21		Other	7		—		7
Total		$	2,884	$	(1,284)	$	1,600
Total other intangible assets with indefinite lives								Total other intangible assets with indefinite lives	711		—		711
Total other intangible assets								Total other intangible assets	$	2,871	$	(1,374)	$	1,497

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Estimated future amortization of intangibles with finite useful lives at ~~June 30, 2021~~March 31, 2022 is as follows:

Six Months
Ending Years Ending Later Years
December 31,
Total 2021 2022 2023 2024 2025
Amortization of intangible assets $ 838 $ 91 $ 122 $ 108 $ 97 $ 83 $ 337


			Nine Months Ending		Years Ending								Later Years
					December 31,
	Total		2022		2023		2024		2025		2026
Amortization of intangible assets	$	775	$	119	$	119	$	116	$	96	$	76	$	249

We recognized amortization expense of ~~$95~~$29 million and ~~$79~~$47 million in the accompanying Condensed Consolidated Statements of Operations for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

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Investments in Unconsolidated Affiliates

We control ~~232~~261 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~~(167 of ~~341~~428 at ~~June 30, 2021)~~March 31, 2022), as well as additional companies in which our Hospital Operations segment holds ownership interests, under the equity method as investments in unconsolidated affiliates and report only our share of net income as equity in earnings of unconsolidated affiliates in the accompanying Condensed Consolidated Statements of Operations. No grant income was recognized during the three months ended March 31, 2022 by our unconsolidated affiliates. Equity in earnings of unconsolidated affiliates included $5$6 million ~~and $11 million~~of grant income for the three ~~and six~~ months ended June 30, 2021, respectively, from PRF grants recognized by our Ambulatory Care segment’s unconsolidated affiliates. During the three and six months ended June 30, 2020, equity in earnings of unconsolidated affiliates included $12 million from PRF grants recognized by these unconsolidated affiliates. March 31, 2021.

Summarized financial information for these equity method investees is included in the following table. For investments acquired during the reported periods, amounts ~~reflect~~below include 100% of the investee’s results beginning on the date of our acquisition of the investment.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Net operating revenues	Net operating revenues	$	711	$	468	$	1,345	$	1,034	Net operating revenues	$	769	$	634
Net income	Net income	$	197	$	138	$	362	$	247	Net income	$	169	$	165
Net income available to the investees	Net income available to the investees	$	115	$	83	$	217	$	152	Net income available to the investees	$	98	$	102

NOTE 2. ACCOUNTS RECEIVABLE

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


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Continuing operations:

Patient accounts receivable	Patient accounts receivable	$	2,448	$	2,499	Patient accounts receivable	$	2,761	$	2,600
Estimated future recoveries	Estimated future recoveries	139		156		Estimated future recoveries	139		137
Net cost reports and settlements receivable and valuation allowances	Net cost reports and settlements receivable and valuation allowances	55		34		Net cost reports and settlements receivable and valuation allowances	16		33
		2,642		2,689			$	2,916	$	2,770
Discontinued operations		1		1
Accounts receivable, net		$	2,643	$	2,690

We participate in various provider fee programs, which help reduce the amount of uncompensated care from indigent patients and those paying with Medicaid. 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 June 30, 2021 and December 31, 2020:~~program:


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Assets:	Assets:					Assets:
Other current assets	Other current assets	$	249	$	378	Other current assets	$	271	$	370
Investments and other assets	Investments and other assets	$	247	$	206	Investments and other assets	$	278	$	213

Liabilities:	Liabilities:					Liabilities:
Other current liabilities	Other current liabilities	$	90	$	110	Other current liabilities	$	123	$	123
Other long-term liabilities	Other long-term liabilities	$	74	$	56	Other long-term liabilities	$	52	$	60

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The following table ~~shows~~presents our estimated costs (based on selected operating expenses, which include salaries, wages and benefits, supplies and other operating expenses) of caring for our uninsured and charity ~~patients in the three and six months ended June 30, 2021 and 2020:~~patients.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Estimated costs for:	Estimated costs for:									Estimated costs for:
Uninsured patients	Uninsured patients	$	158	$	145	$	326	$	301	Uninsured patients	$	122	$	168
Charity care patients	Charity care patients	29		43		49		83		Charity care patients	21		20
Total	Total	$	187	$	188	$	375	$	384	Total	$	143	$	188

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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 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 have provided to patients who are still receiving inpatient care in our facilities at the end of the reporting period. Our Hospital Operations segment’s contract assets were included in other current assets in the accompanying Condensed Consolidated Balance Sheets at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. Approximately 91% of our Hospital Operations segment’s contract assets meet the conditions for unconditional right to payment and 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~~MAPP to disburse payments more quickly due to ~~hospitals more quickly. During~~ the ~~year ended December 31, 2020, our~~pandemic. Our Hospital Operations segment received advance payments from the ~~Medicare accelerated payment program~~MAPP following its expansion under the COVID ~~Acts. These~~Acts during the year ended December 31, 2020; however, no additional advances were received during the three months ended March 31, 2022 and 2021. The remaining advance payments were recorded as contract liabilities in the accompanying Condensed Consolidated Balance Sheets at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020. No additional advances were received in the three and six months ended June 30,~~ 2021.

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

Contract Liability – Contract Liability –
Current Long-term
Contract Assets Advances from Medicare Advances from Medicare
December 31, 2020 $ 208 $ 510 $ 819
June 30, 2021 170 891 301
Increase (decrease) $ (38) $ 381 $ (518)

December 31, 2019 $ 170 $ 0 $ 0
June 30, 2020 176 1,266 0
Increase $ 6 $ 1,266 $ 0


	Contract Assets		Contract Liabilities – Current Advances from Medicare		Contract Liabilities – Long-Term Advances from Medicare
December 31, 2021	$	181	$	876	$	—
March 31, 2022	169		682		—
Decrease	$	(12)	$	(194)	$	—

December 31, 2020	$	208	$	510	$	819
March 31, 2021	180		734		595
Increase (decrease)	$	(28)	$	224	$	(224)

During the three months ended ~~June 30, 2021, $141~~March 31, 2022, $194 million of Medicare advance payments included in the opening contract liabilities balance for our Hospital Operations segment were recouped through a reduction of our Medicare claims payments. No amounts were recouped during the three months ended March 31, 2021.

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Ambulatory Care Segment

~~During the year ended December 31, 2020, our~~Our Ambulatory Care segment also received advance payments from the expanded Medicare accelerated payment ~~program. At June 30, 2021 and~~program during the year ended December 31, ~~2020, contract liabilities included $61 million~~2020; however no additional advances were received during the three months ended March 31, 2022 and $51 million, respectively, and contract liabilities – long-term included $31 million and $62 million, respectively, of Medicare advance payments received by our unconsolidated affiliates for whom we provide cash management services.2021.

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


		Contract Liability –		Contract Liability –			Contract Liabilities – Current Advances from Medicare		Contract Liabilities – Long-Term Advances from Medicare
		Current		Long-term
December 31, 2021						December 31, 2021	$	4	$	—
March 31, 2022						March 31, 2022	4		—
Increase						Increase	$	—	$	—
		Advances from Medicare		Advances from Medicare
December 31, 2020	December 31, 2020	$	93	$	83	December 31, 2020	$	93	$	83
June 30, 2021		106		34
March 31, 2021						March 31, 2021	123		44
Increase (decrease)	Increase (decrease)	$	13	$	(49)	Increase (decrease)	$	30	$	(39)

December 31, 2019		$	0	$	0
June 30, 2020		167		0
Increase		$	167	$	0

During the three months ended ~~June 30, 2021, $11~~March 31, 2022, less than $1 million of Medicare advance payments included in the opening contract liabilities balance for our Ambulatory Care segment were recouped through a reduction of our Medicare claims

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payments. ~~Additionally, $12 million of Medicare advances received by our unconsolidated affiliates for whom we provide cash management services in the opening contract liabilities balance~~No amounts were recouped ~~in the same manner~~ during the three months ended ~~June 30,~~March 31, 2021.

Conifer Segment

Conifer enters into contracts with ~~customers~~clients to provide revenue cycle management and other services, such as value‑based care, consulting and ~~project services.~~engagement solutions. The payment terms and conditions in ~~our customer~~Conifer’s client contracts vary. In some cases, ~~customers~~clients are invoiced in advance and (for other than ~~fixed-price~~fixed‑price fee arrangements) a ~~true-up~~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, 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,~~its clients, Conifer recognizes either unbilled revenue (performance precedes contractual right to invoice the ~~customer)~~client) or deferred revenue ~~(customer~~(client payment precedes Conifer service performance). In the following table, ~~customers~~clients that prepay prior to obtaining control/benefit of ~~the service~~services 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~~client has obtained control/benefit of these services prior to the contractual invoice date. Contracts with payment in arrears are recognized as receivables in the month the ~~service is~~services are performed.

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


						Contract Liability –		Contract Liability –			Receivables		Contract Assets – Unbilled Revenue		Contract Liabilities – Current Deferred Revenue		Contract Liabilities – Long-Term Deferred Revenue
				Contract Asset –		Current		Long-Term
December 31, 2021										December 31, 2021	$	28	$	18	$	79	$	15
March 31, 2022										March 31, 2022	34		15		90		14
Increase (decrease)										Increase (decrease)	$	6	$	(3)	$	11	$	(1)
		Receivables		Unbilled Revenue		Deferred Revenue		Deferred Revenue
December 31, 2020	December 31, 2020	$	56	$	20	$	56	$	16	December 31, 2020	$	56	$	20	$	56	$	16
June 30, 2021		59		15		58		16
March 31, 2021										March 31, 2021	56		14		60		16
Increase (decrease)	Increase (decrease)	$	3	$	(5)	$	2	$	0	Increase (decrease)	$	—	$	(6)	$	4	$	—

December 31, 2019		$	26	$	11	$	61	$	18
June 30, 2020		28		12		63		17
Increase (decrease)		$	2	$	1	$	2	$	(1)

The ~~difference~~differences between the opening and closing balances of Conifer’s contract assets and contract liabilities are primarily related to prepayments for those ~~customers~~clients who are billed in advance, changes in estimates related to ~~metric-based~~metric‑based services, and ~~up-front~~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~~the accompanying Condensed Consolidated Balance Sheets, and its current and ~~long-term~~long‑term contract liabilities were reported as part of contract liabilities and contract liabilities – ~~long-term,~~long‑term, respectively, in ~~our~~the accompanying Condensed Consolidated Balance Sheets.

In both of the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ Conifer recognized ~~$55~~$49 million ~~and $56 million, respectively,~~ of revenue that was included in the opening current deferred revenue liability. This revenue consists primarily of prepayments for those ~~customers~~clients who are billed in advance, changes in estimates related to ~~metric-based~~metric‑based services, and up‑front integration services that are recognized over the services period.

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Contract Costs

During both of the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we recognized amortization expense related to deferred contract setup costs of $1 million. ~~In both of the six months ended June 30, 2021 and 2020, we recognized amortization expense related to deferred contract setup costs of $2 million.~~ At both ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the unamortized ~~customer~~client contract costs were ~~$24~~$23 million and ~~are~~were presented as part of investments and other assets in the accompanying Condensed Consolidated Balance Sheets.

NOTE 4. ASSETS AND LIABILITIES HELD FOR SALE

In ~~June 2021, certain of our subsidiaries~~February 2022, we entered into a definitive agreement to sell ~~five~~1 of our ~~Miami-area~~ micro‑hospitals ~~and certain related operations.~~located in Arizona. As a result, the assets ~~and liabilities~~ associated with ~~these facilities~~the micro‑hospital were classified as held for sale at ~~June 30, 2021~~March 31, 2022 in the accompanying Condensed Consolidated Balance ~~Sheets. We expect to complete the~~Sheet. The sale of ~~these facilities~~this micro‑hospital was completed in ~~the third quarter of 2021.~~April 2022.

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Assets ~~and liabilities~~ classified as held for sale at ~~June 30, 2021~~March 31, 2022 were comprised of the following:


~~Accounts receivable~~	$	~~150~~
~~Other current assets~~	40
~~Investments and other long-term assets~~	41
Property and equipment	~~371~~$	15
Other intangible assets	351
Goodwill	~~191~~3

~~Current liabilities~~	~~(98)~~
~~Long-term liabilities~~	~~(47)~~
Net assets held for sale	$	~~683~~19

In the three months ended June 30, 2021, we completed the sale of the majority of our urgent care centers operated under the MedPost and CareSpot brands, and we also completed the separate sale of a building we owned in the Philadelphia area. The assets and liabilities related to the urgent care centers and the building were classified as held for sale at December 31, 2020 in the accompanying Condensed Consolidated Balance Sheet. We recorded a gain related to the sale of the urgent care centers of $14 million and a gain of $2 million related to the sale of the building in Philadelphia in the three months ended June 30, 2021.

~~The following~~ table below provides information on significant components of our business that ~~were classified as held for sale at June 30, 2021:~~have been recently disposed of:

Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
Significant planned divestitures classified as held for sale:
Income from continuing operations, before income taxes
Miami area $ 16 $ 9 $ 29 $ 15
Total $ 16 $ 9 $ 29 $ 15


	Three Months Ended March 31,
	2022		2021
Significant disposals:
Income from continuing operations, before income taxes





Miami-area hospitals and certain related operations	$	4	$	13

NOTE 5. IMPAIRMENT AND RESTRUCTURING CHARGES, AND ~~ACQUISITION-RELATED~~ACQUISITION‑RELATED COSTS

During the six months ended June 30, 2021, we recorded impairment and restructuring charges and acquisition‑related costs of $40 million, consisting of $34 million of restructuring charges, $1 million of impairment charges and $5 million of acquisition-related costs. Restructuring charges consisted of $10 million of employee severance costs, $12 million related to the transition of various administrative functions to our Global Business Center (“GBC”) in the Philippines and $12 million of other restructuring costs. Our impairment charges for the six months ended June 30, 2021 were comprised of $1 million from our Ambulatory Care segment. Acquisition‑related costs consisted of $5 million of transaction costs.

During the six months ended June 30, 2020, we recorded impairment and restructuring charges and acquisition‑related costs of $109 million, consisting of $103 million of restructuring charges, $5 million of impairment charges and $1 million of acquisition-related costs. Restructuring charges consisted of $37 million of employee severance costs, $25 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, and $17 million of other restructuring costs. Our impairment charges for the six months ended June 30, 2020 were comprised of $5 million from our Ambulatory Care segment. Acquisition-related costs consisted of $1 million of transaction costs.

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 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, future impairments of ~~long-lived~~long‑lived assets and goodwill may occur, and we may incur additional restructuring charges, which could be material.

At ~~June 30, 2021,~~March 31, 2022, our continuing operations consisted of 3 reportable segments – Hospital Operations, Ambulatory Care and Conifer. Our segments are reporting units used to perform our goodwill impairment analysis.

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

During the three months ended March 31, 2022, we recorded impairment and restructuring charges and acquisition‑related costs of $16 million, primarily consisting of $12 million of restructuring charges, $1 million of impairment charges and $3 million of acquisition‑related costs. Restructuring charges consisted of $5 million of employee severance costs, $2 million related to the transition of various administrative functions to our GBC and $5 million of other restructuring costs. Acquisition‑related costs consisted of $3 million of transaction costs.

During the three months ended March 31, 2021, we recorded impairment and restructuring charges and acquisition‑related costs of $20 million, 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.

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NOTE 6. LONG-TERM DEBT

The table below ~~shows~~presents our ~~long-term~~long‑term debt ~~at June 30, 2021 and December 31, 2020:~~included in the accompanying Condensed Consolidated Balance Sheets:


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Senior unsecured notes:	Senior unsecured notes:					Senior unsecured notes:

6.750% due 2023						6.750% due 2023	$	1,769	$	1,872

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

4.625% due 2024	4.625% due 2024	1,870		1,870		4.625% due 2024	770		770
4.625% due 2024	4.625% due 2024	600		600		4.625% due 2024	600		600
7.500% due 2025	7.500% due 2025	700		700		7.500% due 2025	—		700
4.875% due 2026	4.875% due 2026	2,100		2,100		4.875% due 2026	2,100		2,100
5.125% due 2027	5.125% due 2027	1,500		1,500		5.125% due 2027	1,500		1,500
4.625% due 2028	4.625% due 2028	600		600		4.625% due 2028	600		600
4.250% due 2029	4.250% due 2029	1,400		0		4.250% due 2029	1,400		1,400
4.375% due 2030						4.375% due 2030	1,450		1,450
Senior secured second lien notes:	Senior secured second lien notes:					Senior secured second lien notes:

5.125% due 2025		0		1,410

6.250% due 2027	6.250% due 2027	1,500		1,500		6.250% due 2027	1,500		1,500

Finance leases, mortgage and other notes	Finance leases, mortgage and other notes	370		403		Finance leases, mortgage and other notes	437		443
Unamortized issue costs and note discounts	Unamortized issue costs and note discounts	(156)		(176)		Unamortized issue costs and note discounts	(137)		(151)
Total long-term debt	Total long-term debt	15,218		15,719		Total long-term debt	14,851		15,646
Less current portion	Less current portion	127		145		Less current portion	132		135
Long-term debt, net of current portion	Long-term debt, net of current portion	$	15,091	$	15,574	Long-term debt, net of current portion	$	14,719	$	15,511

Senior Unsecured Notes and Senior Secured Notes

On ~~June 2, 2021,~~February 23, 2022, we ~~issued $1.400 billion~~redeemed all $700 million aggregate principal amount outstanding of ~~4.250%~~our 7.500% senior secured first lien notes which will mature on June 1, 2029 (the “2029 Senior Secured First Lien Notes”). We will pay interest on the 2029 Senior Secured First Lien Notes semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2021. The proceeds from the sale of the 2029 Senior Secured First Lien Notes were used, after payment of fees and expenses, together with cash on hand, to finance the redemption of all $1.410 billion aggregate principal amount then outstanding of our 5.125% senior secured second lien notes due 2025 ~~(the “2025 Senior Secured Second Lien Notes”)~~ in advance of their maturity ~~date for approximately $1.428 billion.~~date. We paid $730 million from cash on hand to redeem the notes. In connection with the redemption, we recorded a loss from early extinguishment of debt of approximately $31 million in the three months ended June 30, 2021, primarily related to the difference between the purchase price and the par value of the 2025 Senior Secured Second Lien Notes, as well as the write-off of associated unamortized issuance costs.

In March 2021, we retired approximately $478 million aggregate principal amount of our 7.000% senior unsecured notes due 2025 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$38 million in the three months ended March 31, ~~2021,~~2022, primarily related to the difference between the purchase price and the par value of the notes, as well as the ~~write-off~~write‑off of associated unamortized issuance costs.

Through a series of open‑market transactions in March 2022, we repurchased $103 million aggregate principal amount outstanding of our 6.750% senior unsecured notes due 2023. We paid $107 million from cash on hand to complete these transactions. In connection with the repurchases, we recorded aggregate losses from early extinguishment of debt of $5 million in the three months ended March 31, 2022, primarily related to the difference between the purchase prices and the par value of the notes, as well as the write‑off of associated unamortized issuance costs.

Credit Agreement

We have a senior secured revolving credit facility that provides for revolving loans in an aggregate principal amount of up to ~~$1.900~~$1.500 billion with a $200 million subfacility for standby letters of credit. 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. In March 2022, we further amended our Credit Agreement to, among other things, (i) decrease the aggregate revolving credit commitments from the previous Increased Commitments to aggregate revolving credit commitments not to exceed $1.500 billion, subject to borrowing availability, (ii) extend the scheduled maturity date to March 16, 2027, and (iii) replace the London Interbank Offered Rate (LIBOR) with the Term Secured Overnight Financing Rate (“SOFR”) and Daily Simple SOFR (each, as defined in the Credit Agreement) as the reference interest rate. At ~~June 30, 2021,~~March 31, 2022, we had 0no cash borrowings outstanding under the Credit Agreement, and we had less than $1 million of standby letters of credit outstanding. Based on our eligible receivables, ~~$1.900~~$1.500 billion was available for borrowing under the revolving credit facility at ~~June 30, 2021.~~March 31, 2022.

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

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Outstanding revolving loans accrue interest depending on the type of loan at either ~~(i)~~(a) a base rate plus aan applicable margin ranging from 0.25% to 0.75% per annum or ~~(ii)~~(b) Term SOFR, Daily Simple SOFR or the ~~London~~Euro Interbank Offered Rate ~~(“LIBOR”)~~(EURIBOR) (each, as defined in the Credit Agreement) plus aan applicable margin ranging from 1.25% to 1.75% per annum and (in the case of Term SOFR and Daily Simple SOFR only) a credit spread adjustment of 0.10%, 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~~self‑pay accounts.

Letter of Credit Facility

~~In March 2020, we amended our~~We have a letter of credit facility (as amended to date, the “LC Facility”) that provides for the issuance, from time to ~~extend the~~time, of standby and documentary letters of credit in an aggregate principal amount of up to $200 million. The scheduled maturity date of the LC Facility ~~from March 7, 2021 to~~is September 12, 2024 and to increase the aggregate principal amount of standby and documentary letters of credit that from time to time 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 6.00 to 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. At June 30, 2021, the effective maximum secured debt covenant was 5.50 to 1.00.2024. Obligations under the LC Facility are guaranteed and secured by a first‑priority pledge of the capital stock and other ownership interests of certain of our wholly owned domestic hospital subsidiaries on an ~~equal~~ equal‑ranking basis with our senior secured first lien notes.

Drawings under any letter of credit issued under the LC Facility that we have not reimbursed within 3 business days after notice thereof accrue interest at a base rate plus a margin 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~~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 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. The LC Facility is subject to an effective maximum secured debt covenant of 4.25 to 1.00. At ~~June 30, 2021,~~March 31, 2022, we had ~~$149~~$138 million of standby letters of credit outstanding under the LC Facility.

NOTE 7. GUARANTEES

At ~~June 30, 2021,~~March 31, 2022, 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~~hospital‑based physician groups providing certain services at our hospitals was ~~$129~~$118 million. We had a total liability of ~~$104~~$102 million recorded for these guarantees included in other current liabilities in the accompanying Condensed Consolidated Balance Sheet at ~~June 30, 2021.~~March 31, 2022.

At ~~June 30, 2021,~~March 31, 2022, 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 ~~$96~~$109 million. Of the total, ~~$13~~$16 million relates to the obligations of consolidated subsidiaries, which obligations were recorded in the accompanying Condensed Consolidated Balance Sheet at ~~June 30, 2021.~~March 31, 2022.

NOTE 8. EMPLOYEE BENEFIT PLANS

Share-Based Compensation Plans

The accompanying Condensed Consolidated Statements of Operations for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ include ~~$30~~$16 million and ~~$27~~$14 million, respectively, of pre-tax compensation costs related to our ~~stock-based~~stock‑based compensation arrangements.

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Stock Options

The following table summarizes stock option activity during the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:

Number of
Options Weighted Average
Exercise Price
Per Share Aggregate
Intrinsic Value Weighted Average
Remaining Life
Outstanding at December 31, 2020 912,531 $ 22.51
Exercised (293,581) 20.68
Outstanding at June 30, 2021 618,950 $ 23.38 $ 27 6.7 years
Vested and expected to vest at June 30, 2021 618,950 $ 23.38 $ 27 6.7 years
Exercisable at June 30, 2021 422,932 $ 21.10 $ 19 6.3 years


	Number of Options	Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value		Weighted Average Remaining Life
				(In Millions)
Outstanding at December 31, 2021	520,998	$	23.90

Exercised	(60,051)	$	28.26

Outstanding at March 31, 2022	460,947	$	23.33	$	29	5.9 years
Vested and expected to vest at March 31, 2022	460,947	$	23.33	$	29	5.9 years
Exercisable at March 31, 2022	460,947	$	23.33	$	29	5.9 years

There were ~~293,581~~60,051 and ~~108,488~~293,581 stock options exercised during the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, with aggregate intrinsic values of ~~$10~~$4 million and ~~less than $1~~$10 million, respectively. We did not grant any stock options during the ~~six~~three months ended ~~June 30, 2021 and 2020.~~March 31, 2022 or 2021.

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At June 30, 2021, there were less than $1 million of total unrecognized compensation costs related to stock options. These costs are expected to be recognized over a weighted average period of less than one year.

The following table summarizes information about our outstanding stock options at ~~June 30, 2021:~~March 31, 2022:


		Options Outstanding				Options Exercisable				Options Outstanding				Options Exercisable
Range of Exercise Prices	Range of Exercise Prices	Number of Options	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price Per Share		Number of Options	Weighted Average Exercise Price Per Share		Range of Exercise Prices	Number of Options	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price Per Share		Number of Options	Weighted Average Exercise Price Per Share
$18.99 to $20.609	$18.99 to $20.609	391,748	6.3 years	$	19.96	391,748	$	19.96	$18.99 to $20.609	293,796	5.4 years	$	19.75	293,796	$	19.75
$20.61 to $35.430	$20.61 to $35.430	227,202	7.4 years	29.26		31,184	35.43		$20.61 to $35.430	167,151	6.8 years	$	29.62	167,151	$	29.62
		618,950	6.7 years	$	23.38	422,932	$	21.10		460,947	5.9 years	$	23.33	460,947	$	23.33

Restricted Stock Units

The following table summarizes activity with respect to restricted stock units (“RSUs”) during the ~~six~~three months ended ~~June 30, 2021:~~ March 31, 2022:


		Number of Restricted Stock Units	Weighted Average Grant Date Fair Value Per Unit			Number of Restricted Stock Units	Weighted Average Grant Date Fair Value Per Unit
Unvested at December 31, 2020		2,095,206	$	25.87
Unvested at December 31, 2021					Unvested at December 31, 2021	2,171,202	$	40.51
Granted	Granted	749,110	54.62		Granted	570,080	$	83.75
Vested	Vested	(492,308)	29.78		Vested	(721,858)	$	29.16
Forfeited	Forfeited	(17,914)	32.29		Forfeited	(16,083)	$	44.57
Unvested at June 30, 2021		2,334,094	$	34.37
Unvested at March 31, 2022					Unvested at March 31, 2022	2,003,341	$	62.46

In the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, we granted an aggregate of ~~749,110 RSUs.~~570,080 RSUs, 288,125 of which vest based on the passage of time. Of these ~~261,997~~time‑based RSUs, 281,955 will vest and be settled ratably over a ~~three-year~~three‑year period from the grant date, and 6,170 will vest evenly on the third and fourth anniversaries of the grant date. The vesting of the 281,955 remaining RSUs granted in the three months ended March 31, 2022 is contingent on our achievement of specified performance goals for the years 2022 to 2024. 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 281,955 units granted, depending on our level of achievement with respect to the performance goals.

