Vanguard Health Systems (VHS) 8-K Vanguard Reports Third Quarter Results

EXHIBIT 99.1

Vanguard Reports Third Quarter Results

NASHVILLE, Tenn. — May 9, 2011 — Vanguard Health Systems, Inc. (Vanguard) today announced results for the third quarter ended March 31, 2011.

Total revenues for the quarter ended March 31, 2011 were $1,519.6 million, an increase of $661.5 million or 77.1% from the prior year quarter. Patient service revenues increased $659.0 million from the prior year quarter. These revenue increases were primarily due to the fiscal year 