In the three months ended March 31, 2021, we granted an aggregate of 708,577 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~~vested on December 31, ~~2021.~~2021 and settled in January 2022. We also granted 1,372 RSUs as an initial grant to a then-new member of our board of directors and 1,685 RSUs as a pro‑rata annual grant to the same new board member. 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. In addition, we granted ~~243,076~~241,150 performance‑based ~~RSUs,~~RSUs; the vesting of ~~which~~these RSUs is contingent on our achievement of specified performance goals for the years 2021 to 2023. Provided the goals are achieved, the ~~performance-based~~performance‑based RSUs will vest and settle on the third anniversary of the grant date. The actual number of ~~performance-based~~performance‑based RSUs that could vest will range from 0% to 200% of the ~~243,076~~241,150 units granted, depending on our level of achievement with respect to the performance goals. We also granted 39,738 RSUs to our non-employee directors. Of this total, 36,681 RSUs were for the 2021-2022 board service year, 1,372 were an initial grant to a new member of our board of directors and 1,685 were a pro-rata annual grant to the same new member. While RSUs granted to our board of directors vest immediately, annual grants settle on the third anniversary of the grant date and initial grants settle upon separation from the board. During the ~~six~~three months ended ~~June 30,~~March 31, 2021, we also granted 892 RSUs that vested and settled immediately as a result of our level of achievement with respect to ~~performance-based~~certain performance‑based RSUs granted in 2018.

In the six months ended June 30, 2020, we granted an aggregate of 1,574,325 RSUs. Of these, 517,398 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 409,485 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

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anniversary of the grant date. The actual number of performance-based RSUs that could vest will range from 0% to 200% of the 409,485 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. In addition, in May 2020, we made an annual grant of 103,434 ~~RSUs to our non-employee directors for the 2020-2021 board service year, which units vested immediately and will settle in shares of our common stock on third anniversary of the date of the grant.~~

The fair value of an RSU is based on our share price on the grant date. For certain of the ~~performance-based~~performance‑based RSU grants, the number of units that will ultimately vest is subject to adjustment based on the achievement of a ~~market-based~~market‑based condition. 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:


		Six Months Ended June 30,				Three Months Ended March 31,
		2021	2020			2022	2021
Expected volatility	Expected volatility	71.8% - 79.3%	54.7	%	Expected volatility	39.6% - 68.1%	71.8% - 79.3%

Risk-free interest rate	Risk-free interest rate	0.1% - 0.2%	1.2	%	Risk-free interest rate	1.0% - 1.7%	0.1% - 0.2%

At ~~June 30, 2021,~~March 31, 2022, there were ~~$59~~$84 million of total unrecognized compensation costs related to 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~~1 share of USPI’s ~~non-voting~~non‑voting common stock in the future. The vesting of RSUs granted under the plan varies based on the terms of the underlying award agreement. 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~~. value. At our sole discretion, the purchase of any ~~non-voting~~non‑voting common shares can be made in cash or in shares of ~~Tenet~~’sTenet’s common stock.

The following table summarizes RSU activity under USPI’s management equity plan during the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:

Number of
Restricted Stock Units Weighted Average Grant
Date Fair Value Per Unit
Unvested at December 31, 2020 2,025,056 $ 34.13
Granted 76,990 34.13
Vested (373,499) 34.13
Forfeited (140,120) 34.13
Unvested at June 30, 2021 1,588,427 $ 34.13


	Number of Restricted Stock Units	Weighted Average Grant Date Fair Value Per Unit
Unvested at December 31, 2021	1,494,882	$	34.13

Vested	(367,928)	$	34.13
Forfeited	(42,669)	$	34.13
Unvested at March 31, 2022	1,084,285	$	34.13

InNo new grants were made under the ~~six~~USPI Management Equity Plan and no shares were repurchased during the three months ended ~~June 30, 2021, we granted 76,990 RSUs under USPI’s management equity plan. NaN percent of these RSUs vests on each of the first~~March 31, 2022 and second anniversaries of the grant date, and the remaining 60% vests on the third anniversary of the grant date. RSUs granted in 2020 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.2021.

~~Employee Retirement Plans~~

In the six months ended June 30, 2021 and 2020, we recognized service cost related to 1 of our frozen non‑qualified defined benefit pension plans of less than $1 million for both periods in salaries, wages and benefits expense in the accompanying Condensed Consolidated Statements of Operations. Additionally, in the six months ended June 30, 2021 and 2020, we recognized a benefit of $3 million and expense of $4 million, respectively, related to other components of net periodic pension cost and net periodic postretirement benefit cost related to our frozen qualified and non-qualified defined benefit plans in other non-operating income (expense), net, in the accompanying Condensed Consolidated Statements of Operations.

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NOTE 9. EQUITY

Changes in Shareholders’ Equity

The following tables ~~show~~present the changes in consolidated equity during the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 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					Common Stock					Additional Paid-In Capital				Accumulated Other Comprehensive Loss				Accumulated Deficit				Treasury Stock				Noncontrolling Interests				Total Equity
		Shares Outstanding	Issued Par Amount														Shares Outstanding							Issued Par Amount
Balances at December 31, 2020		106,070	$	7			$	4,844					$	(281)				$	(2,128)		$	(2,414)			$	909		$	937
Balances at December 31, 2021																								Balances at December 31, 2021			107,189			$	8			$	4,877			$	(233)			$	(1,214)			$	(2,410)			$	1,026			$	2,054
Net income	Net income	—	—		—				—		97				—				44			141		Net income			—			—		—				—				140				—				46				186
Distributions paid to noncontrolling interests	Distributions paid to noncontrolling interests	—	—		—				—		—				—				(61)			(61)		Distributions paid to noncontrolling interests			—			—		—				—				—				—				(71)				(71)
Other comprehensive loss		—	—		—				(1)		—				—				—			(1)

Accretion of redeemable noncontrolling interests	Accretion of redeemable noncontrolling interests	—	—		(3)				—		—				—				—			(3)		Accretion of redeemable noncontrolling interests			—			—		(95)				—				—				—				—				(95)
Purchases (sales) of businesses and noncontrolling interests, net		—	—		(10)				—		—				—				1			(9)
Sales of businesses and noncontrolling interests, net																								Sales of businesses and noncontrolling interests, net			—			—		(7)				—				—				—				(1)				(8)

Stock-based compensation expense and issuance of common stock	Stock-based compensation expense and issuance of common stock	617	1		10				—		—				1				—			12		Stock-based compensation expense and issuance of common stock			499			—		(10)				—				—				—				—				(10)
Balances at March 31, 2021		106,687	$	8	$	4,841			$	(282)	$	(2,031)			$	(2,413)			$	893		$	1,016
Net income		—	—		—				—		119				—				58			177
Distributions paid to noncontrolling interests		—	—		—				—		—				—				(43)			(43)
Other comprehensive income		—	—		—				5		—				—				—			5
Accretion of redeemable noncontrolling interests		—	—		(4)				—		—				—				—			(4)
Purchases of businesses and noncontrolling interests, net		—	—		3				—		—				—				—			3

Stock-based compensation expense and issuance of common stock		180	—		14				—		—				1				—			15
Balances at June 30, 2021		106,867	$	8	$	4,854			$	(277)	$	(1,912)			$	(2,412)			$	908		$	1,169
Balances at March 31, 2022																								Balances at March 31, 2022			107,688			$	8	$	4,765			$	(233)			$	(1,074)			$	(2,410)			$	1,000			$	2,056


	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

Our noncontrolling interests balances at March 31, 2022 and December 31, 2021 were comprised of $126 million and $128 million, respectively, from our Hospital Operations segment, and $874 million and $898 million, respectively, from our

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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
Net income — — — — 88 — 35 123
Distributions paid to noncontrolling interests — — — — — — (8) (8)
Other comprehensive income — — — 1 — — — 1
Accretion of redeemable noncontrolling interests — — (2) — — — — (2)
Purchases (sales) of businesses and noncontrolling interests, net — — (2) — — — 2 0
Stock-based compensation expense and issuance of common stock 374 — 16 — — — — 16
Balances at June 30, 2020 104,902 $ 7 $ 4,751 $ (255) $ (2,346) $ (2,414) $ 890 $ 633

Our noncontrolling interests balances at June 30, 2021 and December 31, 2020 were comprised of $129 million and $116 million, respectively, from our Hospital Operations segment, and $779 million and $793 million, respectively, from our Ambulatory Care segment. Our net income available to noncontrolling interests for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ in the table above were comprised of $9$3 million and $5$4 million, respectively, from our Hospital Operations segment, and ~~$93~~$43 million and ~~$62~~$40 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 and physician ~~practices, self-insured organizations, health plans and other entities.~~practices.

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Hospital Operations:	Hospital Operations:									Hospital Operations:
Net patient service revenues from hospitals and related outpatient facilities:	Net patient service revenues from hospitals and related outpatient facilities:									Net patient service revenues from hospitals and related outpatient facilities:
Medicare	Medicare	$	697	$	597	$	1,385	$	1,302	Medicare	$	619	$	688
Medicaid	Medicaid	288		259		547		540		Medicaid	192		259
Managed care	Managed care	2,545		1,824		5,025		4,145		Managed care	2,495		2,480
Uninsured	Uninsured	60		22		107		62		Uninsured	38		47
Indemnity and other	Indemnity and other	192		127		368		320		Indemnity and other	164		176
Total	Total	3,782		2,829		7,432		6,369		Total	3,508		3,650
Other revenues(1)	Other revenues(1)	313		259		610		553		Other revenues(1)	290		297
Hospital Operations total prior to inter-segment eliminations	Hospital Operations total prior to inter-segment eliminations	4,095		3,088		8,042		6,922		Hospital Operations total prior to inter-segment eliminations	3,798		3,947
Ambulatory Care	Ambulatory Care	664		368		1,310		858		Ambulatory Care	738		646
Conifer	Conifer	319		305		629		637		Conifer	324		310
Inter-segment eliminations	Inter-segment eliminations	(124)		(113)		(246)		(249)		Inter-segment eliminations	(115)		(122)
Net operating revenues	Net operating revenues	$	4,954	$	3,648	$	9,735	$	8,168	Net operating revenues	$	4,745	$	4,781



(1)			Primarily physician practices revenues.

Adjustments for ~~prior-year~~prior‑year cost reports and related valuation allowances, principally related to Medicare and Medicaid, increased revenues in the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ by ~~$19~~$4 million and $5 million, respectively. Estimated cost report settlements and valuation allowances were included in accounts receivable in the accompanying 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~~presents the composition of net operating revenues for our Ambulatory Care segment:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Net patient service revenues	Net patient service revenues	$	638	$	349	$	1,257	$	813	Net patient service revenues	$	704	$	619
Management fees	Management fees	21		16		43		37		Management fees	29		22
Revenue from other sources	Revenue from other sources	5		3		10		8		Revenue from other sources	5		5
Net operating revenues	Net operating revenues	$	664	$	368	$	1,310	$	858	Net operating revenues	$	738	$	646

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Revenue cycle services – Tenet	Revenue cycle services – Tenet	$	120	$	109	$	238	$	243	Revenue cycle services – Tenet	$	112	$	118
Revenue cycle services – other customers		175		172		344		348
Revenue cycle services – other clients										Revenue cycle services – other clients	189		169
Other services – Tenet	Other services – Tenet	4		4		8		6		Other services – Tenet	3		4
Other services – other customers		20		20		39		40
Other services – other clients										Other services – other clients	20		19
Net operating revenues	Net operating revenues	$	319	$	305	$	629	$	637	Net operating revenues	$	324	$	310

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Other services, ~~represent~~including value‑based care, consulting and other client‑defined projects, represented approximately 7% of Conifer’s revenue for both of the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020 and include value-based care services, consulting services and other client-defined projects.~~2021.

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-~~volume‑ or ~~contingency-based~~contingency‑based contracts, performance incentives, penalties or other variable consideration that is considered constrained. Conifer’s contract with Catholic Health Initiatives (“CHI”), a

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minority interest owner of Conifer Health Solutions, LLC, represents the majority of the ~~fixed-fee~~fixed‑fee revenue related to remaining performance obligations. Conifer’s contract term with CHI ends December 31, 2032.

Six Months
Ending Years Ending Later Years
December 31,
Total 2021 2022 2023 2024 2025
Performance obligations $ 6,452 $ 302 $ 604 $ 603 $ 549 $ 549 $ 3,845


			Nine Months Ending		Years Ending								Later Years
					December 31,
	Total		2022		2023		2024		2025		2026
Performance obligations	$	6,450	$	485	$	646	$	591	$	591	$	591	$	3,546

NOTE 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, 2021 through March 31, 2022 and April 1, 2022 through March 31, 2023, we have coverage totaling $850 million per occurrence, after deductibles and exclusions, with annual aggregate ~~sub-limits~~sub‑limits of $100 million for floods, $200 million for earthquakes and a ~~per-occurrence sub-limit~~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 ~~$40~~$25 million for California earthquakes, $25 million for floods and 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.~~million for the 2021 to 2022 policy period and $5 million for the 2022 to 2023 policy period.

Professional and General Liability Reserves

We are ~~self-insured~~self‑insured for the majority of our professional and general liability claims, and we purchase insurance from third‑parties to cover catastrophic claims. At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the aggregate current and ~~long-term~~long‑term professional and general liability reserves in the accompanying Condensed Consolidated Balance Sheets were ~~$1.016~~$1.075 billion and ~~$978 million,~~$1.045 billion, respectively. These reserves include the reserves recorded by our captive insurance subsidiaries and our 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.

All commercial insurance we purchase is subject to per‑claim and policy period aggregate limits. If the policy period 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.

Malpractice expense of ~~$179~~$81 million and ~~$144~~$91 million was included in other operating expenses, net, in the accompanying Condensed Consolidated Statements of Operations for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

NOTE 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~~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

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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 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, 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

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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.

Government Investigation of Detroit Medical Center

Detroit Medical Center (“DMC”) is subject to an ongoing investigation commenced in October 2017 by the U.S. Attorney’s Office for the Eastern District of Michigan and the Civil Division of the ~~DOJ~~U.S. Department of Justice (“DOJ”) for potential violations of the Stark law, the Medicare and Medicaid ~~anti-kickback~~anti‑kickback and ~~anti-fraud~~anti‑fraud and abuse amendments codified under Section 1128B(b) of the Social Security Act, and the federal False Claims Act related to DMC’s employment of nurse practitioners and physician assistants (“~~Mid-Level~~Mid‑Level Practitioners”) from 2006 through 2017. As previously disclosed, a media report was published in August 2017 alleging that 14 ~~Mid-Level~~Mid‑Level Practitioners were terminated by DMC earlier in 2017 due to compliance concerns. The DOJ issued a civil investigative demand to DMC for documents and interrogatories in September 2021. We are 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 the entities that purchased ~~from us~~ the operations of Hahnemann University Hospital and St. Christopher’s Hospital for Children in Philadelphia from us commenced Chapter 11 bankruptcy proceedings. ~~As previously disclosed in our Form 8-K filed September 1, 2017,~~In the ~~purchasers assumed our funding~~three months ended December 31, 2021, we established a reserve of $23 million for certain obligations ~~under the Pension Fund for Hospital and Health Care Employees of Philadelphia and Vicinity (the “Fund”), a pension plan~~ related to the ~~operations at Hahnemann University Hospital. Pursuant to rules under~~sale of the ~~Employee Retirement Income Security Act~~hospitals and the subsequent bankruptcy proceedings of ~~1974, as amended (“ERISA”), under certain circumstances we could become liable for withdrawal liability in~~ the event a withdrawal is triggered with respect to the Fund. In addition, pursuant to applicable ERISA rules, we could become secondarily liable if the purchasers fail to satisfy their obligations to the Fund.buyers.

We are also subject to 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, including lawsuits from patients, employees and others exposed to ~~COVID-19~~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 presents reconciliations of the beginning and ending liability balances in connection with legal settlements and related costs recorded in continuing operations during the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021.

Balances at
Beginning
of Period Litigation and
Investigation
Costs Cash
Payments Balances at
End of
Period
Six Months Ended June 30, 2021 $ 26 $ 35 $ (29) $ 32
Six Months Ended June 30, 2020 $ 86 $ 4 $ (4) $ 86


	Balances at Beginning of Period		Litigation and Investigation Costs		Cash Payments		Other		Balances at End of Period
Three Months Ended March 31, 2022	$	78	$	20	$	(36)	$	2	$	64
Three Months Ended March 31, 2021	$	26	$	13	$	(15)	$	—	$	24

~~For the six months ended June 30, 2021 and 2020, we recorded costs~~

Table of ~~$35 million and $4 million, respectively, in continuing operations in connection with significant legal proceedings and governmental investigations.~~

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NOTE 13. REDEEMABLE NONCONTROLLING INTERESTS IN EQUITY OF CONSOLIDATED SUBSIDIARIES

We have a put call agreement (the “Baylor Put/Call Agreement”) with Baylor University Medical Center (“Baylor”) that contains put and call options with respect to the 5% ownership interest Baylor holds in USPI. Each year starting in 2021, Baylor may put up to ~~one-third~~one‑third of ~~their~~its total shares in USPI ~~held as of April 1, 2017~~(the “Baylor Shares”) by delivering notice by the end of January of such year. In each year that Baylor does not put the full 33.3% of USPI’s shares allowable, we may call the difference between the number of shares Baylor put and the maximum number of shares ~~they~~it could have put that year. In addition, the Baylor Put/Call Agreement contains a call option pursuant to which we have the ability to acquire all of Baylor’s ownership interest by 2024. We have the ability to choose whether to settle the purchase price for the Baylor put/call, which is mutually ~~agreed-upon~~agreed‑upon fair market value, in cash or shares of our common stock. 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, 2022 and December 31, 2021. During the three months ended March 31, 2022 and 2021, we recognized accretion totaling $94 million and $1 million, respectively, and a corresponding decrease in additional paid-in capital to adjust Baylor’s minority interest in USPI based on an increase in the estimated fair value of USPI.

Baylor did not deliver a put notice to us in January ~~2021.~~2021 or 2022. In each of February 2021 and 2022, we notified Baylor of our intention to exercise our call option to purchase 33.3% of the ~~USPI shares held by~~ Baylor asShares for that year (now 66.6% in total). We are continuing to negotiate the terms of ~~April 1, 2017. Based on the nature of the Baylor Put/Call Agreement, Baylor’s minority interest in USPI was~~

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~~classified as a redeemable noncontrolling interest in the accompanying Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020.~~those purchases.

The following table ~~shows~~presents the changes in redeemable noncontrolling interests in equity of consolidated subsidiaries during the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Balances at beginning of period	Balances at beginning of period	$	1,952	$	1,506	Balances at beginning of period	$	2,203	$	1,952
Net income	Net income	161		80		Net income	94		81
Distributions paid to noncontrolling interests	Distributions paid to noncontrolling interests	(108)		(52)		Distributions paid to noncontrolling interests	(64)		(58)
Accretion of redeemable noncontrolling interests	Accretion of redeemable noncontrolling interests	7		3		Accretion of redeemable noncontrolling interests	95		3
Purchases of businesses and noncontrolling interests, net	Purchases of businesses and noncontrolling interests, net	22		24		Purchases of businesses and noncontrolling interests, net	30		14
Balances at end of period	Balances at end of period	$	2,034	$	1,561	Balances at end of period	$	2,358	$	1,992

The following tables ~~show~~present the composition by segment of our redeemable noncontrolling interests balances at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, as well as our net income available to redeemable noncontrolling interests for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Hospital Operations	Hospital Operations	$	292	$	267	Hospital Operations	$	316	$	297
Ambulatory Care	Ambulatory Care	1,297		1,273		Ambulatory Care	1,545		1,425
Conifer	Conifer	445		412		Conifer	497		481
Redeemable noncontrolling interests	Redeemable noncontrolling interests	$	2,034	$	1,952	Redeemable noncontrolling interests	$	2,358	$	2,203


		Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Hospital Operations	Hospital Operations	$	16	$	(6)	Hospital Operations	$	22	$	13
Ambulatory Care	Ambulatory Care	112		58		Ambulatory Care	56		52
Conifer	Conifer	33		28		Conifer	16		16
Net income available to redeemable noncontrolling interests	Net income available to redeemable noncontrolling interests	$	161	$	80	Net income available to redeemable noncontrolling interests	$	94	$	81

NOTE 14. INCOME TAXES

During the three months ended ~~June 30, 2021,~~March 31, 2022, we recorded income tax expense of ~~$61~~$99 million in continuing operations on pre-tax income of ~~$319~~$378 million compared to ~~income tax expense of~~ $45 million on pre-tax income of ~~$214~~$267 million during the three months ended June 30, 2020. During the six months ended June 30, 2021, we recorded income tax expense of $106 million in continuing operations on pre-tax income of $586 million compared to an income tax benefit of $30 million on pre-tax income of $299 million during the six months ended June 30, 2020. For the six months ended June 30, 2021, theMarch 31, 2021. Our provision for income taxes ~~was~~during interim reporting periods is 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. 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 six months ended June 30, 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 income tax 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 annual effective tax rate. The discrete method treats the year‑to‑date period as if it were the annual period and determines the income tax expense or benefit on that basis. We believe that the use of this discrete method in 2020 was more appropriate than the 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.income.

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~~The~~A reconciliation between the amount of ~~recorded~~reported income tax expense ~~(benefit)~~ and the amount ~~calculated at~~computed by multiplying income from continuing operations before income taxes by the statutory federal tax rate is ~~shown in the following table:~~presented below:

Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
Tax expense at statutory federal rate of 21% $ 67 $ 45 $ 123 $ 63
State income taxes, net of federal income tax benefit 14 10 26 15
Tax benefit attributable to noncontrolling interests (28) (16) (53) (30)
Nondeductible goodwill 7 0 7 0
Nontaxable gains 0 0 0 3
Stock-based compensation (2) 0 (3) 0
Change in valuation allowance 0 2 0 (88)
Other items 3 4 6 7
Income tax expense (benefit) $ 61 $ 45 $ 106 $ (30)


	Three Months Ended March 31,
	2022		2021
Tax expense at statutory federal rate of 21%	$	79	$	56
State income taxes, net of federal income tax benefit	14		13
Tax benefit attributable to noncontrolling interests	(29)		(25)




Stock-based compensation tax benefit	(2)		(1)
Changes in valuation allowance	32		—

Other items	5		2
Income tax expense	$	99	$	45

~~As a result of~~During the ~~change in the business interest expense disallowance rules under the COVID Acts,~~three months ended March 31, 2022, we recorded an income tax ~~benefit~~expense of ~~$88~~$32 million ~~during the six months ended June 30, 2020~~ to ~~decrease~~increase the valuation allowance for interest expense carryforwards due to a change in the ~~additional deduction of~~business interest ~~expense.~~expense disallowance rules in 2022.

~~During the six months ended June 30, 2021, there~~There were 0no adjustments to our estimated liabilities for uncertain tax ~~positions.~~positions during the three months ended March 31, 2022. The total amount of unrecognized tax benefits ~~at June 30, 2021~~as of March 31, 2022 was ~~$31~~$34 million, of which ~~$29~~$32 million, if recognized, would ~~impact~~affect 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 ~~statement~~condensed consolidated statements of operations. ~~There were 0 accrued~~We did not have any interest ~~and~~or penalties on unrecognized tax benefits accrued at ~~June 30, 2021.~~March 31, 2022.

~~At June 30, 2021, 0~~As of March 31, 2022, no significant changes in unrecognized federal and state tax benefits 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 15. EARNINGS PER COMMON SHARE

The following table is a reconciliation of the numerators and denominators of our basic and diluted earnings per common share calculations for our continuing operations for three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021. 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			Net Income Available to Common Shareholders (Numerator)		Weighted Average Shares (Denominator)	Per-Share Amount
Three Months Ended June 30, 2021
Three Months Ended March 31, 2022							Three Months Ended March 31, 2022
Net income available to Tenet Healthcare Corporation common shareholders for basic earnings per share							Net income available to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	139	107,483	$	1.29
Effect of dilutive stock options, restricted stock units, deferred compensation units and convertible instruments							Effect of dilutive stock options, restricted stock units, deferred compensation units and convertible instruments	3		4,537	(0.02)
Net income available to Tenet Healthcare Corporation common shareholders for diluted earnings per share							Net income available to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	142	112,020	$	1.27

Three Months Ended March 31, 2021							Three Months Ended March 31, 2021
Net income available to Tenet Healthcare Corporation common shareholders for basic earnings per share	Net income available to Tenet Healthcare Corporation common shareholders for basic earnings per share	$	120	106,822	$	1.12	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	Effect of dilutive stock options, restricted stock units and deferred compensation units	—		1,747	(0.01)		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	Net income available to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	120	108,569	$	1.11	Net income available to Tenet Healthcare Corporation common shareholders for diluted earnings per share	$	97	108,065	$	0.90

Three Months Ended June 30, 2020
Net income available to Tenet Healthcare Corporation common shareholders for basic earnings per share		$	88	104,794	$	0.84
Effect of dilutive stock options, restricted stock units and deferred compensation units		—		784	(0.01)
Net income available to Tenet Healthcare Corporation common shareholders for diluted earnings per share		$	88	105,578	$	0.83

At March 31, 2022, our convertible instruments consisted of the Baylor Put/Call Agreement and vested RSUs issued under the USPI Management Equity Plan. See additional discussion of these instruments in Notes 13 and 8, respectively.

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Net Income Available
to Common
Shareholders
(Numerator)
Weighted
Average Shares
(Denominator) Per-Share
Amount
Six Months Ended June 30, 2021
Net income available to Tenet Healthcare Corporation common shareholders
for basic earnings per share
$ 217 106,566 $ 2.04
Effect of dilutive stock options, restricted stock units and deferred compensation units — 1,751 (0.04)
Net income available to Tenet Healthcare Corporation common shareholders for diluted earnings per share $ 217 108,317 $ 2.00
Six Months Ended June 30, 2020
Net income available to Tenet Healthcare Corporation common shareholders
for basic earnings per share
$ 182 104,574 $ 1.74
Effect of dilutive stock options, restricted stock units and deferred compensation units — 1,082 (0.02)
Net income available to Tenet Healthcare Corporation common shareholders for diluted earnings per share $ 182 105,656 $ 1.72

NOTE 16. FAIR VALUE MEASUREMENTS

Fair Value Measurements

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. 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~~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.

Our ~~non-financial~~non‑financial assets and liabilities not permitted or required to be measured at fair value on a recurring basis typically relate to ~~long-lived~~long‑lived assets held and used, ~~long-lived~~long‑lived assets held for sale and goodwill. ~~The following table presents information about~~At March 31, 2022, these measurements consisted of long-lived assets ~~measured at~~held for sale, which had an estimated fair value ~~at December 31, 2020~~of $19 million and ~~indicates the fair value hierarchy of the valuation techniques we utilized to determine such fair values. There~~ were ~~no assets measured at fair value on a non-recurring basis at June 30, 2021.~~

Total Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
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
classified as Level 2 measurements.

Financial Instruments

The fair value of our ~~long-term~~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 ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the estimated fair value of our ~~long-term~~long‑term debt was approximately ~~104.7%~~99.3% and ~~104.5%~~103.3%, respectively, of the carrying value of the debt.

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NOTE 17. ACQUISITIONS

Preliminary purchase price allocations (representing the fair value of the consideration conveyed) for all acquisitions made during the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ are as follows:


		Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Current assets	Current assets	$	9	$	7	Current assets	$	3	$	—
Property and equipment	Property and equipment	27		13		Property and equipment	10		18
Other intangible assets	Other intangible assets	1		8		Other intangible assets	2		—
Goodwill	Goodwill	76		76		Goodwill	84		25
Other long-term assets, including previously held equity method investments		9		5
Other long-term assets						Other long-term assets	11		4
Previously held investments in unconsolidated affiliates						Previously held investments in unconsolidated affiliates	(18)		—
Current liabilities	Current liabilities	(16)		(6)		Current liabilities	(5)		(7)
Long-term liabilities	Long-term liabilities	(11)		(6)		Long-term liabilities	(19)		(2)
Redeemable noncontrolling interests in equity of consolidated subsidiaries	Redeemable noncontrolling interests in equity of consolidated subsidiaries	(28)		(30)		Redeemable noncontrolling interests in equity of consolidated subsidiaries	(28)		(11)
Noncontrolling interests	Noncontrolling interests	(2)		(11)		Noncontrolling interests	—		(2)
Cash paid, net of cash acquired	Cash paid, net of cash acquired	(64)		(56)		Cash paid, net of cash acquired	(40)		(25)
Gains on consolidations	Gains on consolidations	$	1	$	0	Gains on consolidations	$	—	$	—

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 ~~$76~~$84 million from acquisitions completed during the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 was recorded in our Ambulatory Care segment. Approximately $5$3 million and $1$4 million in transaction costs related to prospective and closed acquisitions were expensed during the ~~six-month~~three‑month periods ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, and were included in impairment and restructuring charges, and ~~acquisition-related~~acquisition‑related costs in the accompanying Condensed Consolidated 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 allocated over those fair values is recorded as goodwill. The purchase price allocations for certain acquisitions completed in 2022 and 2021 are preliminary. We are in the process of 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 2021 and 2020 acquisitions.~~interests. Therefore, those purchase price allocations, including goodwill, recorded in the accompanying Condensed Consolidated Financial Statements are subject to adjustment once the assessments and valuation work are completed and evaluated. Such adjustments ~~are~~will be recorded as soon as practical and within the measurement period as defined by the accounting literature.

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During the three months ended March 31, 2022, we adjusted the initial purchase allocation of certain acquisitions completed in 2021 based on the results of completed valuations. These adjustments resulted in a net increase in goodwill of $11 million.

NOTE 18. SEGMENT INFORMATION

Our business consists of our Hospital Operations 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 segment is comprised of acute care and specialty hospitals, imaging centers, ancillary outpatient facilities, ~~micro-hospitals, imaging centers,~~micro‑hospitals and physician ~~practices, and other care sites and clinics.~~practices. At ~~June 30, 2021,~~March 31, 2022, our subsidiaries operated 6560 hospitals serving primarily urban and suburban communities in 9 states. On April 1, 2021, we transferred 24 imaging centers from our Ambulatory Care segment to our Hospital Operations segment. 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. ~~In addition,~~Also in April 2021, we completed the sale of the majority of the urgent care centers then held by our Hospital Operations segment to an unaffiliated urgent care provider. ~~Certain~~In addition, we completed the sale of 5 Miami‑area hospitals and certain related operations in August 2021. In April 2022, we completed the ~~facilities in our~~sale of a Hospital Operations segment ~~were~~micro-hospital, which was classified as held for sale in the accompanying Condensed Consolidated Balance ~~Sheets~~Sheet at ~~June 30, 2021 and December~~March 31, ~~2020.~~2022.

Our Ambulatory Care segment is comprised of the operations of USPI. At ~~June 30, 2021,~~March 31, 2022, USPI had interests in ~~317~~404 ambulatory surgery centers (253 consolidated) and 24 surgical hospitals (8 consolidated) in 3134 states. ~~At December 31, 2020,~~In April 2021, we completed the sale of 40 urgent care centers then held by our Ambulatory Care segment ~~included 40~~to an unaffiliated urgent care provider and, as noted above, transferred 24 imaging centers ~~that were classified as held for sale. We completed the divestiture of these urgent care centers in April 2021.~~from our Ambulatory Care segment to our Hospital Operations segment. At ~~June 30, 2021,~~March 31, 2022, we owned approximately 95% of USPI.

Our Conifer segment provides revenue cycle management and ~~value-based~~value‑based care services to hospitals, health systems, physician practices, employers and other clients. At ~~June 30, 2021,~~March 31, 2022, Conifer provided services to approximately ~~640~~660 Tenet and ~~non-Tenet~~non‑Tenet hospitals and other clients nationwide. ~~In 2012, we entered into an agreement documenting the terms and conditions of various services~~ Conifer provides ~~to Tenet hospitals (“RCM Agreement”), as well as an agreement documenting certain~~

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revenue management, administrative services our Hospital Operations segment provides to Conifer. 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~~various other services ~~Conifer provides~~ to Tenet hospitals. We believe the pricing terms for ~~the~~these services ~~provided under the Amended RCM Agreement~~ are commercially reasonable and consistent with estimated ~~third-party~~third‑party terms. At ~~June 30, 2021,~~March 31, 2022, we owned approximately 76% of Conifer Health Solutions, LLC, which is Conifer’s principal 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, as applicable:


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Assets:	Assets:					Assets:
Hospital Operations	Hospital Operations	$	17,726	$	18,048	Hospital Operations	$	16,236	$	17,173
Ambulatory Care	Ambulatory Care	7,872		8,048		Ambulatory Care	9,486		9,473
Conifer	Conifer	967		1,010		Conifer	928		933
Total	Total	$	26,565	$	27,106	Total	$	26,650	$	27,579

Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
Capital expenditures:
Hospital Operations $ 90 $ 90 $ 200 $ 257
Ambulatory Care 27 10 35 21
Conifer 5 6 8 10
Total $ 122 $ 106 $ 243 $ 288
Net operating revenues:
Hospital Operations total prior to inter-segment eliminations $ 4,095 $ 3,088 $ 8,042 $ 6,922
Ambulatory Care 664 368 1,310 858
Conifer
Tenet 124 113 246 249
Other clients 195 192 383 388
Total Conifer revenues 319 305 629 637
Inter-segment eliminations (124) (113) (246) (249)
Total $ 4,954 $ 3,648 $ 9,735 $ 8,168
Equity in earnings of unconsolidated affiliates:
Hospital Operations $ 5 $ (4) $ 9 $ (2)
Ambulatory Care 49 35 87 61
Total $ 54 $ 31 $ 96 $ 59
Adjusted EBITDA:
Hospital Operations $ 449 $ 492 $ 883 $ 834
Ambulatory Care 295 167 552 323
Conifer 90 73 176 160
Total $ 834 $ 732 $ 1,611 $ 1,317
Depreciation and amortization:
Hospital Operations $ 188 $ 177 $ 378 $ 352
Ambulatory Care 23 20 48 39
Conifer 10 9 19 18
Total $ 221 $ 206 $ 445 $ 409


	Three Months Ended March 31,
	2022		2021
Capital expenditures:
Hospital Operations	$	132	$	110
Ambulatory Care	21		8
Conifer	2		3
Total	$	155	$	121

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Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
Adjusted EBITDA $ 834 $ 732 $ 1,611 $ 1,317
Depreciation and amortization (221) (206) (445) (409)
Impairment and restructuring charges, and acquisition-related costs (20) (54) (40) (109)
Litigation and investigation costs (22) (2) (35) (4)
Interest expense (235) (255) (475) (498)
Loss from early extinguishment of debt (31) (4) (54) (4)
Other non-operating income (expense), net (1) 2 9 3
Net gains on sales, consolidation and deconsolidation of facilities 15 1 15 3
Income from continuing operations, before income taxes $ 319 $ 214 $ 586 $ 299


	Three Months Ended March 31,
	2022		2021






Net operating revenues:
Hospital Operations total prior to inter-segment eliminations	$	3,798	$	3,947
Ambulatory Care	738		646
Conifer
Tenet	115		122
Other clients	209		188
Total Conifer revenues	324		310
Inter-segment eliminations	(115)		(122)
Total	$	4,745	$	4,781

Equity in earnings of unconsolidated affiliates:
Hospital Operations	$	4	$	4
Ambulatory Care	42		38
Total	$	46	$	42

Adjusted EBITDA:
Hospital Operations	$	514	$	434
Ambulatory Care	282		257
Conifer	92		86
Total	$	888	$	777

Depreciation and amortization:
Hospital Operations	$	167	$	190
Ambulatory Care	27		25
Conifer	9		9
Total	$	203	$	224

Adjusted EBITDA	$	888	$	777

Depreciation and amortization	(203)		(224)
Impairment and restructuring charges, and acquisition-related costs	(16)		(20)
Litigation and investigation costs	(20)		(13)
Interest expense	(227)		(240)
Loss from early extinguishment of debt	(43)		(23)
Other non-operating income, net	—		10
Net losses on sales, consolidation and deconsolidation of facilities	(1)		—
Income from continuing operations, before income taxes	$	378	$	267

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

INTRODUCTION TO MANAGEMENT’S DISCUSSION AND ANALYSIS

The purpose of this section, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), is to provide a narrative explanation of our financial statements that enables investors to better understand our business, to enhance our overall financial disclosures, to provide the context within which our financial information may be analyzed, and to provide information about the quality of, and potential variability of, our financial condition, results of operations and cash flows. MD&A, which should be read in conjunction with the accompanying Condensed Consolidated Financial Statements, includes the following sections:

•Management Overview

•Forward-Looking Statements

•Sources of Revenue 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, imaging centers, ancillary outpatient facilities, ~~micro-hospitals, imaging centers,~~micro‑hospitals and physician ~~practices, and other care sites and clinics.~~practices. At ~~June 30, 2021,~~March 31, 2022, our subsidiaries operated 6560 hospitals serving primarily urban and suburban communities in nine states. In April ~~2021, our~~2022, we completed the sale of a Hospital Operations segment micro‑hospital, which was classified as held for sale in the accompanying Condensed Consolidated Balance Sheet at March 31, 2022. In April 2021, we completed the sale of the majority of ~~its~~the urgent care centers then held by our Hospital Operations segment to an unaffiliated urgent care provider. ~~As described~~In addition, in ~~Note 4 to~~August 2021, we completed the ~~accompanying Condensed Consolidated Financial Statements,~~sale of five Miami‑area hospitals and certain ~~of the facilities in~~related operations (the “Miami Hospitals”) held by our Hospital Operations ~~segment were classified as held for sale at June 30, 2021.~~ segment.

Our Ambulatory Care segment is comprised of the operations of USPI Holding Company, Inc. (“USPI”), in which we ~~own a~~held an ownership interest of approximately 95% ~~interest. At June 30, 2021,~~at March 31, 2022. USPI had interests in ~~317~~404 ambulatory surgery centers (each, an “ASC”) (253 consolidated) and 24 surgical hospitals (eight consolidated) in 34 states at March 31, ~~states. At~~2022. In April 2021, we completed the ~~beginning~~sale of ~~the three months ended June 30, 2021,~~40 urgent care centers then held by our Ambulatory Care segment ~~also included~~to an unaffiliated urgent care provider and transferred 24 imaging centers ~~which were transferred~~from our Ambulatory Care segment to our Hospital Operations segment in April 2021. In addition, at December 31, 2020, our Ambulatory Care segment included 40 urgent care centers that were classified as held for sale. We completed the divestiture of these urgent care centers in April 2021. segment.

Our Conifer segment provides revenue cycle management and ~~value-based~~value‑based care services to hospitals, health systems, physician practices, employers and other clients through our Conifer Holdings, Inc. subsidiary (“Conifer”) ~~subsidiary.~~. At ~~June 30, 2021,~~March 31, 2022, Conifer provided services to ~~approximately 640~~over 660 Tenet and ~~non-Tenet~~non‑Tenet hospitals and other clients nationwide. ~~At June 30, 2021, we owned 76%~~Nearly all of the services comprising the operations of our Conifer segment are provided by Conifer Health Solutions, LLC, in which ~~is Conifer’s principal subsidiary.~~ we held an ownership interest of approximately 76% at March 31, 2022, or by one of its direct or indirect wholly owned subsidiaries.

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 adjusted patient~~ per‑adjusted‑patient‑admission and ~~per adjusted patient~~ per‑adjusted‑patient‑day amounts). Continuing operations information includes the results of our same 6560 hospitals operated throughout the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020.~~as well as the Miami Hospitals sold in August 2021. Continuing operations information excludes the results of our hospitals and other businesses that have been classified as discontinued operations for accounting purposes. We believe this information is useful to investors because it includes the operations of all facilities in continuing operations for the period of time that we owned and operated them, and it reflects the recent trends we are experiencing with respect to volumes, revenues and expenses. We present certain metrics as a percentage of net operating revenues because a significant portion of our operating expenses are variable. In addition, we present certain metrics on a per‑adjusted-patient‑admission and per‑adjusted‑patient‑day basis to show trends other than volume.

In certain cases, information presented in MD&A for our Hospital Operations segment is described as presented on a same‑hospital basis, which includes the results of our same 60 hospitals operated throughout the three months ended March 31, 2022 and 2021, and excludes the results of the Miami Hospitals we sold in August 2021 and the results of our discontinued operations. We present same‑hospital data because we believe it provides investors with useful information regarding the performance of our current portfolio of hospitals and other operations that are comparable for the periods presented, as well as reflects recent trends we are experiencing with respect to volumes, revenues and expenses.

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MANAGEMENT OVERVIEW

~~RECENT DEVELOPMENTS~~

~~Definitive Agreement to Sell Five Hospitals and Related Operations in the Miami Area~~—In June 2021, we entered into a definitive agreement to sell five hospitals and related operations in the Miami area. This sale, which is subject to customary closing conditions, including regulatory approvals, is expected to be completed in the third quarter of 2021. For additional details, see Note 4 to the accompanying Condensed Consolidated Financial Statements.

IMPACT OF THE COVID-19 PANDEMIC

The COVID‑19 pandemic generally and, most recently, 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 year ended December 31, 2020. Restrictive measures, including travel bans, social distancing, quarantines and shelter‑in‑place orders, reduced the number of procedures performed at our facilities, as well as the volume of emergency room and physician office visits. We began experiencing gradual andOmicron variant 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.~~employees, in the three months ended March 31, 2022. Broad economic factors resulting from the pandemic ~~including increased unemployment rates and reduced~~

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~~consumer spending, continue to impact~~affected our patient volumes, service mix and revenue mix. ~~The~~In addition, the pandemic ~~has also~~ continued to have an adverse ~~effect~~impact on certain of our operating expenses in the first quarter of 2022.

Various federal legislative actions, including additional funding for the Public Health and Social Services Emergency Fund (“PRF”), have mitigated some of the economic disruption caused by the COVID‑19 pandemic on our business. In the three months ended March 31, 2022 and 2021, we received cash payments of $5 million and $59 million, respectively, from the PRF and state and local grant programs. We recognized $6 million and $31 million, respectively, from these funds as grant income during the three-month periods in 2022 and 2021, respectively. In addition, we recognized $6 million in equity in earnings of unconsolidated affiliates in the accompanying Condensed Consolidated Statement of Operations during the three months ended March 31, 2021.

Throughout MD&A, we have provided additional information on the impact of the COVID‑19 pandemic on our results of operations and the steps we have taken, and are continuing to take, in response. The ultimate extent and scope of the pandemic and its future impact on our business remain unknown. For information about risks and uncertainties related to COVID‑19 that could affect our results of operations, financial condition and cash flows, see the Risk Factors section in this report and in Part I of our Annual Report on Form 10-K for the year ended December 31, 2021 (“Annual Report”).

TRENDS AND STRATEGIES

As described above and throughout MD&A, we continue to experience negative impacts of the pandemic on our business in varying ~~degrees~~degrees. Most recently, primarily in ~~2021.~~January and February 2022, we were affected by a significant acceleration in COVID-19 cases associated with the Omicron variant. Throughout the COVID‑19 pandemic, we have taken, and we continue to take, various actions to increase our liquidity and mitigate the impact of reductions in our patient volumes and changes in our service mix and revenue mix. We have issued new senior unsecured notes and senior secured first lien notes, redeemed existing senior unsecured notes and senior secured first lien notes, including those with the highest interest rates of all of our long‑term debt, and amended our senior secured revolving credit facility (as amended to date, the “Credit Agreement”). We also decreased our employee headcount throughout the organization at the outset of the COVID-19 pandemic, and we deferred certain operating expenses that were not expected to impact our response to the pandemic. In addition, we reduced certain variable costs across the enterprise. Together with government relief packages, we believe these actions supported our ability to provide essential patient services during the initial uncertainty caused by the COVID-19 pandemic and continue to do so. For further information on our liquidity, see “Liquidity and Capital Resources” below.

We have experienced, and continue to experience, increased competition with other healthcare providers in recruiting and retaining qualified personnel responsible for the operation of our facilities. There is a limited availability of experienced medical support personnel nationwide, which drives up the wages and benefits required to recruit and retain employees. In particular, like others in the healthcare industry, we continue to experience a shortage of critical‑care nurses in certain disciplines and geographic areas. This shortage has been exacerbated by the COVID‑19 pandemic as more nurses choose to retire early, leave the workforce or take travel assignments. In some areas, the increased demand for care of COVID‑19 patients in our ~~markets,~~hospitals, as well as the direct impact of COVID‑19 on physicians, employees and their families, have put a strain on our resources and staff. Over the past two years, we have ~~been required~~had to ~~utilize~~rely on higher-cost temporary contract labor, which we compete with other healthcare providers to secure, 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~~ 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 six months ended June 30, 2021 and 2020, we received cash payments of $63 million and $712 million, we recognized approximately $50 million and $511 million as grant income, and we recognized $11 million and $12 million in equity in earnings of unconsolidated affiliates, respectively, in our accompanying Condensed Consolidated Statements of Operations due to grants from the Provider Relief Fund and other state and local grant programs.

Throughout MD&A, we have provided additional information on the impact of the COVID-19 pandemic on our results of operations and the steps we 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 related to 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 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 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. Since the COVID-19 pandemic began to disrupt our business in March 2020, we have issued new senior notes and senior secured first lien notes, redeemed existing senior notes, including those with the highest interest rate and nearest maturity date of 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 further information on our liquidity, see “Liquidity and Capital Resources” below.

In recent years, the healthcare industry, in general, and the acute care hospital business, in particular, have experienced significant regulatory uncertainty based, in large part, on administrative, legislative and 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”). It is difficult to predict the full impact of regulatory uncertainty on our future revenues and operations. In addition, we believe that several key trends ~~have shaped~~are also continuing to shape the demand for healthcare ~~services in recent years:~~services: (1) consumers, employers and insurers are actively seeking ~~lower-cost~~lower‑cost solutions and better value as they focus more on healthcare spending; (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; (3) the growing aging population requires greater chronic disease management and ~~higher-acuity~~higher‑acuity treatment; and (4) consolidation continues across the entire healthcare sector. In addition, the healthcare industry, in general, and the acute care hospital business, in particular, have experienced significant regulatory uncertainty based, in large part, on administrative, legislative and judicial efforts to limit, alter or repeal the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (“Affordable Care Act”). It is difficult to predict the full impact of regulatory uncertainty on our future revenues and operations.

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Expansion of Our Ambulatory Care Segment—In response to these trends, we continue to focus on opportunities to expand our Ambulatory Care segment through acquisitions, organic growth, construction of new outpatient centers and strategic partnerships. During the years ended December 31, 2021 and 2020, we invested $1.315 billion and $1.200 billion, respectively, to acquire ownership interests in new ASCs, increase our ownership interests in existing facilities and invest in de novo facilities. This activity included the acquisition of ownership interests in 86 ASCs and related ambulatory support services (collectively, the “SCD Centers”) from Surgical Center Development #3, LLC and Surgical Center Development #4, LLC (“SCD”) in December 2021. USPI and SCD’s principals have also entered into a joint venture and development agreement under which USPI will have the exclusive option to partner with affiliates of SCD on the future development of a minimum target of 50 de novo ASCs over a period of five years.

During the three months ended March 31, 2022, we acquired controlling interests in two ASCs in Florida and one in New Hampshire, and we acquired a noncontrolling interest in an ASC located in New Jersey. During the same period, we also acquired controlling ownership interests in three previously unconsolidated SCD Centers located in Florida, Pennsylvania and Texas. In addition, we opened two new ASCs in the first quarter of 2022 – one in Florida and one in North Carolina. We believe USPI’s ASCs 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 increase. Historically, our outpatient services have generated significantly higher margins for us than inpatient services.

Driving Growth in Our Hospital Systems—We ~~are~~remain committed to better positioning our hospital systems and competing more effectively in the ~~ever-evolving~~ever‑evolving healthcare environment by focusing on 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~~higher‑demand and ~~higher-acuity~~higher‑acuity clinical service lines (including outpatient lines), expanding patient and physician access, and optimizing our portfolio of assets. Over the past several years, we have undertaken ~~enterprise-wide cost-reduction~~enterprise‑wide cost‑efficiency measures, ~~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~~continue to transition certain support operations offshore to our Global Business Center (“GBC”) in the Philippines. InWe incurred restructuring charges 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 $10 million~~ in the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, and we ~~expect to~~could incur additional such ~~restructuring~~ charges ~~throughout 2021.~~in the future.

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We also continue to exit service lines, businesses and markets that we believe are no longer a core part of our long‑term growth strategy. In April 2021, we divested the majority of our urgent care centers operated under the MedPost and CareSpot brands by our Hospital Operations and Ambulatory Care segments. In addition, we completed the sale of the Miami Hospitals in ~~June 2021, we entered into a definitive agreement to sell five of our Miami-area hospitals and certain related operations.~~August 2021. We intend ~~to continue~~ to further refine our portfolio of hospitals and other 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~~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 a focus on aging and chronic disease patients; (3) offering greater affordability and 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 serve. Through these efforts, we intend to improve the customer care experience in every part of our operations.

~~Expansion of Our Ambulatory Care Segment—~~We 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 six months ended June 30, 2021, we acquired controlling ownership interests in four ambulatory surgery centers in Maryland, two in Georgia and one in Florida. We also opened two new ambulatory surgery centers – one in Nevada and one in Montana. 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 increase following the 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—~~Growth—We 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 as a separate, independent, publicly traded company. Completion of the proposed spin-off is subject to 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 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 restatement of the master services agreement between Conifer and Tenet remains an additional prerequisite to the spin-off of Conifer. We are continuing to pursue the Conifer spin-off; however, there can be no assurance regarding the timeframe for completion, the allocation of assets and liabilities betweenserves over 660 Tenet and ~~Conifer, that the other conditions of the spin-off will be met, or that it will be completed at all.~~

~~Conifer serves approximately 640~~ non‑Tenet ~~and non-Tenet~~ hospitals and other clients nationwide. In addition to providing revenue cycle management services to health systems and physicians, Conifer provides support to both providers and self‑insured employers seeking assistance with clinical integration, financial risk management and population health management. Conifer remains focused on driving growth by continuing to market and expand its revenue cycle management and ~~value-based~~value‑based care solutions businesses. We believe that our success in growing Conifer and increasing its profitability depends 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~~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~~value‑based care environment to drive competitive differentiation.

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Improving Profitability—As we return to more normal operations, we ~~will~~ continue to focus on growing patient volumes and effective cost management as a means to improve profitability. We believe our inpatient admissions have been constrained in recent years (prior to the ~~COVID-19~~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~~co‑pays, co‑insurance amounts and deductibles, changing consumer behavior, and adverse economic conditions and demographic trends in certain of our markets. However, we also believe that emphasis on ~~higher-demand~~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 over time. We are also continuing to explore new opportunities to enhance efficiency, including further integration of ~~enterprise-wide~~enterprise‑wide centralized support functions, outsourcing additional functions unrelated to direct patient care, and reducing clinical and vendor contract variation.

Reducing Our Leverage Over Time—All of our outstanding ~~long-term~~long‑term debt has a fixed rate of interest, except for outstanding borrowings, if any, under our ~~revolving credit facility,~~Credit Agreement, and the maturity dates of our notes are staggered from 2023 through 2031. We believe that our capital structure minimizes the ~~near-term~~near‑term impact of increased interest rates, and the staggered maturities of our debt allow us to refinance our debt over time. During the three months ended March 31, 2022, we redeemed all $700 million aggregate principal amount outstanding of our 7.500% senior secured first lien notes due 2025 (the “2025 Senior Secured First Lien Notes”) in advance of their maturity date using cash on hand. In addition, we repurchased $103 million aggregate principal amount outstanding of our 6.750% senior unsecured notes due 2023 (the “2023 Senior Unsecured Notes”) through a series of open‑market transactions in March 2022 using cash on hand. We anticipate these redemption and repurchase transactions will reduce future annual cash interest expense payments by approximately $60 million. It isremains our long‑term objective to reduce our debt and lower our ratio of ~~debt-to-Adjusted~~debt‑to‑Adjusted EBITDA, primarily through more efficient capital allocation and Adjusted EBITDA growth, which should lower our refinancing risk. During the six months ended June 30, 2021, we retired approximately $1.888 billion aggregate principal amount of certain of our senior unsecured and senior secured second lien notes. These notes were retired using proceeds from the June 2021 sale of $1.400 billion aggregate principal amount of 4.250% senior secured first lien notes, which will mature on June 1, 2029 (the “2029 Senior Secured First Lien Notes”), and cash on hand. These transactions reduced future annual cash interest expense payments by approximately $46 million.

Our ability to execute on our strategies and respond to the aforementioned trends is subject to the extent and scope of the impact on our operations of the ~~COVID-19~~COVID‑19 pandemic, as well as a number of other risks and uncertainties, 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~~Forward‑Looking Statements ~~section~~and Risk Factors sections in this report, as well as the ~~Forward-Looking~~Forward‑Looking Statements and Risk Factors sections in Part I of our Annual Report.

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RESULTS OF OPERATIONS—OVERVIEW

~~We have provided below certain~~The following tables present selected operating statistics for our Hospital Operations and Ambulatory Care segments, as well as consolidated net operating revenues and expenses, in each case for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ on a continuing operations basis. The following tables also show information about facilities in our Ambulatory Care segment that we control and, 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 June 30,				Increase (Decrease)				Continuing Operations Three Months Ended March 31,				Increase (Decrease)
Selected Operating Statistics	Selected Operating Statistics	2021		2020					Selected Operating Statistics	2022		2021
Hospital Operations – hospitals and related outpatient facilities:	Hospital Operations – hospitals and related outpatient facilities:								Hospital Operations – hospitals and related outpatient facilities:
Number of hospitals (at end of period)	Number of hospitals (at end of period)	65		65		—		(1)	Number of hospitals (at end of period)	60		65		(5)		(1)
Total admissions	Total admissions	153,319		134,898		13.7	%		Total admissions	127,781		147,674		(13.5)	%
Adjusted patient admissions(2)	Adjusted patient admissions(2)	273,824		221,159		23.8	%		Adjusted patient admissions(2)	227,933		251,017		(9.2)	%
Paying admissions (excludes charity and uninsured)	Paying admissions (excludes charity and uninsured)	143,864		125,792		14.4	%		Paying admissions (excludes charity and uninsured)	121,802		138,756		(12.2)	%
Charity and uninsured admissions	Charity and uninsured admissions	9,455		9,106		3.8	%		Charity and uninsured admissions	5,979		8,918		(33.0)	%
Admissions through emergency department	Admissions through emergency department	114,911		98,193		17.0	%		Admissions through emergency department	97,688		112,730		(13.3)	%
Emergency department visits, outpatient	Emergency department visits, outpatient	541,417		388,038		39.5	%		Emergency department visits, outpatient	500,659		450,830		11.1	%
Total emergency department visits	Total emergency department visits	656,328		486,231		35.0	%		Total emergency department visits	598,347		563,560		6.2	%
Total surgeries	Total surgeries	101,023		73,722		37.0	%		Total surgeries	84,166		89,964		(6.4)	%
Patient days — total	Patient days — total	757,003		687,883		10.0	%		Patient days — total	705,627		797,489		(11.5)	%
Adjusted patient days(2)	Adjusted patient days(2)	1,328,952		1,094,208		21.5	%		Adjusted patient days(2)	1,224,824		1,321,890		(7.3)	%
Average length of stay (days)	Average length of stay (days)	4.94		5.10		(3.1)	%		Average length of stay (days)	5.52		5.40		2.2	%
Average licensed beds	Average licensed beds	17,170		17,219		(0.3)	%		Average licensed beds	15,395		17,178		(10.4)	%
Utilization of licensed beds(3)	Utilization of licensed beds(3)	48.4	%	43.9	%	4.5	%	(1)	Utilization of licensed beds(3)	50.9	%	51.6	%	(0.7)	%	(1)
Total visits	Total visits	1,653,430		983,321		68.1	%		Total visits	1,373,188		1,401,217		(2.0)	%
Paying visits (excludes charity and uninsured)	Paying visits (excludes charity and uninsured)	1,540,577		908,197		69.6	%		Paying visits (excludes charity and uninsured)	1,295,352		1,312,096		(1.3)	%
Charity and uninsured visits	Charity and uninsured visits	112,853		75,124		50.2	%		Charity and uninsured visits	77,836		89,121		(12.7)	%
Ambulatory Care:	Ambulatory Care:								Ambulatory Care:
Total consolidated facilities (at end of period)	Total consolidated facilities (at end of period)	232		243		(11)		(1)	Total consolidated facilities (at end of period)	261		291		(30)		(1)
Total cases		352,972		364,196		(3.1)	%
Total consolidated cases									Total consolidated cases	300,320		553,814		(45.8)	%



(1)			The change is the difference between the ~~2021~~2022 and ~~2020~~2021 amounts shown.
(2)			Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services provided by facilities in our Hospital Operations 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 ~~increased~~decreased by ~~18,421,~~19,893, or ~~13.7%~~13.5%, and total surgeries decreased by 5,798, or 6.4%, in the three months ended ~~June 30, 2021~~March 31, 2022 compared to the three months ended ~~June 30, 2020, and total surgeries increased by 27,301, or 37.0%, in the 2021 period compared to the 2020 period.~~March 31, 2021. Total emergency department visits increased ~~35.0%~~6.2% in the three months ended ~~June 30, 2021~~March 31, 2022 compared to the same period in ~~the prior year.~~2021. The ~~increase~~decrease in our patient volumes from continuing operations in the three months ended ~~June 30, 2021~~March 31, 2022 compared to the three months ended June 30, 2020 reflects the gradual and continued recovery from the COVID-19 pandemic. Patient and surgical volumes during the three months ended June 30, 2020 were negatively impacted by shelter-in-place orders, the mandated suspension of many elective procedures at our hospitals dueMarch 31, 2021 is primarily attributable to the ~~COVID-19 pandemic,~~sale of the Miami Hospitals in August 2021 and the ~~closure or reduction~~impact of ~~operating hours at our ambulatory surgery centers~~the Omicron variant in January and ~~other outpatient centers that specialize in elective procedures, all of which began in March 2020.~~February 2022. The decrease ofin Ambulatory Care total consolidated cases of ~~3.1%~~45.8% in the three months ended ~~June 30, 2021~~March 31, 2022 compared to the ~~2020~~same period in 2021 is primarily due to the divestiture of ~~the~~USPI’s urgent care centers and the realignment of ~~the~~its imaging centers under our Hospital Operations segment.


		Continuing Operations Three Months Ended June 30,				Increase (Decrease)			Continuing Operations Three Months Ended March 31,				Increase (Decrease)
Revenues	Revenues	2021		2020				Revenues	2022		2021
Net operating revenues:	Net operating revenues:							Net operating revenues:
Hospital Operations prior to inter-segment eliminations	Hospital Operations prior to inter-segment eliminations	$	4,095	$	3,088	32.6	%	Hospital Operations prior to inter-segment eliminations	$	3,798	$	3,947	(3.8)	%
Ambulatory Care	Ambulatory Care	664		368		80.4	%	Ambulatory Care	738		646		14.2	%
Conifer	Conifer	319		305		4.6	%	Conifer	324		310		4.5	%
Inter-segment eliminations	Inter-segment eliminations	(124)		(113)		9.7	%	Inter-segment eliminations	(115)		(122)		(5.7)	%
Total	Total	$	4,954	$	3,648	35.8	%	Total	$	4,745	$	4,781	(0.8)	%

Net operating revenues decreased by $36 million, or 0.8%, in the three months ended March 31, 2022 compared to the same period in 2021, primarily due to the loss of revenues in our Hospital Operations segment from the Miami Hospitals we sold in August 2021 and lower patient volumes, partially offset by high patient acuity and negotiated commercial rate increases. On a consolidated basis, this decrease was further offset by higher revenues from our Ambulatory Care segment, which increased $92 million, or 14.2%, in the 2022 period compared to the 2021 period. This increase was largely driven by our

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~~Net operating~~recently acquired ASCs, higher surgical patient volumes and negotiated commercial rate increases. Conifer’s revenues, net of intercompany eliminations, increased ~~by $1.306 billion,~~$21 million, or ~~35.8%~~11.2%, induring the three months ended ~~June 30, 2021~~March 31, 2022 compared to the same period in ~~2020,~~2021, primarily due to ~~growth in patient volumes, continued high patient acuity, USPI’s acquisition of the SCD Centers in December 2020~~contractual rate increases and ~~negotiated commercial rate increases.~~new business expansion. During the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we recognized net grant income of ~~$19~~$6 million and ~~$511~~$31 million, respectively, which amounts are not included in net operating revenues.

Our accounts receivable days outstanding (“AR Days”) from continuing operations were ~~55.2~~58.9 days at ~~June 30, 2021~~March 31, 2022 and ~~55.6~~57.0 days at December 31, ~~2020, compared~~2021, primarily due to the approval of Texas’ Medicaid supplemental funding programs by the Centers for Medicare and Medicaid Services (“CMS”) at the end of March 2022, which resulted in our recognition of $57 million of revenue in the three months ended March 31, 2022. This revenue has not yet been collected given that the programs were just recently approved. Our AR Days target ofis 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 Miami-area hospitals that have been classified in assets held for sale on our Condensed Consolidated Balance Sheet at June 30, 2021.~~assets. The AR Days calculation excludes (i) urgent care centers operated under the MedPost and CareSpot brands, which we divested ~~effective~~in April ~~30,~~2021, (ii) the Miami Hospitals, which we sold in August 2021, and ~~(ii)~~(iii) our California provider fee revenues.


		Continuing Operations Three Months Ended June 30,				Increase (Decrease)			Continuing Operations Three Months Ended March 31,				Increase (Decrease)
Selected Operating Expenses	Selected Operating Expenses	2021		2020				Selected Operating Expenses	2022		2021
Hospital Operations:	Hospital Operations:							Hospital Operations:
Salaries, wages and benefits	Salaries, wages and benefits	$	1,941	$	1,580	22.8	%	Salaries, wages and benefits	$	1,820	$	1,857	(2.0)	%
Supplies	Supplies	689		531		29.8	%	Supplies	583		646		(9.8)	%
Other operating expenses	Other operating expenses	901		842		7.0	%	Other operating expenses	774		916		(15.5)	%
Total	Total	$	3,531	$	2,953	19.6	%	Total	$	3,177	$	3,419	(7.1)	%
Ambulatory Care:	Ambulatory Care:							Ambulatory Care:
Salaries, wages and benefits	Salaries, wages and benefits	$	169	$	119	42.0	%	Salaries, wages and benefits	$	194	$	174	11.5	%
Supplies	Supplies	169		79		113.9	%	Supplies	201		157		28.0	%
Other operating expenses	Other operating expenses	95		75		26.7	%	Other operating expenses	105		103		1.9	%
Total	Total	$	433	$	273	58.6	%	Total	$	500	$	434	15.2	%
Conifer:	Conifer:							Conifer:
Salaries, wages and benefits	Salaries, wages and benefits	$	170	$	165	3.0	%	Salaries, wages and benefits	$	168	$	170	(1.2)	%
Supplies	Supplies	1		1		—	%	Supplies	1		1		—	%
Other operating expenses	Other operating expenses	58		66		(12.1)	%	Other operating expenses	63		53		18.9	%
Total	Total	$	229	$	232	(1.3)	%	Total	$	232	$	224	3.6	%
Total:	Total:							Total:
Salaries, wages and benefits	Salaries, wages and benefits	$	2,280	$	1,864	22.3	%	Salaries, wages and benefits	$	2,182	$	2,201	(0.9)	%
Supplies	Supplies	859		611		40.6	%	Supplies	785		804		(2.4)	%
Other operating expenses	Other operating expenses	1,054		983		7.2	%	Other operating expenses	942		1,072		(12.1)	%
Total	Total	$	4,193	$	3,458	21.3	%	Total	$	3,909	$	4,077	(4.1)	%
Rent/lease expense(1):
Rent/lease expense(1):								Rent/lease expense(1):
Hospital Operations	Hospital Operations	$	75	$	67	11.9	%	Hospital Operations	$	70	$	77	(9.1)	%
Ambulatory Care	Ambulatory Care	24		20		20.0	%	Ambulatory Care	27		27		—	%
Conifer	Conifer	3		3		—	%	Conifer	3		3		—	%
Total	Total	$	102	$	90	13.3	%	Total	$	100	$	107	(6.5)	%



(1)			Included in other operating expenses.


		Continuing Operations Three Months Ended June 30,				Increase (Decrease)			Continuing Operations Three Months Ended March 31,				Increase (Decrease)
Selected Operating Expenses per Adjusted Patient Admission	Selected Operating Expenses per Adjusted Patient Admission	2021		2020				Selected Operating Expenses per Adjusted Patient Admission	2022		2021
Hospital Operations:	Hospital Operations:							Hospital Operations:
Salaries, wages and benefits per adjusted patient admission(1)	Salaries, wages and benefits per adjusted patient admission(1)	$	7,090	$	7,147	(0.8)	%	Salaries, wages and benefits per adjusted patient admission(1)	$	7,985	$	7,396	8.0	%
Supplies per adjusted patient admission(1)	Supplies per adjusted patient admission(1)	2,519		2,396		5.1	%	Supplies per adjusted patient admission(1)	2,557		2,571		(0.5)	%
Other operating expenses per adjusted patient admission(1)	Other operating expenses per adjusted patient admission(1)	3,289		3,811		(13.7)	%	Other operating expenses per adjusted patient admission(1)	3,393		3,647		(7.0)	%
Total per adjusted patient admission	Total per adjusted patient admission	$	12,898	$	13,354	(3.4)	%	Total per adjusted patient admission	$	13,935	$	13,614	2.4	%



(1)			Adjusted patient admissions represents actual patient admissions adjusted to include outpatient services provided by facilities in our Hospital Operations 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 for our Hospital Operations segment increased $361 million, or 22.8%, in the three months ended June 30, 2021 compared to the same period in 2020. This change was primarily attributable to increased contract

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Salaries, wages and benefits expense for our Hospital Operations segment decreased $37 million, or 2.0%, in the three months ended March 31, 2022 compared to the same period in 2021. This change was primarily attributable to the sale of the Miami Hospitals in August 2021 and our continued focus on cost-efficiency measures, partially offset by increased contract labor costs, ~~higher patient volumes,~~ increased ~~incentive compensation,~~overtime expense and annual merit increases for certain of our ~~employees and a greater number of employed physicians.~~employees. On a ~~per adjusted patient~~ per‑adjusted‑patient‑admission basis, salaries, wages and benefits ~~decreased 0.8%~~increased 8.0% in the three months ended ~~June 30, 2021~~March 31, 2022 compared to the three months ended ~~June 30, 2020, reflecting our continued focus on cost‑reduction measures and corporate efficiencies.~~March 31, 2021, primarily due to the expenses mentioned above.

Supplies expense for our Hospital Operations segment ~~increased $158~~decreased $63 million, or ~~29.8%~~9.8%, induring the three months ended June 30, 2021 compared to the same period in 2020. The increase was primarily due to the continued recovery of patient volumes and the increased costs for certain supplies as a result of the COVID-19 pandemic. On a per adjusted patient admission basis, supplies expense increased 5.1% in the three months ended June 30, 2021March 31, 2022 compared to the three months ended ~~June 30, 2020~~March 31, 2021. This decrease was primarily ~~due~~attributable to the sale of the Miami Hospitals, the decrease in patient volumes during the 2022 period and our cost-efficiency measures, partially offset by increased costs for certain supplies as a result of the COVID-19 pandemic and ~~growth~~high patient acuity. On a per‑adjusted‑patient‑admission basis, supplies expense decreased 0.5% in ~~our higher‑acuity, supply‑intensive surgical services.~~the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily due to the cost-efficiency measures described above.

Other operating expenses for our Hospital Operations segment ~~increased $59~~decreased $142 million, or ~~7.0%~~15.5%, in the three months ended ~~June 30, 2021~~March 31, 2022 compared to the same period in ~~2020.~~2021. The ~~increase~~decrease was primarily ~~due~~attributable to ~~higher software costs, increased malpractice expense, increased repair~~sale of the Miami Hospitals, a gain of $69 million realized from the sale of several medical office buildings in the three months ended March 31, 2022, and ~~maintenance costs, and higher rent and lease expense.~~our continued focus on cost-efficiency measures. On a ~~per adjusted patient~~ per‑adjusted‑patient‑admission basis, other operating expenses ~~decreased 13.7%~~ in the three months ended ~~June 30, 2021~~March 31, 2022 decreased 7.0% compared to the ~~three months ended June 30, 2020~~same period in 2021, primarily due to the ~~increase in patient volumes and the fact that there is a high level of fixed costs (e.g., rent expense) in other operating expenses.~~items mentioned above.

LIQUIDITY AND CAPITAL RESOURCES OVERVIEW

Cash and cash equivalents were ~~$2.194 billion at June 30, 2021 compared to $2.141~~$1.405 billion at March 31, ~~2021~~2022 compared to $2.364 billion at December 31, 2021.

S~~ignificant~~Significant cash flow items in the three months ended ~~June 30, 2021~~March 31, 2022 included:

•Net cash provided by operating activities before interest, taxes, discontinued operations, and restructuring charges, ~~acquisition-related~~acquisition‑related costs, and litigation costs and settlements of ~~$607~~$458 million (including $5 million from federal ~~state and local~~ grants);

•Proceeds from the sale of facilities and other assets of ~~$111~~$148 million;

•Debt payments of $879 million, including the redemption of all $700 million aggregate principal amount outstanding of our 2025 Senior Secured First Lien Notes and the repurchase of $103 million aggregate principal amount outstanding of our 2023 Senior Unsecured Notes;

•Interest payments of $166 million;

•Capital expenditures of ~~$122~~$155 million;

•$93135 million of distributions paid to noncontrolling interests;

•Payments totaling $56 million for restructuring charges, ~~acquisition-related~~acquisition‑related costs, and litigation costs and ~~settlements of $34 million;~~

•~~Purchases of businesses and joint venture interests of $39 million;~~

•~~Proceeds from sale of marketable securities, long-term investments and other assets of $12 million;~~

•~~Purchases of marketable securities and equity investments of $8 million;~~

•~~Debt issuance costs of $15 million;~~

•Interest payments of $296 million, which included $9 million of accelerated interest payments due in November 2021 and paid in the three months ended June 30, 2021 in connection with our redemption of debt;

•Debt payments of $1.471 billion, including $1.428 billion of cash to retire our $1.410 billion aggregate principal amount of 5.125% senior secured second lien notes due 2025 (“2025 Senior Secured Second Lien Notes”);settlements; and

•$~~1.400 billion~~40 million of ~~proceeds~~payments for purchases of businesses or joint venture interests.

Net cash provided by operating activities was $228 million in the three months ended March 31, 2022 compared to $534 million in the three months ended March 31, 2021. Key factors contributing to the change between the 2022 and 2021 periods include the following:

•$194 million of Medicare advances recouped in the three months ended March 31, 2022 compared to no amounts recouped during the same period in 2021;

•$5 million of cash received from grants in the ~~issuance of $1.400 billion aggregate principal amount of our 2029 Senior Secured First Lien Notes.~~three months ended March 31, 2022 compared to $31 million received in the three months ended March 31, 2021;

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~~Net~~•Decreased cash ~~provided by operating activities was $779~~receipts of $12 million related to supplemental Medicaid programs in ~~the six months ended June 30, 2021 compared to $2.368 billion in the six months ended June 30, 2020. Key factors contributing to the change between the 2021~~California and ~~2020 periods include the following:~~

•An increase in net income before interest, taxes, discontinued operations and restructuring charges, acquisition‑related costs, and litigation costs and settlements of $755 million (excluding $50 million and $511 million of income recognized from federal, state and local grants in the 2021 and 2020 periods, respectively);

•$152 million of recoupment of cash advances received from Medicare pursuant to COVID-19 stimulus legislation in the three months ended June 30, 2021 compared to $1.378 billion of cash advances received from Medicare pursuant to COVID-19 stimulus legislation in the three months ended June 30, 2020;

•~~$36 million of cash received from federal and state grants in the 2021 period compared to $674 million received in the 2020 period;~~

•~~Higher interest payments of $21 million in the 2021 period;~~

•~~Higher income tax payments of $29 million in the 2021 period;~~

•~~A decrease of $29 million in payments on reserves for restructuring charges, acquisition-related costs, and litigation costs and settlements;~~Texas; and

•The timing of other working capital items.

FORWARD-LOOKING STATEMENTS

This report includes ~~“forward-looking~~“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~~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~~Forward‑looking statements represent management’s expectations, based on currently available information, as to the outcome and timing of future 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 to be materially different from those expressed or implied by ~~forward-looking~~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.~~Report and the Risk Factors section in Part II of this report.

When considering ~~forward-looking~~forward‑looking statements, 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 these reports occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any ~~forward-looking~~forward‑looking statement. We specifically disclaim any obligation to update any information contained in a ~~forward-looking~~forward‑looking statement or any ~~forward-looking~~forward‑looking statement in its entirety except as required by law.

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

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

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


Net Patient Service Revenues Less Implicit Price Concessions from:	Net Patient Service Revenues Less Implicit Price Concessions from:	Three Months Ended June 30,				Increase (Decrease)(1)				Six Months Ended June 30,								Increase (Decrease)(1)		Net Patient Service Revenues Less Implicit Price Concessions from:			Three Months Ended March 31,								Increase (Decrease)(1)
		2021		2020				2021				2020									2022				2021
Medicare	Medicare	18.4	%	21.1	%			(2.7)	%			18.6	%			20.4	%			(1.8)	%	Medicare			17.6	%			18.8	%			(1.2)	%
Medicaid	Medicaid	7.6	%	9.2	%	(1.6)	%			7.4	%			8.5	%			(1.1)	%	Medicaid			5.5	%			7.1	%			(1.6)	%
Managed care(2)	Managed care(2)	67.3	%	64.5	%	2.8	%			67.6	%			65.1	%			2.5	%	Managed care(2)			71.1	%			68.0	%			3.1	%
Uninsured	Uninsured	1.6	%	0.8	%	0.8	%			1.4	%			1.0	%			0.4	%	Uninsured			1.1	%			1.3	%			(0.2)	%
Indemnity and other	Indemnity and other	5.1	%	4.4	%	0.7	%			5.0	%			5.0	%			—	%	Indemnity and other			4.7	%			4.8	%			(0.1)	%



(1)			The change is the difference between the 2022 and 2021 ~~and 2020~~ percentages ~~shown.~~presented.
(2)			Includes Medicare and Medicaid managed care programs.

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


		Three Months Ended June 30,				Increase (Decrease)(1)				Six Months Ended June 30,								Increase (Decrease)(1)					Three Months Ended March 31,								Increase (Decrease)(1)
Admissions from:	Admissions from:	2021		2020				2021				2020				Admissions from:				2022				2021
Medicare	Medicare	20.7	%	22.5	%			(1.8)	%			21.1	%			23.6	%				(2.5)	%	Medicare			21.5		%		21.4				%	0.1	%
Medicaid	Medicaid	5.7	%	6.4	%	(0.7)	%			5.7	%			6.2	%			(0.5)	%	Medicaid			5.6		%		5.7		%			(0.1)		%
Managed care(2)	Managed care(2)	64.3	%	61.5	%	2.8	%			64.0	%			61.0	%			3.0	%	Managed care(2)			64.8		%		63.7		%		1.1		%
Charity and uninsured	Charity and uninsured	6.2	%	6.8	%	(0.6)	%			6.1	%			6.4	%			(0.3)	%	Charity and uninsured			4.7		%		6.0		%		(1.3)		%
Indemnity and other	Indemnity and other	3.1	%	2.8	%	0.3	%			3.1	%			2.8	%			0.3	%	Indemnity and other			3.4		%		3.2		%		0.2		%



(1)			The change is the difference between the 2022 and 2021 ~~and 2020~~ percentages ~~shown.~~presented.
(2)			Includes Medicare and Medicaid managed care programs.

GOVERNMENT PROGRAMS

~~The Centers for Medicare and Medicaid Services (“CMS”),~~CMS is an agency of the U.S. Department of Health and Human Services (“HHS”), that administers a number of government programs authorized by federal law; it is the single largest payer of healthcare services in the United States. Approximately 61 million individuals rely on healthcare benefits through Medicare, and approximately 81 million individuals are enrolled in Medicaid and the Children’s Health Insurance Program (“CHIP”). These three programs are authorized by federal law and administered by CMS. Medicare is a federally funded health insurance program primarily for individuals 65 years of age and older, as well as some younger people with certain disabilities and conditions, and is provided without regard to income or assets. Medicaid is ~~co-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,~~Children’s Health Insurance Program (“CHIP”), which is also ~~co-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. Funding for the CHIP has been reauthorized through federal fiscal year ~~(“FFY”)~~ 2027.

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~~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 FFS Medicare special needs plans and Medicare medical savings account plans. Our total net patient service revenues from continuing operations of the hospitals and related outpatient facilities in our Hospital Operations segment for services provided to patients enrolled in the Original Medicare Plan were ~~$697~~$619 million and ~~$597~~$688 million for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $1.385 billion and $1.302 billion for the six months ended June 30, 2021 and 2020,~~ respectively.

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.

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Medicaid

Medicaid programs and the corresponding reimbursement methodologies vary from ~~state-to-state~~state‑to‑state and from year‑to‑year. Even prior to the ~~COVID-19~~COVID‑19 pandemic, several states in which we operate faced budgetary challenges that resulted 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 supplemental payment programs authorized under the Social Security Act. Continuing pressure on state budgets and other factors, including legislative and regulatory changes, could ~~adversely affect the~~result in future reductions to Medicaid payments, payment delays or changes to Medicaid supplemental ~~payments~~payment programs. Federal government denials or delayed approvals of waiver applications or extension requests by the states in which we operate could materially impact our ~~hospitals receive.~~Medicaid funding levels.

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Estimated revenues under various state Medicaid programs, including ~~state-funded~~state‑funded Medicaid managed care programs, constituted approximately ~~17.3%~~18.8% and ~~18.2%~~16.9% of total net patient service revenues less implicit price concessions of our acute care hospitals and related outpatient facilities for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. We also receive disproportionate share hospital (“DSH”) and other supplemental revenues under various state Medicaid programs. For the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ our total Medicaid revenues attributable to DSH and other supplemental revenues were approximately ~~$392~~$119 million and ~~$363~~$180 million, respectively. The ~~2021 period included $107~~decrease between the two three‑month periods was primarily attributable to $57 million ~~related to the California provider fee program, $129 million related to the Michigan provider fee program, $17 million~~of assessments we recognized related to the Texas ~~Section 1115 waiver program, $69~~Comprehensive Hospital Increase Reimbursement Program (“CHIRP”) following its approval in 2022. During the three months ended March 31, 2022, we also recognized $114 million of revenue related to CHIRP that, due to the structure of the program, is included in Managed Medicaid ~~DSH programs in multiple states, and $70 million from a number of other state and local programs.~~revenue.

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 ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 were $659 million and ~~2020 were $1.287 billion and $1.161 billion,~~$617 million, respectively. During the three months ended March 31, 2022, Medicaid and Managed Medicaid revenues comprised ~~43%~~29% and ~~57%~~71%, respectively, of our ~~Medicaid-related~~Medicaid‑related net patient service revenues from continuing operations recognized by the hospitals and related outpatient facilities in our Hospital Operations ~~segment for the six months ended June 30, 2021. These~~segment. All Medicaid and Managed Medicaid patient service revenues are presented net of provider taxes or assessments paid by our hospitals, which are reported as an offset reduction to FFS Medicaid revenue.

Because we cannot predict what actions the federal government or the states may take under existing 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; however, the impact on our future financial position, results of operations or cash flows could be material.

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.

Proposed Payment and Policy Changes to the Medicare Inpatient Prospective Payment Systems—Section 1886(d) of the Social Security Act requires CMS to update Medicare 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 federal fiscal ~~year.~~year (“FFY”). In April ~~2021,~~2022, CMS issued proposed changes to the Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and Fiscal Year ~~2022~~2023 Rates (“Proposed IPPS Rule”). The Proposed IPPS Rule includes the following proposed payment and policy changes:

•A market basket increase of ~~2.5%~~3.1% for Medicare ~~severity-adjusted diagnosis-related~~severity‑adjusted diagnosis‑related group (“~~MS-DRG”~~MS‑DRG”) operating payments for hospitals reporting specified quality measure data and that are meaningful users of electronic health record technology; CMS also proposed a ~~0.2%~~0.4% multifactor productivity reduction required by the ~~ACA~~Affordable Care Act and a 0.5% increase required by the Medicare Access and CHIP Reauthorization Act that ~~collectively~~together result in a net operating payment update of ~~2.8%~~3.2% before budget neutrality adjustments;

•Changes to the hospital Value‑Based Purchasing (“VBP”) and Hospital-Acquired Condition (“HAC”) programs for FFY 2023 due to the impact of the COVID-19 Public Health Emergency, including the implementation of a special scoring methodology for the VBP program that results in each hospital receiving a value‑based incentive payment amount equal to its 2% reduction to the operating standardized amount; and suppression of all measures in the HAC reduction program resulting in no hospitals being penalized for FFY 2023;

•An increase in the cost outlier threshold from $30,988 to $43,214;

•A 1.63% net increase in the capital federal MS‑DRG rate; and

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

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

•~~An increase in the cost outlier threshold from $29,064 to $30,967;~~

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•~~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.payments.

According to CMS, the combined impact of the proposed payment and policy changes in the Proposed IPPS Rule for operating costs will yield an average ~~2.7%~~1.4% increase in Medicare operating ~~MS-DRG~~MS‑DRG FFS payments for hospitals in urban areas, and an average ~~2.8%~~2.3% increase in such payments for proprietary hospitals in FFY ~~2022.~~2023. We estimate that all of the proposed payment and policy changes affecting operating ~~MS-DRG~~MS‑DRG and ~~UC-DSH~~UC‑DSH payments will result in an estimated ~~1.6%~~2.3% increase in

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our annual Medicare FFS IPPS payments, which yields an estimated increase of approximately ~~$32~~$45 million. Because of the uncertainty associated with various factors that may influence our future IPPS payments by individual hospital, including legislative, 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 ~~estimates of the impact of the proposed payment and policy changes.~~

~~Proposed Payment and Policy Changes to the Medicare Outpatient Prospective Payment and Ambulatory Surgery Center Payment Systems—~~In July 2021, CMS released proposed policy changes and payment rates for the Hospital Outpatient Prospective Payment System (“OPPS”) and Ambulatory Surgical Center (“ASC”) Payment System for calendar year (“CY”) 2022 (“Proposed OPPS/ASC Rule”). The Proposed OPPS/ASC Rule includes the following payment and policy changes:

•~~An estimated net increase of 2.3% for the OPPS rates based on an estimated market basket increase of 2.5%, reduced by a multifactor productivity adjustment required by the ACA of 0.2%;~~

•Continuation of the current policy of paying an adjusted amount of average sales price (“ASP”) minus 22.5% for drugs acquired under the 340B program (which program is the subject of litigation discussed in greater detail below);

•Cessation of the elimination of the Inpatient Only List (“IPO List”) (which is the list of procedures that must be performed on an inpatient basis); efforts to eliminate the IPO List commenced in CY 2021 and were scheduled to be completed over a transitional period ending in CY 2024; in addition, CMS is proposing to reinstate the 298 services removed from the IPO List in CY 2021 to the IPO List beginning in CY 2022;

•Various modifications to the hospital price transparency requirements that took effect on January 1, 2021, including significant increases to the civil monetary penalty for noncompliance, as well as prohibitions to specific barriers to accessing machine-readable price transparency files;

•~~A 2.3% increase to the ASC payment rates; and~~

•~~Re-adoption of the ASC Covered Procedures List (“ASC CPL”) criteria in effect in CY 2020 and removal of 258 of the 267 procedures that were added to the ASC CPL in CY 2021.~~

CMS projects that the combined impact of the proposed payment and policy changes in the Proposed OPPS/ASC Rule will yield an average 1.8% increase in Medicare FFS OPPS payments for hospitals in urban areas and an average 2.0% increase in Medicare FFS OPPS payments for proprietary hospitals. Based on CMS’ estimates, the projected annual impact of the payment and policy changes in the Proposed OPPS/ASC Rule on our hospitals is an increase to Medicare FFS hospital outpatient revenues of approximately $14 million, which represents an increase of approximately 2.0%. Because of the uncertainty associated with various factors that may influence our future OPPS payments, including legislative or legal actions, volumes and case mix, as well as potential changes to the proposed rule, we cannot provide any assurances regarding our estimate of the impact of the proposed payment and policy changes.

~~Proposed Payment and Policy Changes to the Medicare Physician Fee Schedule~~—In July 2021, CMS released the CY 2022 Medicare Physician Fee Schedule (“MPFS”) Proposed Rule (“MPFS Proposed Rule”). The MPFS Proposed Rule updates payment policies, payment rates and other provisions for services reimbursed under the MPFS on and after January 1, 2022. Under the MPFS Proposed Rule, the CY 2022 conversion factor, which is the base rate that is used to convert relative units into payment rates, would be reduced from $34.89 to $33.58, due in part to the expiration of the one-time 3.75% MPFS payment increase provided for in CY 2021 by the Consolidated Appropriations Act, 2021, as well as budget neutrality rules. This change would result in an annual reduction of approximately $7 million to our FFS MPFS revenues. Because of the

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uncertainty associated with various factors that may influence our future MPFS payments, including legislative, regulatory or legal actions, volumes and case mix, as well as potential changes to the MPFS Proposed Rule, we cannot provide any assurances regarding our estimate of the impact of the proposed payment and policy changes.

Public Health and Social Services Emergency ~~Fund~~—Fund—During the three months ended ~~June 30,~~March 31, 2022 and 2021, our Hospital Operations and Ambulatory Care segments together recognized ~~approximately $14~~a total of $6 million and $24 million, respectively, of ~~Provider Relief Fund~~PRF grant income associated with lost revenues and ~~COVID-related~~COVID‑related costs. We also recognized ~~an additional $5~~$6 million of ~~Provider Relief Fund~~PRF grant income from our unconsolidated affiliates during ~~this period. During~~ the ~~six~~three months ended ~~June 30, 2021, our Hospital Operations and Ambulatory Care segments recognized approximately $38 million of Provider Relief Fund~~March 31, 2021. In addition to PRF grant income, ~~associated with lost revenues and COVID-related costs. We recognized an additional $11 million of Provider Relief Fund grant income from~~ our ~~unconsolidated affiliates during this period. Our~~ Hospital Operations and Ambulatory Care segments also recognized ~~$5 million and $12~~$7 million of grant income from state and local grant programs during the three ~~and six~~ months ended ~~June 30, 2021, respectively.~~March 31, 2021. Grant income recognized by our Hospital Operations and 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 accompanying Condensed Consolidated Statement~~each case in the condensed consolidated statements of ~~Operations for the three~~operations. We cannot predict whether additional distributions of grant funds will be authorized, and ~~six months ended June 30, 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, if any, to be recognized in the future.

Medicare and Medicaid Payment Policy Ch~~anges~~—Changes—The federally mandated 2% sequestration reduction on Medicare FFS and Medicare Advantage payments to hospitals, physicians and other providers was suspended effective May 1, ~~2020. It was scheduled to resume on~~ ~~April 1, 2021; however, on April 14, 2021, President Biden signed H.R. 1868, which included an extension of the suspension of the 2% sequestration reduction~~2020 through December 31, 2021. The Protecting Medicare and American Farmers from Sequester Cuts Act (the “Sequester Cuts Act”), which was signed into law in December 2021, extended the 2% Medicare sequestration moratorium through March 31, 2022, and adjusted the sequestration to 1% for the period April 1, 2022 through June 30, 2022, after which the full 2% reduction will be restored unless further legislation is passed. The impact of the ~~suspension~~Sequester Cuts Act on our operations was an increase of approximately ~~$38~~$20 million of revenues in the ~~six~~three months ended ~~June 30, 2021. We expect~~March 31, 2022, and we estimate its impact for the ~~suspension to result in~~full year ending December 31, 2022 will be an increase of approximately ~~$80~~$30 million of ~~revenues for the year ending~~ ~~December 31, 2021~~.revenues. 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.

~~The American Rescue Plan Act of 2021~~—~~In March 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 expand Medicaid by temporarily increasing each respective state’s Federal Medical Assistance Percentage for 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 Litigation

The CMS 340B program allows certain hospitals (i.e., only nonprofit organizations with specific federal designations and/or funding) (“340B Hospitals”) to purchase drugs at discounted rates from drug ~~manufacturers.~~manufacturers (“340B Drugs”). In the final rule regarding ~~OPPS~~Hospital Outpatient Prospective Payment System (“OPPS”) payment and policy changes for CYcalendar year (“CY”) 2018, CMS reduced the payment for 340B Drugs from the ~~ASP~~average sales price (“ASP”) plus 6% to the ASP minus 22.5% and made a corresponding budget‑neutral increase to payments to all hospitals for other drugs and services reimbursed under the OPPS (the “340B Payment Adjustment”). In the final rules regarding OPPS payment and policy changes for CYs 2019 ~~2020 and 2021,~~through 2022, 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 Rules exceeded CMS’ statutory authority by reducing drug

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reimbursement rates for 340B Hospitals. In July 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~~Hospitals’ petition for a rehearing. The 340B Hospitals filed a timely petition asking the U.S. Supreme Court (“Supreme Court”) to reverse the Appeals Court’s decision and, ~~on July 2,~~in December 2021, the Supreme Court ~~agreed to review~~heard oral arguments in the case. We cannot predict the timing or outcome of the Supreme Court’s decision or what further actions ~~the Supreme Court,~~ 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 net operating revenues and cash flows.

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PRIVATE INSURANCE

Managed Care

We currently have thousands of managed care contracts with various HMOs and PPOs. HMOs generally maintain a ~~full-service~~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~~cost‑effective manner. HMOs typically provide reduced benefits or reimbursement (or none at all) to their members who use ~~non-contracted~~non‑contracted healthcare providers for ~~non-emergency~~non‑emergency care.

PPOs generally offer limited benefits to members who use ~~non-contracted~~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~~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~~high‑deductible healthcare plans that may have limited benefits, but cost the employee less in premiums.

The amount of our managed care net patient service revenues, including Medicare and Medicaid managed care programs, from our hospitals and related outpatient facilities during the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ was ~~$5.025~~$2.495 billion and ~~$4.145~~$2.480 billion, respectively. Our top 10 managed care payers generated 61% of our managed care net patient service revenues for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022. During the same period, national payers generated ~~43%~~41% of our managed care net patient service ~~revenues. The~~revenues; the remainder came from regional or local payers. At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020, 64%~~2021, 68% and ~~66%~~67%, respectively, of our net accounts receivable for our Hospital Operations segment were due from managed care payers.

Revenues under managed care plans are based primarily on payment terms involving predetermined rates per diagnosis, ~~per-diem~~per‑diem rates, discounted FFS rates 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 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 ~~June 30, 2021,~~March 31, 2022, a 3% increase or decrease in the estimated contractual allowance would impact the estimated reserves by approximately ~~$17~~$16 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~~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~~in‑house and discharged‑not‑final‑billed patients that change reimbursement levels; (5) secondary benefits determined after primary insurance payments; and (6) reclassification of patients among insurance plans with different coverage and payment levels. Contractual allowance estimates are periodically reviewed for accuracy by taking into consideration known contract terms, as well as payment history. 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 revenues. In addition, on a ~~corporate-wide~~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.

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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~~year‑over‑year aggregate managed care pricing improvements for some time, we have seen these improvements moderate in recent years, and we believe this moderation could continue into the future. In the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, our commercial managed care net inpatient revenue per admission from the hospitals in our Hospital Operations segment was approximately ~~84%~~86% higher than our aggregate yield on a ~~per~~ per‑admission basis from government payers, including managed Medicare and Medicaid insurance plans.

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Indemnity

An ~~indemnity-based~~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.

Legislative Changes

As more fully described in Item 1, Business — Healthcare Regulation and Licensing, of Part I of our Annual Report, the No Surprises Act (“NSA”) and the rules promulgated thereunder went into effect on January 1, 2022. The NSA is intended to address unexpected gaps in insurance coverage that result in “surprise medical bills” when patients unknowingly obtain medical services from physicians and other providers outside their health insurance network, including certain emergency services, anesthesiology services and air ambulance transportation. At this time, we are unable to assess the effect that the NSA or regulations relating to the NSA might have on our business, financial position, results of operations or cash flows.

UNINSURED PATIENTS

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 uninsured patients are admitted through our hospitals’ emergency departments and often require ~~high-acuity~~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~~Self‑pay accounts receivable, which include amounts due from uninsured patients, as well as ~~co-pays, co-insurance~~co‑pays, co‑insurance amounts and deductibles owed to us by patients with insurance, pose significant collectability problems. At ~~both June 30, 2021~~March 31, 2022 and December 31, ~~2020, approximately~~2021, 3% and 4%, respectively, of our net accounts receivable for our Hospital Operations segment was ~~self-pay.~~self‑pay. Further, a significant portion of our implicit price concessions relates to ~~self-pay~~self‑pay amounts. We provide revenue cycle management services through Conifer, which is subject to various statutes and regulations regarding consumer protection in areas including finance, debt collection and credit reporting activities. For additional information, see Item 1, Business — Regulations Affecting Conifer’s Operations, of 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 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~~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~~co‑pay, co‑insurance and deductible amounts owed to us by patients with insurance, that we deem highly collectible. We leverage a ~~statistical-based~~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 the challenges associated with serving uninsured patients. For example, our Compact with Uninsured Patients (“Compact”) is designed to offer managed ~~care-style~~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. 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~~self‑pay accounts are recorded. The uninsured patient accounts, net of contractual allowances recorded, are further reduced to their net realizable value through implicit price concessions based on historical collection trends for ~~self-pay~~self‑pay accounts and other factors that affect the estimation process.

We also provide financial assistance through our charity and uninsured discount programs to uninsured patients who are unable to pay for the healthcare services they receive. Our policy is not to pursue collection of amounts determined to qualify 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. Some states have also developed provider fee or other supplemental payment programs to mitigate the shortfall of Medicaid reimbursement compared to the cost of caring for Medicaid patients.

The initial expansion of health insurance coverage under the Affordable Care Act resulted in an increase in the number of patients using our facilities 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 certain states to expand Medicaid coverage and for persons living in the country who are not permitted to enroll in a health insurance exchange or government healthcare insurance program.

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		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Estimated costs for:	Estimated costs for:									Estimated costs for:
Uninsured patients	Uninsured patients	$	158	$	145	$	326	$	301	Uninsured patients	$	122	$	168
Charity care patients	Charity care patients	29		43		49		83		Charity care patients	21		20
Total	Total	$	187	$	188	$	375	$	384	Total	$	143	$	188

RESULTS OF OPERATIONS

The following ~~two~~ tables ~~summarize~~present our consolidated net operating revenues, operating expenses and operating income ~~from~~on a continuing operations basis, both in dollar amounts and as percentages of net operating revenues.


	Three Months Ended March 31,				Increase (Decrease)
	2022		2021
Net operating revenues:
Hospital Operations	$	3,798	$	3,947	$	(149)
Ambulatory Care	738		646		92
Conifer	324		310		14
Inter-segment eliminations	(115)		(122)		7
Net operating revenues	4,745		4,781		(36)
Grant income	6		31		(25)
Equity in earnings of unconsolidated affiliates	46		42		4
Operating expenses:
Salaries, wages and benefits	2,182		2,201		(19)
Supplies	785		804		(19)
Other operating expenses, net	942		1,072		(130)
Depreciation and amortization	203		224		(21)
Impairment and restructuring charges, and acquisition-related costs	16		20		(4)
Litigation and investigation costs	20		13		7
Net losses on sales, consolidation and deconsolidation of facilities	1		—		1
Operating income	$	648	$	520	$	128


	Three Months Ended March 31,				Increase (Decrease)(1)
	2022		2021
Net operating revenues	100.0	%	100.0	%	—	%
Grant income	0.1	%	0.6	%	(0.5)	%
Equity in earnings of unconsolidated affiliates	1.0	%	0.9	%	0.1	%
Operating expenses:
Salaries, wages and benefits	46.0	%	46.0	%	—	%
Supplies	16.5	%	16.8	%	(0.3)	%
Other operating expenses, net	19.9	%	22.4	%	(2.5)	%
Depreciation and amortization	4.3	%	4.7	%	(0.4)	%
Impairment and restructuring charges, and acquisition-related costs	0.3	%	0.4	%	(0.1)	%
Litigation and investigation costs	0.4	%	0.3	%	0.1	%
Net losses on sales, consolidation and deconsolidation of facilities	—	%	—	%	—	%
Operating income	13.7	%	10.9	%	2.8	%



(1)			The change is the difference between the 2022 and 2021 percentages presented.

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The following tables present our net operating revenues, operating expenses and operating income, both in dollar amounts and as percentages of net operating revenues, ~~for the three and six months ended June 30, 2021 and 2020. We present metrics as~~by operating segment on a ~~percentage of net operating revenues because a significant portion of our costs are variable.~~continuing operations basis.


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31, 2022
		2021			2020			2021			2020
Net operating revenues:
Hospital Operations		$	4,095		$	3,088		$	8,042		$	6,922
Ambulatory Care		664			368			1,310			858
Conifer		319			305			629			637
Inter-segment eliminations		(124)			(113)			(246)			(249)
Net operating revenues		4,954			3,648			9,735			8,168
Grant income		19			511			50			511
Equity in earnings of unconsolidated affiliates		54			31			96			59
Operating expenses:
Salaries, wages and benefits		2,280			1,864			4,481			4,051
Supplies		859			611			1,663			1,374
Other operating expenses, net		1,054			983			2,126			1,996
Depreciation and amortization		221			206			445			409
Impairment and restructuring charges, and acquisition-related costs		20			54			40			109
Litigation and investigation costs		22			2			35			4
Net gains on sales, consolidation and deconsolidation of facilities		(15)			(1)			(15)			(3)
Operating income		$	586		$	471		$	1,106		$	798
															Hospital Operations		Ambulatory Care		Conifer
		Three Months Ended June 30,						Six Months Ended June 30,
		2021			2020			2021			2020
Net operating revenues	Net operating revenues	100.0		%	100.0		%	100.0		%	100.0		%	Net operating revenues	$	3,683	$	738	$	324
Grant income	Grant income	0.4		%	14.0		%	0.5		%	6.2		%	Grant income	4		2		—
Equity in earnings of unconsolidated affiliates	Equity in earnings of unconsolidated affiliates	1.1		%	0.8		%	1.0		%	0.7		%	Equity in earnings of unconsolidated affiliates	4		42		—
Operating expenses:	Operating expenses:													Operating expenses:
Salaries, wages and benefits	Salaries, wages and benefits	46.0		%	51.1		%	46.0		%	49.6		%	Salaries, wages and benefits	1,820		194		168
Supplies	Supplies	17.4		%	16.7		%	17.1		%	16.8		%	Supplies	583		201		1
Other operating expenses, net	Other operating expenses, net	21.3		%	26.9		%	21.8		%	24.4		%	Other operating expenses, net	774		105		63
Depreciation and amortization	Depreciation and amortization	4.5		%	5.6		%	4.6		%	5.0		%	Depreciation and amortization	167		27		9
Impairment and restructuring charges, and acquisition-related costs	Impairment and restructuring charges, and acquisition-related costs	0.4		%	1.5		%	0.4		%	1.3		%	Impairment and restructuring charges, and acquisition-related costs	12		3		1
Litigation and investigation costs	Litigation and investigation costs	0.4		%	0.1		%	0.4		%	—		%	Litigation and investigation costs	8		—		12
Net gains on sales, consolidation and deconsolidation of facilities		(0.3)		%	—		%	(0.2)		%	—		%
Net losses on sales, consolidation and deconsolidation of facilities														Net losses on sales, consolidation and deconsolidation of facilities	1		—		—
Operating income	Operating income	11.8		%	12.9		%	11.4		%	9.8		%	Operating income	$	326	$	252	$	70


	Three Months Ended March 31, 2022
	Hospital Operations		Ambulatory Care		Conifer


Net operating revenues	100.0	%	100.0	%	100.0	%
Grant income	0.1	%	0.3	%	—	%
Equity in earnings of unconsolidated affiliates	0.1	%	5.7	%	—	%
Operating expenses:
Salaries, wages and benefits	49.4	%	26.3	%	51.9	%
Supplies	15.8	%	27.2	%	0.3	%
Other operating expenses, net	21.1	%	14.3	%	19.4	%
Depreciation and amortization	4.5	%	3.7	%	2.8	%
Impairment and restructuring charges, and acquisition-related costs	0.3	%	0.4	%	0.3	%
Litigation and investigation costs	0.2	%	—	%	3.7	%
Net losses on sales, consolidation and deconsolidation of facilities	—	%	—	%	—	%
Operating income	8.9	%	34.1	%	21.6	%

Total net operating revenues increased by $1.306 billion and $1.567 billion, or 35.8% and 19.2%, for the three and six months ended June 30, 2021, respectively, compared to the three and six months ended June 30, 2020, respectively. Hospital Operations net operating revenues net of inter-segment eliminations increased by $996 million and $1.123 billion, or 33.5% and 16.8%, for the three and six months ended June 30, 2021, respectively, compared to the same three and six-month periods in 2020. These increases were primarily due to increased patient volumes, higher patient acuity and negotiated commercial rate


	Three Months Ended March 31, 2021
	Hospital Operations		Ambulatory Care		Conifer


Net operating revenues	$	3,825	$	646	$	310
Grant income	24		7		—
Equity in earnings of unconsolidated affiliates	4		38		—
Operating expenses:
Salaries, wages and benefits	1,857		174		170
Supplies	646		157		1
Other operating expenses, net	916		103		53
Depreciation and amortization	190		25		9
Impairment and restructuring charges, and acquisition-related costs	10		4		6
Litigation and investigation costs	9		3		1

Operating income	$	225	$	225	$	70

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	Three Months Ended March 31, 2021
	Hospital Operations		Ambulatory Care		Conifer


Net operating revenues	100.0	%	100.0	%	100.0	%
Grant income	0.6	%	1.1	%	—	%
Equity in earnings of unconsolidated affiliates	0.1	%	5.9	%	—	%
Operating expenses:
Salaries, wages and benefits	48.5	%	26.9	%	54.8	%
Supplies	16.9	%	24.3	%	0.3	%
Other operating expenses, net	23.9	%	16.0	%	17.2	%
Depreciation and amortization	5.0	%	3.9	%	2.9	%
Impairment and restructuring charges, and acquisition-related costs	0.3	%	0.6	%	1.9	%
Litigation and investigation costs	0.2	%	0.5	%	0.3	%

Operating income	5.9	%	34.8	%	22.6	%

Total net operating revenues decreased by $36 million, or 0.8%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Hospital Operations net operating revenues, net of inter‑segment eliminations, decreased by $142 million, or 3.7%, for the three months ended March 31, 2022 compared to the same period in 2021. These decreases were primarily due to the sale of the Miami Hospitals and lower patient volumes, partially offset by high patient acuity and negotiated commercial rate increases. Our Hospital Operations segment also recognized income from federal ~~state and local~~ grants totaling $4 million ~~and $28 million~~ during the three ~~and six~~ months ended ~~June 30, 2021, respectively,~~March 31, 2022, which ~~was~~is not included in net operating revenues.

Ambulatory Care net operating revenues increased by ~~$296 million and $452~~$92 million, or ~~80.4% and 52.7%~~14.2%, for the three ~~and six~~ months ended ~~June 30, 2021, respectively,~~March 31, 2022 compared to the three ~~and six~~ months ended ~~June 30, 2020, respectively.~~March 31, 2021. The change ~~in 2021 revenues for the three-month period~~ was driven by an increase from acquisitions of $91 million, as well as an increase in ~~same-facility~~same‑facility net operating revenues of ~~$200~~$52 million due primarily to higher surgical patient volumes ~~and acuity, incremental revenue from new service lines~~ and negotiated commercial rate increases ~~as well as an increase from acquisitions of $123 million.~~in the 2022 period. These increases were also partially offset by a decrease of ~~$27~~$51 million due primarily to the sale of ~~our~~the Ambulatory Care segment’s urgent care centers and the transfer of its imaging centers to the Hospital Operations segment. The change in 2021 revenues for the six-month period was driven by an increase in same-facility net operating revenues of $244 million due primarily to higher patient volumes and acuity, incremental revenue from new service lines and negotiated commercial rate increases, as well as an increase from acquisitions of $241 million. These increases were partially offset by a decrease of $33 million due to the sale of our urgent care centers, the transfer of imaging centers to the Hospital Operations segment and the deconsolidation of a facility. Our Ambulatory Care segment also recognized income from federal grants totaling ~~$15 million and $22~~$2 million during the three ~~and six~~ months ended ~~June 30, 2021, respectively,~~March 31, 2022, which ~~was~~is not included in net operating revenues.

Conifer’s ~~total~~ net operating revenues increased by $14 million, or ~~4.6%~~4.5%, for the three months ended ~~June 30, 2021~~March 31, 2022 compared to the three months ended ~~June 30, 2020. The portion of~~March 31, 2021. Conifer’s revenues from ~~third-party customers,~~third‑party clients, which revenues are not eliminated in consolidation, increased $3$21 million, or ~~1.6%~~11.2%, for the three months ended ~~June 30, 2021 as~~March 31, 2022 compared to the ~~three months ended June 30, 2020.~~same period in 2021. This increase was primarily due to volumes related to new services with existing customers, along with customer incentives. Conifer’s total net operating revenues decreased by $8 million, or 1.3%, for the six months ended June 30, 2021 compared to the same period in 2020 due to the revised terms in the Amended RCM Agreement and expected client attrition. These impacts were partially offset by client volume improvement in the 2021 period as compared to the 2020 period, which was adversely affected by the COVID-19 pandemic, as well ascontractual rate increases, new business ~~expansion. The portion~~expansion and the transition of ~~Conifer’s revenues from third-party customers, which are not eliminated in consolidation, decreased $5 million, or 1.3%, for~~ the ~~six months ended June 30, 2021 compared~~Miami Hospitals to ~~the six months ended June 30, 2020. This decrease was primarily attributable to expected client attrition, partially offset by new business expansion.~~third‑party clients.

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The following table ~~shows~~presents selected operating expenses of our three ~~reportable business~~operating segments. Information for our Hospital Operations segment is presented on a ~~same-hospital~~same‑hospital basis, ~~which includes the results of~~whereas information presented for our ~~same 65 hospitals operated throughout the three~~Ambulatory Care and six months ended June 30, 2021 and 2020 and excludes the urgent care centers that we divested effective April 30, 2021. We present same-hospital data because we believe it provides investors with useful information regarding the performance of our hospitals and otherConifer segments is presented on a continuing operations ~~that are comparable for the periods presented.~~basis.


		Three Months Ended June 30,				Increase (Decrease)			Six Months Ended June 30,						Increase (Decrease)			Three Months Ended March 31,				Increase (Decrease)
Selected Operating Expenses	Selected Operating Expenses	2021		2020				2021			2020			Selected Operating Expenses			2022		2021
Hospital Operations — Same-Hospital:	Hospital Operations — Same-Hospital:																	Hospital Operations — Same-Hospital:
Salaries, wages and benefits	Salaries, wages and benefits	$	1,928	$	1,567	23.0	%		$	3,772		$	3,397		11.0	%	Salaries, wages and benefits	$	1,812	$	1,742		4.0	%
Supplies	Supplies	688		529		30.1	%		1,333			1,178			13.2	%	Supplies	581		603		(3.6)	%
Other operating expenses	Other operating expenses	888		836		6.2	%		1,798			1,699			5.8	%	Other operating expenses	761		843		(9.7)	%
Total	Total	$	3,504	$	2,932	19.5	%		$	6,903		$	6,274		10.0	%	Total	$	3,154	$	3,188	(1.1)	%
Ambulatory Care:	Ambulatory Care:																Ambulatory Care:
Salaries, wages and benefits	Salaries, wages and benefits	$	169	$	119	42.0	%		$	343		$	281		22.1	%	Salaries, wages and benefits	$	194	$	174	11.5	%
Supplies	Supplies	169		79		113.9	%		326			191			70.7	%	Supplies	201		157		28.0	%
Other operating expenses	Other operating expenses	95		75		26.7	%		198			161			23.0	%	Other operating expenses	105		103		1.9	%
Total	Total	$	433	$	273	58.6	%		$	867		$	633		37.0	%	Total	$	500	$	434	15.2	%
Conifer:	Conifer:																Conifer:
Salaries, wages and benefits	Salaries, wages and benefits	$	170	$	165	3.0	%		$	340		$	344		(1.2)	%	Salaries, wages and benefits	$	168	$	170	(1.2)	%
Supplies	Supplies	1		1		—	%		2			2			—	%	Supplies	1		1		—	%
Other operating expenses	Other operating expenses	58		66		(12.1)	%		111			131			(15.3)	%	Other operating expenses	63		53		18.9	%
Total	Total	$	229	$	232	(1.3)	%		$	453		$	477		(5.0)	%	Total	$	232	$	224	3.6	%

Rent/lease expense(1):
Rent/lease expense(1):																	Rent/lease expense(1):
Hospital Operations	Hospital Operations	$	72	$	64	12.5	%		$	147		$	127		15.7	%	Hospital Operations	$	68	$	72	(5.6)	%
Ambulatory Care	Ambulatory Care	24		20		20.0	%		51			43			18.6	%	Ambulatory Care	27		27		—	%
Conifer	Conifer	3		3		—	%		6			6			—	%	Conifer	3		3		—	%
Total	Total	$	99	$	87	13.8	%		$	204		$	176		15.9	%	Total	$	98	$	102	(3.9)	%



(1)			Included in other operating expenses.

Table of Contents

RESULTS OF OPERATIONS BY SEGMENT

Our operations are reported in three segments:

•Hospital Operations, which is comprised of acute care and specialty hospitals, imaging centers, ancillary outpatient facilities, ~~micro-hospitals, imaging centers,~~micro‑hospitals and physician practices, and other care sites and clinics. Certain of the facilities in our Hospital Operations segment were classified as held for sale in the accompanying Condensed Consolidated Balance Sheet at June 30, 2021.practices;

•~~Our~~ Ambulatory Care, ~~segment~~which is comprised of USPI’s ~~ambulatory surgery centers~~ASCs and surgical ~~hospitals.~~hospitals; and

•Conifer, which provides revenue cycle management and ~~value-based~~value‑based care services to hospitals, health systems, physician practices, employers and other clients.

~~Table of Contents~~

Hospital Operations Segment

The following tables ~~show~~present operating statistics, revenues and expenses of our ~~continuing operations~~ hospitals and related outpatient facilities on a ~~same-hospital~~same‑hospital basis, unless otherwise indicated, which includes the results of our same 65 hospitals operated throughout the six months ended June 30, 2021 and 2020 and excludes the urgent care centers that we divested effective April 30, 2021. We present same-hospital data because we believe it provides investors with useful information regarding the performance of our hospitals and other operations that are comparable for the periods presented. 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 operating expenses are variable.indicated.


		Same-Hospital Continuing Operations								Same-Hospital Continuing Operations												Same-Hospital
		Three Months Ended June 30,				Increase (Decrease)				Six Months Ended June 30,						Increase (Decrease)						Three Months Ended March 31,							Increase (Decrease)
Admissions, Patient Days and Surgeries	Admissions, Patient Days and Surgeries	2021		2020					2021			2020			Admissions, Patient Days and Surgeries					2022			2021
Number of hospitals (at end of period)	Number of hospitals (at end of period)	65		65				—	(1)			65			65				—		(1)	Number of hospitals (at end of period)			60			60					—	(1)
Total admissions	Total admissions	153,319		134,898		13.7	%			300,993			300,633			0.1	%			Total admissions		127,782				134,120				(4.7)		%
Adjusted patient admissions(2)	Adjusted patient admissions(2)	273,824		220,947		23.9	%			524,663			511,554			2.6	%			Adjusted patient admissions(2)		227,933				231,273			(1.4)		%
Paying admissions (excludes charity and uninsured)	Paying admissions (excludes charity and uninsured)	143,864		125,792		14.4	%			282,620			281,612			0.4	%			Paying admissions (excludes charity and uninsured)		121,797				127,005			(4.1)		%
Charity and uninsured admissions	Charity and uninsured admissions	9,455		9,106		3.8	%			18,373			19,021			(3.4)	%			Charity and uninsured admissions		5,985				7,115			(15.9)		%
Admissions through emergency department	Admissions through emergency department	114,911		98,193		17.0	%			227,641			220,484			3.2	%			Admissions through emergency department		97,684				100,847			(3.1)		%
Paying admissions as a percentage of total admissions	Paying admissions as a percentage of total admissions	93.8	%	93.2	%	0.6	%	(1)		93.9	%		93.7	%		0.2	%	(1)		Paying admissions as a percentage of total admissions		95.3		%		94.7	%		0.6		%	(1)
Charity and uninsured admissions as a percentage of total admissions	Charity and uninsured admissions as a percentage of total admissions	6.2	%	6.8	%	(0.6)	%	(1)		6.1	%		6.3	%		(0.2)	%	(1)		Charity and uninsured admissions as a percentage of total admissions		4.7		%		5.3	%		(0.6)		%	(1)
Emergency department admissions as a percentage of total admissions	Emergency department admissions as a percentage of total admissions	74.9	%	72.8	%	2.1	%	(1)		75.6	%		73.3	%		2.3	%	(1)		Emergency department admissions as a percentage of total admissions		76.4		%		75.2	%		1.2		%	(1)
Surgeries — inpatient	Surgeries — inpatient	40,074		34,973		14.6	%			76,861			76,935			(0.1)	%			Surgeries — inpatient		32,908				34,096			(3.5)		%
Surgeries — outpatient	Surgeries — outpatient	60,949		38,749		57.3	%			114,126			92,139			23.9	%			Surgeries — outpatient		51,258				50,275			2.0		%
Total surgeries	Total surgeries	101,023		73,722		37.0	%			190,987			169,074			13.0	%			Total surgeries		84,166				84,371			(0.2)		%
Patient days — total	Patient days — total	757,003		687,883		10.0	%			1,554,492			1,498,362			3.7	%			Patient days — total		705,623				731,525			(3.5)		%
Adjusted patient days(2)	Adjusted patient days(2)	1,328,952		1,093,144		21.6	%			2,649,850			2,477,423			7.0	%			Adjusted patient days(2)		1,224,824				1,225,520			(0.1)		%
Average length of stay (days)	Average length of stay (days)	4.94		5.10		(3.1)	%			5.16			4.98			3.6	%			Average length of stay (days)		5.52				5.45			1.3		%
Licensed beds (at end of period)	Licensed beds (at end of period)	17,164		17,219		(0.3)	%			17,164			17,219			(0.3)	%			Licensed beds (at end of period)		15,395				15,403			(0.1)		%
Average licensed beds	Average licensed beds	17,170		17,219		(0.3)	%			17,174			17,219			(0.3)	%			Average licensed beds		15,395				15,403			(0.1)		%
Utilization of licensed beds(3)	Utilization of licensed beds(3)	48.4	%	43.9	%	4.5	%	(1)		50.0	%		47.8	%		2.2	%	(1)		Utilization of licensed beds(3)		50.9		%		52.8	%		(1.9)		%	(1)



(1)			The change is the difference between the 2022 and 2021 ~~and 2020~~ amounts ~~shown.~~presented.
(2)			Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services provided by facilities in our Hospital Operations 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												Same-Hospital
		Three Months Ended June 30,				Increase (Decrease)					Six Months Ended June 30,						Increase (Decrease)						Three Months Ended March 31,							Increase (Decrease)
Outpatient Visits	Outpatient Visits	2021		2020						2021			2020			Outpatient Visits					2022			2021
Total visits	Total visits	1,478,354		866,436				70.6	%				2,748,407			2,308,383				19.1		%	Total visits			1,240,386			1,222,696					1.4	%
Paying visits (excludes charity and uninsured)	Paying visits (excludes charity and uninsured)	1,371,155		796,028		72.2	%				2,560,377			2,130,454			20.2	%			Paying visits (excludes charity and uninsured)		1,165,718				1,147,511				1.6		%
Charity and uninsured visits	Charity and uninsured visits	107,199		70,408		52.3	%				188,030			177,929			5.7	%			Charity and uninsured visits		74,668				75,185			(0.7)		%
Emergency department visits	Emergency department visits	541,417		388,038		39.5	%				992,247			1,029,320			(3.6)	%			Emergency department visits		500,665				424,361			18.0		%
Surgery visits	Surgery visits	60,949		38,749		57.3	%				114,126			92,139			23.9	%			Surgery visits		51,258				50,275			2.0		%
Paying visits as a percentage of total visits	Paying visits as a percentage of total visits	92.7	%	91.9	%	0.8	%	(1)			93.2	%		92.3	%		0.9	%	(1)		Paying visits as a percentage of total visits		94.0		%		93.9	%		0.1		%	(1)
Charity and uninsured visits as a percentage of total visits	Charity and uninsured visits as a percentage of total visits	7.3	%	8.1	%	(0.8)	%	(1)			6.8	%		7.7	%		(0.9)	%	(1)		Charity and uninsured visits as a percentage of total visits		6.0		%		6.1	%		(0.1)		%	(1)



(1)			The change is the difference between the 2022 and 2021 ~~and 2020~~ amounts ~~shown.~~presented.

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		Same-Hospital Continuing Operations								Same-Hospital Continuing Operations													Same-Hospital
		Three Months Ended June 30,				Increase (Decrease)				Six Months Ended June 30,								Increase (Decrease)					Three Months Ended March 31,						Increase (Decrease)
Revenues	Revenues	2021		2020				2021				2020				Revenues				2022				2021
Total segment net operating revenues(1)	Total segment net operating revenues(1)	$	3,937	$	2,961			33.0	%			$	7,744			$	6,637				16.7	%	Total segment net operating revenues(1)		$	3,652		$			3,561	2.6	%
Selected revenue data – hospitals and related outpatient facilities:	Selected revenue data – hospitals and related outpatient facilities:																			Selected revenue data – hospitals and related outpatient facilities:
Net patient service revenues(1)(2)	Net patient service revenues(1)(2)	$	3,749	$	2,816	33.1	%			$	7,381			$	6,334			16.5	%	Net patient service revenues(1)(2)			$	3,478		$	3,392		2.5	%
Net patient service revenue per adjusted patient admission(1)(2)	Net patient service revenue per adjusted patient admission(1)(2)	$	13,691	$	12,745	7.4	%			$	14,068			$	12,382			13.6	%	Net patient service revenue per adjusted patient admission(1)(2)			$	15,259		$	14,667		4.0	%
Net patient service revenue per adjusted patient day(1)(2)	Net patient service revenue per adjusted patient day(1)(2)	$	2,821	$	2,576	9.5	%			$	2,785			$	2,557			8.9	%	Net patient service revenue per adjusted patient day(1)(2)			$	2,840		$	2,768		2.6	%



(1)			Revenues are net of implicit price concessions.
(2)			Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services provided by facilities in our Hospital Operations 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															Same-Hospital
		Three Months Ended June 30,				Increase (Decrease)					Six Months Ended June 30,								Increase (Decrease)							Three Months Ended March 31,								Increase (Decrease)(1)
Total Segment Selected Operating Expenses	Total Segment Selected Operating Expenses	2021		2020						2021			2020				Total Segment Selected Operating Expenses						2022				2021
Salaries, wages and benefits as a percentage of net operating revenues	Salaries, wages and benefits as a percentage of net operating revenues	49.0	%	52.9	%			(3.9)	%	(1)			48.7	%			51.2	%				(2.5)		%	(1)	Salaries, wages and benefits as a percentage of net operating revenues			49.6		%		48.9				%	0.7	%
Supplies as a percentage of net operating revenues	Supplies as a percentage of net operating revenues	17.5	%	17.9	%	(0.4)	%	(1)			17.2	%			17.7	%			(0.5)	%	(1)		Supplies as a percentage of net operating revenues			15.9		%		16.9		%			(1.0)		%
Other operating expenses as a percentage of net operating revenues	Other operating expenses as a percentage of net operating revenues	22.6	%	28.2	%	(5.6)	%	(1)			23.2	%			25.6	%			(2.4)	%	(1)		Other operating expenses as a percentage of net operating revenues			20.8		%		23.7		%		(2.9)		%



(1)			The change is the difference between the 2022 and 2021 ~~and 2020~~ amounts ~~shown.~~presented.

Revenues

~~Same-hospital~~Same‑hospital net operating revenues increased ~~$976~~$91 million, or ~~33.0%~~2.6%, during the three months ended ~~June 30, 2021~~March 31, 2022 compared to the three months ended ~~June 30, 2020,~~March 31, 2021, primarily due to ~~increased patient volumes, higher~~high patient acuity and negotiated commercial rate increases. Our Hospital Operations segment also recognized grant income totaling $4 million and $24 million from federal, state and local grants ~~totaling $4 million~~ in the three months ended ~~June 30,~~March 31, 2022 and 2021, respectively, which is not included in net operating revenues. Same‑hospital admissions ~~increased 13.7%~~decreased 4.7% in the three months ended ~~June 30, 2021~~March 31, 2022 compared to the same period in ~~2020. Same‑hospital outpatient visits increased 70.6% in the three months ended June 30,~~ 2021, ~~compared to the prior-year period.~~

~~Same-hospital net operating revenues increased $1.107 billion, or 16.7%, during the six months ended June 30, 2021 compared to the six months ended June 30, 2020,~~ primarily due to the ~~same factors that impacted~~impact of the ~~three-month period ended June 30, 2021. Our Hospital Operations segment also recognized income from federal, state~~Omicron variant in January and local grants totaling $28 million in the six months ended June 30, 2021, which is not included in net operating revenues. Same-hospital admissions increased 0.1% in the six months ended June 30, 2021 compared to the same period in 2020. Same-hospital outpatient visits increased 19.1% in the six months ended June 30, 2021 compared to the prior-year period.February 2022.

~~Table of Contents~~

The following table ~~shows~~presents the consolidated net accounts receivable by payer at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Medicare	Medicare	$	149	$	152	Medicare	$	150	$	155
Medicaid	Medicaid	45		49		Medicaid	50		47
Net cost report settlements receivable and valuation allowances	Net cost report settlements receivable and valuation allowances	55		34		Net cost report settlements receivable and valuation allowances	16		33
Managed care	Managed care	1,513		1,567		Managed care	1,751		1,602
Self-pay uninsured	Self-pay uninsured	24		32		Self-pay uninsured	18		21
Self-pay balance after insurance	Self-pay balance after insurance	75		74		Self-pay balance after insurance	69		70
Estimated future recoveries	Estimated future recoveries	139		156		Estimated future recoveries	139		137
Other payers	Other payers	354		318		Other payers	373		331
Total Hospital Operations	Total Hospital Operations	2,354		2,382		Total Hospital Operations	2,566		2,396
Ambulatory Care	Ambulatory Care	288		307		Ambulatory Care	350		374
Total discontinued operations		1		1
		$	2,643	$	2,690
Accounts receivable, net						Accounts receivable, net	$	2,916	$	2,770

Collection of accounts receivable has been a key area of focus, particularly over the past several years. At ~~June 30, 2021,~~March 31, 2022, our Hospital Operations segment collection rate on ~~self-pay~~self‑pay accounts was approximately ~~25.4%~~27.2%. Our self‑pay collection rate includes payments made by patients, including ~~co-pays, co-insurance~~co‑pays, co‑insurance amounts and deductibles paid by patients with insurance. Based on our accounts receivable from uninsured patients and ~~co-pays, co-insurance~~co‑pays, co‑insurance amounts and deductibles owed to us by patients with insurance at ~~June 30, 2021,~~March 31, 2022, a 10% decrease or increase in our ~~self-pay~~self‑pay collection rate, or approximately 3%, which we believe could be a reasonably likely change, would result in an unfavorable or favorable adjustment to patient accounts receivable of approximately $9 million. There are various factors that can impact collection 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~~co‑pays and

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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~~COVID‑19 pandemic, continuously change and can have an impact on collection trends and our estimation process.

~~Payment pressure from managed care payers~~We also ~~affects the collectability of our 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 segment collection rate from managed care payers was approximately ~~97.0%~~96.3% at ~~June 30, 2021.~~March 31, 2022.

We manage our implicit price concessions using ~~hospital-specific~~hospital‑specific goals and benchmarks such as (1) total cash collections, (2) ~~point-of-service~~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 segment of ~~$2.299~~$2.550 billion and ~~$2.348~~$2.363 billion at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, excluding cost report settlements receivable and valuation allowances of ~~$55~~$16 million and ~~$34~~$33 million, respectively, at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:

June 30, 2021
Medicare Medicaid Managed
Care Indemnity,
Self-Pay
and Other Total
0-60 days 91 % 40 % 55 % 24 % 50 %
61-120 days 5 % 27 % 17 % 14 % 16 %
121-180 days 2 % 14 % 10 % 8 % 9 %
Over 180 days 2 % 19 % 18 % 54 % 25 %
Total 100 % 100 % 100 % 100 % 100 %

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

~~Table of Contents~~



	Medicare		Medicaid		Managed Care		Indemnity, Self-Pay and Other		Total
At March 31, 2022:
0-60 days	91	%	32	%	56	%	23	%	50	%
61-120 days	4	%	29	%	16	%	14	%	15	%
121-180 days	2	%	16	%	10	%	9	%	10	%
Over 180 days	3	%	23	%	18	%	54	%	25	%
Total	100	%	100	%	100	%	100	%	100	%

At December 31, 2021:
0-60 days	93	%	35	%	57	%	22	%	52	%
61-120 days	4	%	31	%	18	%	14	%	16	%
121-180 days	1	%	14	%	10	%	9	%	9	%
Over 180 days	2	%	20	%	15	%	55	%	23	%
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,~~pre‑registration, registration, verification of eligibility and benefits, liability identification and collections at ~~point-of-service,~~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 ~~June 30, 2021,~~March 31, 2022, we had a cumulative total of patient account assignments to Conifer of ~~$2.2~~$1.911 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;~~receivables; 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~~and Enrollment Services program (“~~MEP”~~EES”) 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~~EES, net of appropriate ~~contractual allowances recorded.~~implicit price concessions. Based on recent trends, approximately 97% of all accounts in the ~~MEP~~EES are ultimately approved for benefits under a government program, such as Medicaid.

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The following table ~~shows~~presents the approximate amount of accounts receivable in the ~~MEP~~EES still awaiting determination of eligibility under a government program at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 by aging category:


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
0-60 days	0-60 days	$	77	$	91	0-60 days	$	75	$	87
61-120 days	61-120 days	12		24		61-120 days	18		17
121-180 days	121-180 days	2		6		121-180 days	4		4
Over 180 days	Over 180 days	7		6		Over 180 days	9		7
Total	Total	$	98	$	127	Total	$	106	$	115

Salaries, Wages and Benefits

~~Same-hospital~~Same‑hospital salaries, wages and benefits increased ~~$361~~$70 million, or ~~23%~~4%, in the three months ended ~~June 30, 2021~~March 31, 2022 compared to the same period in ~~2020.~~2021. This ~~change~~increase was primarily attributable to increased contract labor ~~costs, higher patient volumes, increased incentive compensation, annual merit increases for certain of our employees~~ and ~~a greater number of employed physicians. This increase was~~overtime costs, partially offset by our ~~continued focus on cost‑reduction~~cost-efficiency measures, ~~and corporate efficiencies. Same-hospital~~including the use of labor management tools as patient volumes fluctuate. Same‑hospital salaries, wages and benefits as a percentage of net operating revenues ~~decreased~~increased by ~~390~~70 basis points to ~~49.0%~~49.6% in the three months ended ~~June 30, 2021~~March 31, 2022 compared to the three months ended ~~June 30, 2020,~~March 31, 2021, primarily due to the ~~same~~ factors described above. Salaries, wages and benefits expense for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ included ~~stock-based~~stock‑based compensation expense of $12 million and $8$10 million, respectively.

~~Same-hospital salaries, wages and benefits increased $375~~Supplies

Same‑hospital supplies expense decreased $22 million, or ~~11.0%~~3.6%, in the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 compared to the same period in ~~2020. This increase was primarily attributable to the same factors that impacted the three‑month period ended June 30,~~ 2021. Same-hospital salaries, wages and benefits as a percentage of net operating revenues decreased by 250 basis points to 48.7% in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily due to the same factors that impacted the three‑month period ended June 30, 2021. Salaries, wages and benefits expense for the six months ended June 30, 2021 and 2020 included stock-based compensation expense of $22 million and $15 million, respectively.

~~Supplies~~

~~Same-hospital supplies expense increased $159 million, or 30.1%, in the three months ended June 30, 2021 compared to the same period in 2020.~~ The ~~increase~~decrease was primarily due to ~~increased~~our cost-efficiency measures, including those described below, and lower patient volumes, partially offset by the increased cost of certain supplies as a result of the ~~COVID-19~~COVID‑19 pandemic and growth in our ~~higher-acuity, supply-intensive~~higher‑acuity, supply‑intensive surgical services. ~~Same-hospital~~Same‑hospital supplies expense as a percentage of net operating revenues decreased by 40100 basis points to ~~17.5%~~15.9% in the three months ended ~~June 30, 2021~~March 31, 2022 compared to the three months ended ~~June 30, 2020,~~March 31, 2021, primarily due to ~~the same factors described above.~~

Same-hospital supplies expense increased $155 million, or 13.2%, in the six months ended June 30, 2021 compared to the same period in 2020. The increase was primarily due to the same factors that impacted the three-month period ended June 30, 2021. Same-hospital supplies expense as a percentage of net operating revenues decreased by 50 basis points to 17.2%

~~Table of Contents~~

~~in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily due to the same factors that impacted the three-month period ended June 30, 2021.~~

our continued focus on strategic cost-efficiency measures. We strive to control supplies expense through product standardization, consistent contract 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 focus include PPE, cardiac stents and pacemakers, orthopedics, implants, and high-cost pharmaceuticals.~~

Other Operating Expenses, Net

~~Same-hospital~~Same‑hospital other operating expenses ~~increased~~decreased by ~~$52~~$82 million, or ~~6.2%~~9.7%, in the three months ended ~~June 30, 2021~~March 31, 2022 compared to the same period in ~~2020. Same-hospital~~2021. The changes in other operating expenses included:

•a gain on the sale of several medical office buildings of $69 million; and

•decreased medical expenses of $11 million.

Same‑hospital other operating expenses as a percentage of net operating revenues decreased by ~~560~~290 basis points to ~~22.6%~~20.8% for the three months ended ~~June 30, 2021~~March 31, 2022 compared to ~~28.2%~~23.7% for the three months ended ~~June 30, 2020,~~March 31, 2021, primarily due to ~~increased patient volumes~~the gain recognized on the sale of several medical office buildings during the 2022 period and ~~the fact that there is a high level of fixed costs (e.g., rent expense) in other operating expenses. The changes in other operating expenses included:~~our continued focus on cost-efficiency measures.

•~~increased software costs of $22 million;~~

•~~increased malpractice expense of $15 million;~~

•~~increased rent and lease expense of $8 million;~~

•~~increased repair and maintenance costs of $13 million; and~~

•~~a gain on sale and leaseback of a medical office building of $12 million, which is classified as a reduction of other operating expenses, net.~~

Same-hospital other operating expenses increased by $99 million, or 5.8%, in the six months ended June 30, 2021 compared to the same period in 2020. Same-hospital other operating expenses as a percentage of net operating revenues decreased by 240 basis points to 23.2% in the six months ended June 30, 2021 compared to 25.6% for the six months ended June 30, 2020, primarily due to increased patient volumes and the fact that there is a high level of fixed costs (e.g., rent expense) in other operating expenses. The changes in other operating expenses included:

•~~increased software costs of $34 million;~~

•~~increased malpractice expense of $32 million;~~

•~~increased rent and lease expense of $20 million;~~

•~~increased repair and maintenance costs of $12 million; and~~

•~~a gain on sale and leaseback of a medical office building of $12 million, which is classified as a reduction of other operating expenses, net.~~

Ambulatory Care Segment

Our Ambulatory Care segment is comprised of USPI’s ~~ambulatory surgery centers~~ASCs and surgical hospitals. USPI operates its surgical facilities in partnership with local physicians and, in many of these facilities, a health system partner. We hold an ownership interest in each facility, with each being operated through a separate legal entity in most cases. USPI operates facilities on a ~~day-to-day~~day‑to‑day basis through management services contracts. Our sources of earnings from each facility consist of:

•management and administrative services revenues, computed as a percentage of each facility’s net revenues (often net of 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 USPI.

Our role as an owner and ~~day-to-day~~day‑to‑day manager provides us with significant influence over the operations of each facility. For many of the facilities our Ambulatory Care segment operates ~~(109~~(167 of ~~341~~428 facilities at ~~June 30, 2021)~~March 31, 2022), this influence

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does not represent control of the facility, so we account for our investment in the facility under the equity method for

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an unconsolidated affiliate. USPI controls ~~232~~261 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 USPI is classified within ~~“net~~net income available to noncontrolling interests.”

For unconsolidated affiliates, our 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 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~~day‑to‑day operations of each facility, usually quantified as a percentage of each facility’s net revenues less implicit price concessions.

Our Ambulatory Care segment operating income is driven by the performance of all facilities USPI operates and by USPI’s ownership interests in those facilities, but our individual revenue and expense line items contain only consolidated businesses, which represent ~~68%~~61% of those facilities. This translates to trends in consolidated operating income that often do not correspond with changes in consolidated revenues and 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 statement of operations items for the periods indicated:


		Three Months Ended June 30,				Increase (Decrease)				Six Months Ended June 30,								Increase (Decrease)					Three Months Ended March 31,						Increase (Decrease)
Ambulatory Care Results of Operations	Ambulatory Care Results of Operations	2021		2020				2021				2020				Ambulatory Care Results of Operations				2022				2021
Net operating revenues	Net operating revenues	$	664	$	368			80.4	%			$	1,310			$	858				52.7	%	Net operating revenues		$	738		$			646	14.2	%
Grant income	Grant income	$	15	$	37	(59.5)	%			$	22			$	37			(40.5)	%	Grant income			$	2		$	7		(71.4)	%
Equity in earnings of unconsolidated affiliates	Equity in earnings of unconsolidated affiliates	$	49	$	35	40.0	%			$	87			$	61			42.6	%	Equity in earnings of unconsolidated affiliates			$	42		$	38		10.5	%
Salaries, wages and benefits	Salaries, wages and benefits	$	169	$	119	42.0	%			$	343			$	281			22.1	%	Salaries, wages and benefits			$	194		$	174		11.5	%
Supplies	Supplies	$	169	$	79	113.9	%			$	326			$	191			70.7	%	Supplies			$	201		$	157		28.0	%
Other operating expenses, net	Other operating expenses, net	$	95	$	75	26.7	%			$	198			$	161			23.0	%	Other operating expenses, net			$	105		$	103		1.9	%

~~Our~~ Revenues

Ambulatory Care net operating revenues increased by ~~$296~~$92 million, or ~~80.4%~~14.2%, during the three months ended ~~June 30, 2021 as~~March 31, 2022 compared to the same period in ~~2020.~~2021. The change was driven by an increase from acquisitions of $91 million, as well as an increase in ~~same-facility~~same‑facility net operating revenues of ~~$200~~$52 million due primarily to higher surgical patient volumes ~~and acuity, incremental revenue from new service lines~~ and negotiated commercial rate ~~increases, as well as an increase from acquisitions of $123 million.~~increases. These increases were also partially offset by a decrease of ~~$27~~$51 million due primarily to the sale of ~~our~~the Ambulatory Care segment’s urgent care centers and the transfer of its imaging centers to the Hospital Operations segment. Our Ambulatory Care segment also recognized income from federal grants totaling ~~$15~~$2 million and $7 million during the three months ended ~~June 30,~~March 31, 2022 and 2021, which is not included in net operating revenues. Our Ambulatory Care net operating revenues increased by $452 million, or 52.7%, during the six months ended June 30, 2021 as compared to the same period in 2020. The change was driven by an increase in same-facility net operating revenues of $244 million due primarily to higher patient volumes and acuity, incremental revenue from new service lines and negotiated commercial rate increases, as well as an increase from acquisitions of $241 million, partially offset by a decrease of $33 million due to the sale of our urgent care centers, the transfer of imaging centers to the Hospital Operations segment and the deconsolidation of a facility. Our Ambulatory Care segment also recognized income from federal grants totaling $22 million during the six months ended June 30, 2021,respectively, which is not included in net operating revenues.

Salaries, Wages and Benefits

Salaries, wages and benefits expense increased by ~~$50~~$20 million, or ~~42.0%~~11.5%, during the three months ended ~~June 30, 2021 as~~March 31, 2022 compared to the same period in ~~2020.~~2021. Salaries, wages and benefits expense was impacted by an increase from acquisitions of ~~$22~~$26 million, as well as an increase in ~~same-facility~~same‑facility salaries, wages and benefits expense of ~~$36~~$17 million due primarily to higher surgical patient ~~volumes,~~volumes. These increases were partially offset by a decrease of $8$23 million due primarily to the sale of ~~our~~the Ambulatory Care segment’s urgent care centers and the transfer of its imaging centers to the Hospital Operations segment. Salaries, wages and benefits expense for three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ included ~~stock-based~~stock‑based compensation expense of $3 million ~~and $5 million, respectively. Salaries, wages and benefits expense increased by $62 million, or 22.1%, during the six months ended June 30, 2021 as compared to the same~~in both periods.

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period in 2020. Salaries, wages and benefits expense was impacted by an increase from acquisitions of $41 million, an increase in same‑facility salaries, wages and benefits expense of $31 million due primarily to higher patient volumes, partially offset by a decrease of $10 million due to the sale of our urgent care centers, the transfer of imaging centers to the Hospital Operations segment and the deconsolidation of a facility. Salaries, wages and benefits expense for six months ended June 30, 2021 and 2020 included stock-based compensation expense of $6 million and $10 million, respectively.

Supplies

Supplies expense increased by ~~$90~~$44 million, or ~~113.9%~~28.0%, during the three months ended ~~June 30, 2021 as~~March 31, 2022 compared to the same period in ~~2020.~~2021. The change was driven by an increase from acquisitions of ~~$37~~$32 million, as well as an increase in same‑facility supplies expense of ~~$55~~$15 million due primarily to an increase in ~~cases at our consolidated centers, higher costs driven by the higher level of~~surgical patient ~~acuity,~~volumes and higher pricing of certain supplies as a result of the ~~COVID-19~~COVID‑19 pandemic, partially offset by a decrease of $2$3 million due to the sale of ~~our~~the Ambulatory Care segment’s urgent care centers and the transfer of its imaging centers to the Hospital Operations segment. ~~Supplies expense~~

Other Operating Expenses, Net

Other operating expenses increased by ~~$135~~$2 million, or ~~70.7%~~1.9%, during the ~~six~~three months ended ~~June 30, 2021 as~~March 31, 2022 compared to the same period in ~~2020.~~2021. The change was driven by an increase from acquisitions of ~~$74~~$12 million, as well as an increase in same-facility supplies expense of $65 million due primarily to an increase in cases at our consolidated centers, higher costs driven by the higher level of patient acuity, and higher pricing of certain supplies as a result of the COVID-19 pandemic, partially offset by a decrease of $4 million due to the sale of our urgent care centers, the transfer of imaging centers to the Hospital Operations segment and the deconsolidation of a facility.

Other operating expenses increased by $20 million, or 26.7%, during the three months ended June 30, 2021 as compared to the same period in 2020. The change was driven by an increase from acquisitions of $13 million, as well as an increase in same-facilitysame‑facility other operating expenses of ~~$16~~$5 million, partially offset by a decrease of $9$15 million due to the sale of ~~our~~the Ambulatory Care segment’s urgent care centers and the transfer of imaging centers to the Hospital Operations segment. Other operating expenses increased by $37 million, or 23.0%, during the six months ended June 30, 2021 as compared to the same period in 2020. The change was driven by an increase from acquisitions of $26 million, as well as an increase in same-facility other operating expenses of $21 million, partially offset by a decrease of $10 million due to the sale of our urgent care centers and the transfer ofits imaging centers to the Hospital Operations segment.

Facility Growth

The following table summarizes the year‑over‑year changes in our ~~same-facility~~same‑facility revenue ~~year-over-year~~for the three‑month periods ended March 31, 2022 and 2021 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
June 30, 2021 Six Months Ended
June 30, 2021
Net revenues 50.1% 25.9%
Cases 68.2% 29.1%
Net revenue per case (10.7)% (2.5)%

Ambulatory Care Facility Growth

Three Months Ended
March 31, 2022

Net revenues

9.3%

Cases

8.0%

Net revenue per case

1.1%

Joint Ventures with Health System Partners

USPI’s business model is to jointly own its facilities with local physicians and, in many of these facilities, a not‑for‑profit health system partner. Accordingly, as of ~~June 30, 2021,~~March 31, 2022, the majority of facilities in our Ambulatory Care segment are operated in this model.

The table below summarizes the amounts we paid to acquire various ownership interests in ambulatory care facilities in the periods indicated:


	Three Months Ended March 31,				Increase (Decrease)
Type of Ownership Interests Acquired	2022		2021
Controlling interests	$	40	$	24	$	16

Equity investment in unconsolidated affiliates and consolidated facilities	9		1		8
Total	$	49	$	25	$	24

The table below provides information about the ownership structure of the facilities our Ambulatory Care segment operated at March 31, 2022:


Ambulatory Care Facilities									Six Months Ended June 30, 2021March 31, 2022
~~Facilities:~~Ownership Structure:
With a health system partner									~~191~~198
Without a health system partner									~~150~~230
Total facilities operated									~~341~~428

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The table below reflects changes in the number of ambulatory care facilities during the three months ended March 31, 2022:


Ambulatory Care Facilities									Three Months Ended March 31, 2022





Change from December 31, ~~2020:~~2021:
Acquisitions									84
De novo									2
Dispositions/Mergers									~~(65)~~(1)
Total ~~decrease~~increase in number of facilities operated									~~(55)~~5

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During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, we acquired controlling interests in ~~four ambulatory surgery centers~~two ASCs located in ~~Maryland, two in Georgia~~Florida and one in ~~Florida.~~New Hampshire. We paid cash totaling ~~approximately $63~~$31 million for these ~~acquisitions. Other than the ambulatory surgery center located in Florida, all of the facilities acquired~~acquisitions, which are jointly owned with physicians. ~~The Florida facility is jointly owned with a health system partner and physicians.~~ During the ~~six months ended June 30, 2021,~~same period in 2022, we ~~transferred all 24 imaging centers held~~acquired a noncontrolling interest in ~~our Ambulatory Care segment to our Hospital Operations segment. We also divested 40 urgent care centers during the six months ended June 30, 2021.~~an ASC located in New Jersey.

During the six months ended June 30, 2021, we acquired noncontrolling interests in one ambulatory surgery center in New Mexico. We paid cash totaling approximately $1 million for this acquisition, which is jointly owned with physicians and a hospital partner. Also during the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, we ~~sold a portion~~acquired controlling interests in three previously unconsolidated SCD Centers, located in Florida, Pennsylvania and Texas, for $9 million. Following our acquisition of ~~our ownership in two ambulatory surgery centers in which we previously had~~ a controlling interest ~~to a health system for approximately $12 million, resulting~~ in the ~~deconsolidation of these facilities.~~Texas ASC, we contributed our ownership interest in it to our subsidiary Texas Health Ventures Group, L.L.C.

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 in control. These transactions are primarily the acquisitions of equity interests in ~~ambulatory surgery centers~~ASCs and the investment of additional cash in facilities that need capital for new acquisitions, new construction or other business growth opportunities. During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, we invested approximately $6$9 million in such transactions.

Conifer Segment

Revenues

Our Conifer segment generated net operating revenues of ~~$319~~$324 million and ~~$305~~$310 million during the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, a portion of which was eliminated in consolidation as described in Note 18 to the accompanying Condensed Consolidated Financial Statements. ~~Conifer~~The increase in Conifer’s net operating revenues was $14 million, or 4.5%. Conifer’s revenues from ~~third-party customers,~~third‑party clients, which revenues are not eliminated in consolidation, increased $3$21 million, or ~~1.6%~~11.2%, for the three months ended ~~June 30, 2021~~March 31, 2022 compared to the same period in ~~2020. Our Conifer segment generated net operating revenues of $629 million and $637 million during the six months ended June 30, 2021 and 2020, respectively.~~2021. The decline in Conifer’s net operating revenues of $8 million, or 1.3%, was primarily due to the revised terms in the Amended RCM Agreement and expected client attrition. These impacts were partially offset by client volume improvement in the 2021 period as compared to the 2020 period, which was adversely affected by the COVID‑19 pandemic, as well as new business expansion. Conifer revenues from third-party customers, which are not eliminated in consolidation, decreased $5 million, or 1.3%, for the six months ended June 30, 2021 compared to the same period in 2020. This decreaseincrease was primarily attributable to ~~expected client attrition, partially offset by~~contractual rate increases, new business ~~expansion. The remainder~~expansion and the transition of the ~~decrease in Conifer’s total net operating revenues was primarily driven by the revised terms~~Miami Hospitals to third‑party clients in the ~~Amended RCM Agreement.~~2022 period.

Salaries, Wages and Benefits

Salaries, wages and benefits expense for Conifer ~~increased $5~~decreased $2 million, or ~~3.0%~~1.2%, in the three months ended ~~June 30, 2021~~March 31, 2022 compared to the same period in ~~2020,~~2021. The decrease was primarily due cost-efficiency measures and ~~decreased $4~~lower incentive compensation in 2022. Salaries, wages and benefits expense included stock‑based compensation expense of $1 million in each of the three‑month periods ended March 31, 2022 and 2021.

Other Operating Expenses, Net

Other operating expenses for Conifer increased $10 million, or ~~1.2%~~18.9%, in the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 compared to the same period in ~~2020. Salaries, wages~~2021. This increase was primarily due to higher vendor fee and ~~benefits expense included stock-based compensation expense of $1 million~~recruiting expenses in ~~both of the three-month periods ended June 30, 2021 and 2020, and $2 million in both of the six-month periods ended June 30, 2021 and 2020.~~

Other operating expenses for Conifer decreased $8 million, or 12.1%, in the three months ended June 30, 2021 compared to the same period in 2020. Other operating expenses for Conifer decreased $20 million, or 15.3%, in the six months ended June 30, 2021 compared to the same period in 2020.2022.

In March 2021, we entered into the Amended RCM Agreement effective January 1, 2021. The Amended RCM Agreement updates certain terms and conditions related to the revenue cycle management services Conifer provides to Tenet hospitals. Conifer’s contract with Tenet represented 39.1%

Table of ~~the net operating revenues Conifer recognized in the six months ended June 30, 2021.~~Contents

Consolidated

Impairment and Restructuring Charges, and Acquisition-Related Costs

~~During the three months ended June 30, 2021, we recorded~~The following table presents information about our impairment and restructuring charges, and acquisition‑related ~~costs of $20 million, consisting of $18 million of~~costs:


	Three Months Ended March 31,
	2022		2021
Consolidated:
Impairment charges	$	1	$	—
Restructuring charges	12		16
Acquisition-related costs	3		4
Total impairment and restructuring charges, and acquisition-related costs	$	16	$	20

By segment:
Hospital Operations	$	12	$	10
Ambulatory Care	3		4
Conifer	1		6
Total impairment and restructuring charges, and acquisition-related costs	$	16	$	20

During the three months ended March 31, 2022, restructuring ~~charges, $1 million of impairment charges and $1 million of acquisition-related costs. Restructuring~~ charges consisted of $6$5 million of employee severance costs, $2 million related to the transition of various administrative functions to our GBC and $5 million of other restructuring costs. Acquisition‑related costs consisted of $3 million of transaction costs.

During the three months ended March 31, 2021, restructuring charges consisted of $4 million of employee severance costs, $6 million related to the transition of various administrative functions to our ~~Global Business Center (“GBC”) in the Philippines~~GBC and $6 million of other restructuring costs. Acquisition-related costs consisted of $1 million of transaction costs. Our impairment and restructuring charges and acquisition-related costs for the three months ended June 30, 2021 were comprised of

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~~$10 million from our Hospital Operations segment, $4 million from our Ambulatory Care segment and $6 million from our Conifer segment.~~

During the three months ended June 30, 2020, we recorded impairment and restructuring charges and acquisition‑related costs of $54 million, consisting of $49 million of restructuring charges and $5 million of impairment charges. Restructuring charges consisted of $27 million of employee severance costs, $10 million related to the transition of various administrative functions to our GBC and $12 million of other restructuring costs. Our impairment and restructuring charges and acquisition-related costs for the three months ended June 30, 2020 were comprised of $32 million from our Hospital Operations segment, $7 million from our Ambulatory Care segment and $15 million from our Conifer segment.

During the six months ended June 30, 2021, we recorded impairment and restructuring charges and acquisition‑related costs of $40 million, consisting of $34 million of restructuring charges, $1 million of impairment charges and $5 million of acquisition-related costs. Restructuring charges consisted of $10 million of employee severance costs, $12 million related to the transition of various administrative functions to our GBC and $12 million of other restructuring costs. Acquisition‑related costs consisted of $5$4 million of transaction costs. Our impairment and restructuring charges and acquisition-related costs for the six months ended June 30, 2021 were comprised of $20 million from our Hospital Operations segment, $8 million from our Ambulatory Care segment and $12 million from our Conifer segment.

During the six months ended June 30, 2020, we recorded impairment and restructuring charges and acquisition‑related costs of $109 million, consisting of $103 million of restructuring charges, $5 million of impairment charges and $1 million of acquisition-related costs. Restructuring charges consisted of $37 million of employee severance costs, $25 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, and $17 million of other restructuring costs. Acquisition-related costs consisted of $1 million of transaction costs. Our impairment and restructuring charges and acquisition‑related costs for the six months ended June 30, 2020 were comprised of $50 million from our Hospital Operations segment, $31 million from our Ambulatory Care segment and $28 million from our Conifer segment.

Litigation and Investigation Costs

Litigation and investigation costs for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ were ~~$22~~$20 million and $2$13 million, respectively. Litigation and investigation costs for the six months ended June 30, 2021 and 2020 were $35 million and $4 million, respectively. In all periods, these amounts are primarily related to costs associated with significant legal proceedings and governmental investigations.

~~Net Gains on Sales, Consolidation and Deconsolidation of Facilities~~

During the three and six months ended June 30, 2021, we recorded net gains on sales, consolidation and deconsolidation of facilities of approximately $15 million, primarily related to the sale of our urgent care centers in April 2021.

During the three months ended June 30, 2020, we recorded net gains on sales, consolidation and deconsolidation of facilities of approximately $1 million, primarily due to a post-closing adjustment on the 2019 sale of three of our hospitals in the Chicago-area.

During the six months ended June 30, 2020, we recorded net gains on sales, consolidation and deconsolidation of facilities of approximately $3 million, primarily comprised of gains of $11 million related to consolidation changes of certain USPI businesses due to ownership changes, partially offset by a loss of $5 million related to post-closing adjustments on the 2019 sale of three of our hospitals in the Chicago area and a loss of $3 million related to post-closing adjustments on the 2018 sale of MacNeal Hospital.

Interest Expense

Interest expense for the three months ended ~~June 30, 2021~~March 31, 2022 was ~~$235~~$227 million compared to ~~$255~~$240 million for the same period in ~~2020. Interest expense for the six months ended June 30, 2021 was $475 million compared to $498 million for the same period in 2020.~~2021.

Loss from Early ~~Extinguishment~~Extinguishment of Debt

~~Loss~~During the three months ended March 31, 2022, we incurred aggregate losses from the early extinguishment of debt ~~was $31 million and $54 million for the three and six months ended June 30, 2021, respectively.~~of $43 million. These losses related to ~~our retirement of approximately $1.888 billion aggregate principal amount of certain~~the redemption of our ~~senior unsecured and senior secured second lien notes~~2025 Senior Secured First Lien Notes in advance of their maturity ~~dates in~~date and the ~~three and six~~

~~Table~~repurchase of ~~Contents~~

~~months ended June 30, 2021. See Note 6~~$103 million aggregate principal amount outstanding of our 2023 Senior Unsecured Notes. The losses incurred from these transactions primarily related to the ~~accompanying Condensed Consolidated Financial Statements for additional discussion~~difference between the purchase prices and the par value of ~~these retirements.~~the notes, as well as the write‑off of associated unamortized issuance costs.

Loss from early extinguishment of debt was $4$23 million for ~~both~~ the three months ended March 31, 2021 and ~~six month periods ended June 30, 2020. The loss~~related to the retirement of our 7.000% senior unsecured notes due 2025 in ~~the 2020 period included $8 million due to debt repurchase transactions partially offset by $4 million~~advance of ~~gains on the extinguishment of mortgage notes.~~their maturity date.

Income Tax Expense

During the three months ended ~~June 30, 2021,~~March 31, 2022, we recorded income tax expense of ~~$61~~$99 million in continuing operations on a pre-tax income of ~~$319~~$378 million compared to ~~income tax expense of~~ $45 million on pre-tax income of ~~$214~~$267 million during the prior‑year period. During the three months ended ~~June 30, 2020. During the six months ended June 30, 2021,~~March 31, 2022, we recorded income tax expense of ~~$106~~$32 million to increase the valuation allowance for interest expense carryforwards due to a change in ~~continuing operations on a pre-tax income of $586 million compared to an income tax benefit of $30 million on pre-tax income of $299 million during~~ the ~~six months ended June 30, 2020.~~business interest expense disallowance rules in 2022.

~~The~~

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A reconciliation between the amount of ~~recorded~~reported income tax expense ~~(benefit)~~ and the amount ~~calculated at~~computed by multiplying income from continuing operations before income taxes by the statutory federal tax rate is ~~shown in the following table:~~presented below:

Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
Tax expense at statutory federal rate of 21% $ 67 $ 45 $ 123 $ 63
State income taxes, net of federal income tax benefit 14 10 26 15
Tax benefit attributable to noncontrolling interests (28) (16) (53) (30)
Nondeductible goodwill 7 — 7 —
Nontaxable gains — — — 3
Stock-based compensation (2) — (3) —
Change in valuation allowance — 2 — (88)
Other items 3 4 6 7
Income tax expense (benefit) $ 61 $ 45 $ 106 $ (30)


	Three Months Ended March 31,
	2022		2021
Tax expense at statutory federal rate of 21%	$	79	$	56
State income taxes, net of federal income tax benefit	14		13
Tax benefit attributable to noncontrolling interests	(29)		(25)




Stock-based compensation tax benefit	(2)		(1)
Changes in valuation allowance	32		—

Other items	5		2
Income tax expense	$	99	$	45

Net Income Available to Noncontrolling Interests

Net income available to noncontrolling interests was ~~$138~~$140 million for the three months ended ~~June 30, 2021~~March 31, 2022 compared to ~~$81~~$125 million for the three months ended ~~June 30, 2020.~~March 31, 2021. Net income available to noncontrolling interests for the ~~2021~~2022 period was comprised of $8$99 million related to our Ambulatory Care segment, $25 million related to our Hospital Operations segment, ~~$113 million related~~which was substantially due to our ~~Ambulatory Care segment~~Alabama joint venture partner’s share of the $69 million gain from the sale of several medical office buildings, and ~~$17~~$16 million related to our Conifer segment. Of the portion related to our Ambulatory Care segment, ~~$5 million related to the minority interests in USPI.~~

Net income available to noncontrolling interests was $263 million for the six months ended June 30, 2021 compared to $147 million for the six months ended June 30, 2020. Net income available to noncontrolling interests for the six months ended June 30, 2021 was comprised of $25 million related to our Hospital Operations segment, $205 million related to our Ambulatory Care segment and $33 million related to our Conifer segment. Of the portion related to our Ambulatory Care segment, $9$4 million related to the minority interests in USPI.

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~~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, we use these measures to define certain performance targets under our compensation programs.

“Adjusted EBITDA” is a ~~non-GAAP~~non‑GAAP measure 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 attributable (income available) to noncontrolling interests, (3) income (loss) from discontinued operations, net of tax, (4) income tax benefit (expense), (5) gain (loss) from early extinguishment of debt, (6) other ~~non-operating~~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

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and deconsolidation of facilities, (10) impairment and restructuring charges and ~~acquisition-related~~acquisition‑related costs, (11) depreciation and amortization, and (12) income (loss) from divested and closed ~~businesses.~~businesses (i.e., health plan businesses). Litigation and investigation costs do not include ordinary course of business malpractice and other litigation and related expense.

We believe the foregoing ~~non-GAAP~~non‑GAAP measure is useful to investors and analysts because it presents additional information about our financial performance. Investors, analysts, company management and our board of directors utilize this ~~non-GAAP~~non‑GAAP measure, in addition to GAAP measures, to track our financial and operating performance and compare that performance to peer companies, which utilize similar non‑GAAP measures in their presentations. The human resources committee of our board of directors also uses certain non‑GAAP measures to evaluate management’s performance for the purpose of determining incentive compensation. 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~~non‑GAAP measures, as factors in determining the estimated fair value of shares of our common stock. Company management also regularly reviews the Adjusted EBITDA performance for each operating segment. We do not use Adjusted EBITDA to measure liquidity, but instead to measure operating performance. The ~~non-GAAP~~non‑GAAP Adjusted EBITDA measure 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 our financial performance.

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The following table ~~shows~~presents the reconciliation of Adjusted EBITDA to net income available to Tenet Healthcare Corporation common shareholders (the most comparable GAAP term) for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2021			2020			2021			2020				2022			2021
Net income available to Tenet Healthcare Corporation common shareholders	Net income available to Tenet Healthcare Corporation common shareholders	$	119		$	88		$	216		$	181		Net income available to Tenet Healthcare Corporation common shareholders	$	140		$	97
Less: Net income available to noncontrolling interests	Less: Net income available to noncontrolling interests	(138)			(81)			(263)			(147)			Less: Net income available to noncontrolling interests	(140)			(125)
Loss from discontinued operations, net of tax		(1)			—			(1)			(1)
Income from discontinued operations, net of tax														Income from discontinued operations, net of tax	1			—
Income from continuing operations	Income from continuing operations	258			169			480			329			Income from continuing operations	279			222
Income tax benefit (expense)		(61)			(45)			(106)			30
Income tax expense														Income tax expense	(99)			(45)
Loss from early extinguishment of debt	Loss from early extinguishment of debt	(31)			(4)			(54)			(4)			Loss from early extinguishment of debt	(43)			(23)
Other non-operating income (expense), net		(1)			2			9			3
Other non-operating income, net														Other non-operating income, net	—			10
Interest expense	Interest expense	(235)			(255)			(475)			(498)			Interest expense	(227)			(240)
Operating income	Operating income	586			471			1,106			798			Operating income	648			520
Litigation and investigation costs	Litigation and investigation costs	(22)			(2)			(35)			(4)			Litigation and investigation costs	(20)			(13)
Net gains on sales, consolidation and deconsolidation of facilities		15			1			15			3
Net losses on sales, consolidation and deconsolidation of facilities														Net losses on sales, consolidation and deconsolidation of facilities	(1)			—
Impairment and restructuring charges, and acquisition-related costs	Impairment and restructuring charges, and acquisition-related costs	(20)			(54)			(40)			(109)			Impairment and restructuring charges, and acquisition-related costs	(16)			(20)
Depreciation and amortization	Depreciation and amortization	(221)			(206)			(445)			(409)			Depreciation and amortization	(203)			(224)

Adjusted EBITDA	Adjusted EBITDA	$	834		$	732		$	1,611		$	1,317		Adjusted EBITDA	$	888		$	777

Net operating revenues	Net operating revenues	$	4,954		$	3,648		$	9,735		$	8,168		Net operating revenues	$	4,745		$	4,781

Net income available to Tenet Healthcare Corporation common shareholders as a % of net operating revenues	Net income available to Tenet Healthcare Corporation common shareholders as a % of net operating revenues	2.4		%	2.4		%	2.2		%	2.2		%	Net income available to Tenet Healthcare Corporation common shareholders as a % of net operating revenues	3.0		%	2.0		%

Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin)	Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin)	16.8		%	20.1		%	16.5		%	16.1		%	Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin)	18.7		%	16.3		%

LIQUIDITY AND CAPITAL RESOURCES

CASH REQUIREMENTS

Scheduled Contractual Obligations

There have been no material changes to our obligations to make future cash payments under ~~contracts,~~scheduled contractual obligations, 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 the matters described below and the additional lease obligations and the ~~long-term~~long‑term debt transactions disclosed in Notes 1 and 6, respectively, to our accompanying Condensed Consolidated Financial Statements.

At ~~June 30, 2021,~~March 31, 2022, using the last 12 months of Adjusted EBITDA, our ratio of total ~~long-term~~long‑term debt, net of cash and cash equivalent balances, to Adjusted EBITDA was ~~3.79x,~~3.74x, or ~~4.17x~~3.93x if adjusted to include outstanding obligations arising from cash advances received from Medicare pursuant to ~~COVID-19 stimulus~~COVID‑19 relief legislation. We anticipate this ratio will fluctuate from

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quarter to quarter based on earnings performance and other factors, including the use of our ~~revolving credit facility~~Credit Agreement as a source of liquidity and acquisitions that involve the assumption of ~~long-term~~long‑term debt. We 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~~long‑term objective to manage our capital structure, we ~~may seek~~continue to evaluate opportunities to retire, purchase, redeem orand refinance ~~some of our~~ outstanding debt ~~or issue equity or convertible securities, in each case~~ subject to prevailing market conditions, our liquidity requirements, operating results, contractual restrictions and other factors. In the year ending December 31, 2023 and beyond, we may also consider share repurchases depending on market conditions and other investment opportunities. 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~~Forward‑Looking Statements and Risk Factors sections in Part I of our Annual ~~Report.~~Report and the Risk Factors section in Part II of this report.

Interest payments, net of capitalized interest, were $166 million and $190 million in the three months ended March 31, 2022 and 2021, respectively.

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Other Contractual Obligations

Baylor Put/Call Agreement—As previously discussed in our Annual Report, we have a put/call agreement with Baylor University Medical Center (“Baylor”) with respect to Baylor’s 5% ownership in USPI. Each year starting in 2021, Baylor may put up to one‑third of its total shares in USPI (the “Baylor Shares”) by delivering notice by the end of January of such year. In each year that Baylor does not put the full 33.3% of USPI’s shares allowable, we may call the difference between the number of shares Baylor put and the maximum number of shares it could have put that year. 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 or 2022. In each of February 2021 and 2022, we notified Baylor of our intention to exercise our call option to purchase 33.3% of the Baylor Shares for that year (now 66.6% in total). We are continuing to negotiate the terms of those purchases. We expect that the estimated payment to repurchase the shares called in February 2021 and 2022 will be at least $250 million in the aggregate based on an increase in the estimated fair value of USPI.

Investment in the SCD Centers—USPI continues to make offers in an ongoing process to acquire a portion of the equity interests in certain of the SCD Centers from the physician owners for consideration of up to approximately $250 million. During the three months ended March 31, 2022, we made aggregate payments of $9 million to acquire controlling interests in three SCD Centers. We cannot reasonably predict how many additional physician owners will accept our offers to acquire a portion of their equity, nor the timing or amount of any remaining payments. We expect to fund these payments using cash on hand.

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 $247 million of standby letters of credit outstanding and guarantees at March 31, 2022.

Other Cash Requirements

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 or hospitals, and various other capital improvements, as well as commitments to make capital expenditures in connection with acquisitions of businesses. Capital expenditures were ~~$243~~$155 million and ~~$288~~$121 million in the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. We anticipate that our capital expenditures for continuing operations for the year ending December 31, ~~2021~~2022 will total approximately ~~$700~~$725 million to ~~$750~~$775 million, including ~~$93~~$95 million that was accrued as a liability at December 31, ~~2020.~~2021.

~~Interest payments, net of capitalized interest, were $486 million and $465 million in the six months ended June 30, 2021 and 2020, respectively.~~

Income tax payments, net of tax refunds, were ~~$34~~$8 million in the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 compared to $5$2 million in the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021.

SOURCES AND USES OF CASH

Our liquidity for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 was primarily derived from net cash provided by operating activities and cash on ~~hand and borrowings under our revolving credit facility.~~hand. During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, we also received supplemental funds from federal ~~state and local~~ grants provided under ~~COVID-19~~COVID‑19 relief legislation. We had ~~$2.194~~$1.405 billion of cash and cash equivalents on hand at ~~June 30, 2021~~March 31, 2022 to fund our operations and capital expenditures, and our borrowing availability under our credit facility was ~~$1.900~~$1.500 billion based on our borrowing base calculation at ~~June 30, 2021.~~March 31, 2022.

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, as well as levels of implicit price concessions, due to shifts in payer mix and other factors. Our Credit Agreement provides additional liquidity to manage fluctuations in operating cash caused by these factors.

Net cash provided by operating activities was ~~$779~~$228 million in the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 compared to ~~$2.368 billion~~$534 million in the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. Key factors contributing to the change between the ~~2021~~2022 and ~~2020~~2021 periods include the following:

•An increase in net income before interest, taxes, discontinued operations and restructuring charges, acquisition‑related costs, and litigation costs and settlements of $755 million (excluding $50 million and $511$194 million of ~~income recognized~~Medicare advances recouped in the three months ended March 31, 2022 compared to no amounts recouped during the same period in 2021;

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•$5 million of cash received from ~~federal, state and local~~ grants in the ~~2021 and 2020 periods, respectively);~~three months ended March 31, 2022 compared to $31 million received in the three months ended March 31, 2021;

•~~$152~~Decreased cash receipts of $12 million ~~of recoupment of cash advances received from Medicare pursuant~~related to ~~COVID-19 stimulus legislation~~supplemental Medicaid programs in ~~the three months ended June 30, 2021 compared to $1.378 billion of cash advances received from Medicare pursuant to COVID-19 stimulus legislation in the three months ended June 30, 2020;~~

•~~$36 million of cash received from federal~~California and ~~state grants in the 2021 period compared to $674 million received in the 2020 period;~~

•~~Higher interest payments of $21 million in the 2021 period;~~

•~~Higher income tax payments of $29 million in the 2021 period;~~

•~~A decrease of $29 million in payments on reserves for restructuring charges, acquisition-related costs, and litigation costs and settlements;~~Texas; and

•The timing of other working capital items.

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~~Net~~We used net cash ~~used~~of $60 million and $145 million in investing activities ~~was $195 million for~~during the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~compared~~respectively. The decrease in cash used of $85 million between the 2022 and 2021 periods was attributable to ~~$289 million for the six months ended June 30, 2020. The 2021 activity included~~ an increase of $135 million in proceeds from the sale of facilities and other assets, ~~of $112 million,~~ primarily related to the sale of several medical office buildings in 2022. This was partially offset by higher capital expenditures of $34 million and an increase of $15 million in cash used for purchases of businesses or joint venture interests in the ~~majority of our urgent care centers in April 2021, as~~three months ended March 31, 2022 compared to the ~~2020 period. Capital expenditures were $243 million and $288 million~~same period in ~~the six months ended June 30, 2021 and 2020, respectively.~~2021.

Net cash used in financing activities was ~~$836~~$1.127 billion for the three months ended March 31, 2022 compared to $694 million for the ~~six~~three months ended ~~June 30, 2021 compared to net cash provided by financing activities of $1.173 billion for~~March 31, 2021. Financing activity in the ~~six months ended June 30, 2020. The 2021 amount~~2022 period included ~~total~~ payments of ~~$2.012 billion~~$879 million to ~~retire approximately $1.888 billion aggregate principal amount of certain of~~reduce our ~~senior unsecured and senior secured second lien notes and~~long-term debt, including $730 million paid to fund distributions to noncontrolling interests of $212 million. These decreases were partially offset by proceeds from the issuance of our 2029 Senior Secured First Lien Notes. The 2020 amount included proceeds from the issuance ofredeem all $700 million aggregate principal amount outstanding of ~~7.500%~~our 2025 Senior Secured First Lien Notes and $107 million paid to repurchase $103 million aggregate principal amount outstanding of our 2023 Senior Unsecured Notes. In addition, we paid total distributions to noncontrolling interest holders of $135 million, funds held for USPI’s unconsolidated affiliates for which we provide cash management services decreased by $80 million and we made payments of $27 million related to our stock‑based compensation plans. Net cash used in financing activities during the three months ended March 31, 2021 included payments of $541 million to reduce our long-term debt, including a payment of $495 million to retire our 7.000% senior ~~secured first lien~~unsecured notes due 2025, and ~~$600 million aggregate principal amount~~distributions to noncontrolling interest holders of 4.625% senior secured first lien notes due 2028. The 2020 amount also included $104 million of cash advances from Medicare and $38 million of stimulus grants received by our Ambulatory Care segment’s unconsolidated affiliates, as well as $142 million of payments for our purchases of $135 million aggregate principal amount of our outstanding 8.125% senior unsecured notes due 2022.$119 million.

We record our equity securities and our debt securities classified as ~~available-for-sale~~available‑for‑sale at fair market value. 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

Credit Agreement—~~We have a senior secured revolving credit facility that, at June 30, 2021,~~At March 31, 2022, our Credit Agreement provided for revolving loans in an aggregate principal amount of up to ~~$1.900~~$1.500 billion with a $200 million subfacility for standby letters of credit. In March 2022, we amended the revolving credit facility to, among other things, (i) decrease the previous maximum aggregate revolving credit commitments from $1.900 billion to $1.500 billion, subject to borrowing availability, (ii) extend the scheduled maturity date from September 2024 to March 2027, and (iii) replace the London Interbank Offered Rate (LIBOR) with the Term Secured Overnight Financing Rate (“SOFR”) and Daily Simple SOFR (each, as defined in the Credit Agreement) as the reference interest rate. At ~~June 30, 2021,~~March 31, 2022, we had no cash borrowings outstanding under the ~~revolving credit facility,~~Credit Agreement, and we had less than $1 million of standby letters of credit outstanding. Based on our eligible receivables, ~~$1.900~~$1.500 billion was available for borrowing under the ~~revolving credit facility~~Credit Agreement at ~~June 30, 2021.~~March 31, 2022. At ~~June 30, 2021,~~March 31, 2022, we were in compliance with all covenants and conditions in our ~~senior secured revolving credit facility.~~Credit Agreement.

On April 24, 2020, we 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 reduce the interest rate margins. See Note 6 to the accompanying Condensed Consolidated Financial Statements for additional information about our Credit Facility and related amendments.

Letter of Credit Facility—~~In March 2020, we amended our~~We have a letter of credit facility (as amended to date, the “LC Facility”) that provides for the issuance, from time to ~~extend the~~time, of standby and documentary letters of credit in an aggregate principal amount of up to $200 million. The scheduled maturity date of the LC Facility ~~from March 7, 2021 to~~is September 12, 2024 and to increase the aggregate principal amount of standby and documentary letters of credit that from time to time may be issued thereunder from $180 million to $200 million. On July 29, 2020, we further amended the2024. The LC Facility is subject to incrementally increase the maximum secured debt covenant from 4.25 to 1.00 on a quarterly basis up to 6.00 to 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. At June 30, 2021, thean effective maximum secured debt covenant ~~was 5.50~~of 4.25 to 1.00. Obligations under the LC Facility are guaranteed and secured by a 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 ~~June 30, 2021,~~March 31, 2022, we were in compliance with all covenants and conditions in the LC ~~Facility. At June 30, 2021,~~Facility, and we had ~~$149~~$138 million of standby letters of credit outstanding ~~under the LC Facility.~~thereunder.

Senior Unsecured Notes and Senior Secured Notes—On ~~June 2, 2021,~~February 23, 2022, we ~~issued $1.400 billion~~redeemed all $700 million aggregate principal amount of our 2029 Senior Secured First Lien Notes. We will pay interest on the 2029 Senior Secured First Lien Notes semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2021. The proceeds from the sale of the 2029 Senior Secured First Lien Notes were used, after payment of fees and expenses, together with cash on hand, to finance the redemption of all $1.410 billion aggregate principal amount then outstanding of our 2025 Senior Secured ~~Second~~First Lien Notes in advance of their maturity ~~date for approximately $1.428 billion.~~date. We paid $730 million from cash on hand to redeem the notes. In connection with the redemption, we recorded a loss from early extinguishment of debt of ~~approximately $31 million in the three months ended June 30, 2021, primarily related to the~~

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~~difference between the purchase price and the par value of the 2025 Senior Secured Second Lien Notes, as well as the write-off of associated unamortized issuance costs.~~

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In addition, in March 2022, we repurchased $103 million aggregate principal amount outstanding of our 2023 Senior Unsecured Notes through a series of open‑market transactions. We paid $107 million from cash on hand to complete these transactions. In connection with the repurchases, we recorded a loss from early extinguishment of debt of $5 million in the three months ended March 31, 2022, primarily related to the difference between the purchase prices 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, see Note 6 to the accompanying Condensed Consolidated Financial Statements and Note 8 to the Consolidated Financial Statements included in our Annual Report.

LIQUIDITY

~~Broad economic factors resulting from~~We continue to experience negative impacts of the ~~COVID-19~~COVID‑19 pandemic ~~including increased unemployment rates~~on our business in varying degrees. During January and ~~reduced consumer spending, are impacting our service mix, revenue mix~~February 2022, we were affected by a significant acceleration in COVID‑19 cases associated with the Omicron variant. Future variants could similarly emerge and ~~patient volumes. Business closings and layoffs~~cause surges in COVID‑19 cases, which may adversely impact the local economies of 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.~~serve. 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.

~~While demand for our services is expected to further rebound in the future, we~~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.~~changes in our service mix and revenue mix. These actions included the sale and redemption of various senior unsecured notes 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 Increased Commitments through April 22, 2022. In~~ addition, we have continued ~~to focus on cost‑reduction~~cost-efficiency measures, ~~and corporate efficiencies~~as well as necessary cost reductions, 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~~COVID‑19 pandemic’s disruption of our patient volumes and service mix by growing our services for which demand has been more resilient, including our ~~higher-acuity~~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~~lower‑acuity services, we believe demand for our ~~higher-acuity~~higher‑acuity service lines will continue to grow. We believe these actions, together with government relief packages, supported our ability to ~~the extent available to us, will help us to continue operating~~provide essential patient services during the initial uncertainty caused by the COVID‑19 ~~pandemic.~~pandemic and continue to do so.

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~~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, as well as cash disbursements required to respond to the ~~COVID-19~~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 ~~will~~may 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 and anticipated future cash provided by our operating activities ~~and 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, other sections of this report and in our Annual Report, including any costs associated with legal proceedings and government investigations.

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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 balance 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 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~~Table of ~~operations, liquidity, capital expenditures or capital resources, except for $257 million of standby letters of credit outstanding and guarantees at June 30, 2021.~~Contents

CRITICAL ACCOUNTING ESTIMATES

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

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

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following table presents information about certain of our market-sensitive financial instruments at ~~June 30, 2021.~~March 31, 2022. 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 end of the reporting ~~date.~~period. The effects of unamortized discounts and issue costs are excluded from the table.


		Maturity Date, Years Ending December 31,																								Maturity Date, Years Ending December 31,
		2021			2022			2023			2024			2025			Thereafter			Total			Fair Value			2022			2023			2024			2025			2026			Thereafter			Total			Fair Value

		(Dollars in Millions)																								(Dollars in Millions)
Fixed rate long-term debt	Fixed rate long-term debt	$	88		$	109		$	1,939		$	2,498		$	721		$	10,019		$	15,374		$	16,096	Fixed rate long-term debt	$	102		$	1,894		$	1,455		$	46		$	2,120		$	9,371		$	14,988		$	14,876
Average effective interest rates	Average effective interest rates	4.3		%	4.3		%	6.7		%	4.6		%	7.5		%	5.4		%	5.5		%			Average effective interest rates	4.1		%	6.6		%	4.6		%	5.7		%	4.9		%	5.4		%	5.4		%

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 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.~~report. The evaluation was performed under the supervision and with the participation of management, including our chief executive officer and chief financial officer. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective ~~at June 30, 2021~~as of March 31, 2022 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 ~~June 30, 2021~~March 31, 2022 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 legal proceedings in which we are involved, see Note 12 to our accompanying Condensed Consolidated Financial Statements, which is incorporated by reference.

ITEM 1A. RISK FACTORS

~~There have been no material changes to~~This section supplements and updates certain of the ~~risk factors disclosed in~~information found under Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021 (the “Annual Report”) based on information currently known to us and recent developments since the filing of the Annual Report.

A cybersecurity incident we recently experienced could result in negative impacts on our business.

In April 2022, we experienced a cybersecurity incident that temporarily disrupted a subset of our acute care operations and involved the exfiltration of certain confidential company and patient information. During this time, our hospitals remained operational and continued to deliver patient care safely and effectively, utilizing well‑established back‑up processes. We immediately suspended user access to impacted information technology applications, executed extensive cybersecurity protection protocols, and took steps to restrict further unauthorized activity. Promptly after the incident, we began to restore impacted information technology operations and launched an investigation of the incident, which investigation is ongoing, to determine, among other things, the full extent of the company and patient information involved. We are also continuing the process of fully restoring impacted information technology operations. As with any cybersecurity incident, system interruption or unavailability of our information systems or of third-party systems with access to our data, this cybersecurity incident could result in: the unauthorized disclosure, misuse, loss or corruption of such data; interruptions and delays in our normal business operations (including the collection of revenues); patient harm; potential liability under privacy, security, consumer protection or other applicable laws; significant recovery costs or regulatory penalties; and negative publicity and damage to our reputation. Any of these could have a material adverse effect on our business, financial condition, results of operations or cash flows.

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ITEM 6. EXHIBITS

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



~~(4)~~	~~Instruments Defining the Rights of Security Holders, Including Indentures~~

	~~(a)~~	Thirty-Seventh Supplemental Indenture dated as of June 2, 2021, among the Registrant, the guarantors party thereto and The Bank of New York Mellon Trust Company, N.A. (Incorporated by reference to Exhibit 4.2 ~~to Registrant’s Current Report on Form 8-K filed June 2, 2021)~~

(10)	Material Contracts

	(a)	~~Exchange~~Amendment No. 7, dated as of March 16, 2022, to that certain Amended and ~~Registration Rights~~Restated Credit Agreement, dated as of ~~June 2, 2021,~~October 19, 2010, among the Registrant, the ~~guarantors~~lenders and issuers party thereto and ~~Barclays Capital~~Citicorp USA, Inc., as ~~representative of the other initial purchasers of the Notes named therein~~ ~~(Incorporated~~administrative agent (Incorporated by reference to Exhibit 10.1 to ~~Registrant’s~~Registrant's Current Report on Form 8-K filed ~~June 2, 2021)~~March 17, 2022)

	(b)	Amendment No. 1 to Amended and Restated Employment Agreement between the Registrant and Ronald A. Rittenmeyer, effective as of February 25, 2022 *

	(c)	Forms of Award used to evidence (i) grants of time-based restricted stock units and (ii) grants of performance-based restricted stock units, in each case to Saumya Sutaria, M.D. after 2021 under the Tenet Healthcare 2019 Stock Incentive Plan*

	(d)	Forms of Award used to evidence (i) grants of time-based restricted stock units and (ii) grants of performance-based restricted stock units, in each case to Ronald A. Rittenmeyer after 2021 under the Tenet Healthcare 2019 Stock Incentive Plan*

	(e)	Forms of Award used to evidence (i) grants of time-based restricted stock units to executives and (ii) grants of performance-based restricted stock units to executives, in each case after 2021 under the Tenet Healthcare 2019 Stock Incentive Plan*

	(f)	Amendment to Retirement Agreement and General Release by and among the Registrant, Tenet Business Services Corporation and Audrey Andrews, dated April 15, 2022*

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

	(a)	Certification of ~~Ronald A. Rittenmeyer, Executive Chairman and~~Saumya Sutaria, M.D., Chief Executive Officer

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

(32)	Section 1350 Certifications of ~~Ronald A. Rittenmeyer, Executive Chairman and~~Saumya Sutaria, M.D., Chief Executive Officer, and Daniel J. Cancelmi, Executive Vice President and Chief Financial Officer

(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

(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.~~document

(104)	Cover page from the ~~Company’s~~Registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2021~~March 31, 2022 formatted in Inline XBRL (included in Exhibit 101)

* Management contract or compensatory plan or arrangement

5957

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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: ~~July 30, 2021~~April 29, 2022	By:	/s/ R. SCOTT RAMSEY
		R. Scott Ramsey
		Senior Vice President, Controller
		(Principal Accounting Officer)

6058


		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	2725

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5855

Item 4.	Controls and Procedures	5855



PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	5956

Item 1A.	Risk Factors	5956



Item 6.	Exhibits	5957


			Six Months Ending		Years Ending								Later Years
					December 31,
	Total		2021		2022		2023		2024		2025
Amortization of intangible assets	$	838	$	91	$	122	$	108	$	97	$	83	$	337


December 31, 2019	$	170	$	0	$	0
June 30, 2020	176		1,266		0
Increase	$	6	$	1,266	$	0


	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)





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


Ambulatory Care Facility Growth	Three Months Ended June 30, 2021	Six Months Ended June 30, 2021
Net revenues	50.1%	25.9%
Cases	68.2%	29.1%
Net revenue per case	(10.7)%	(2.5)%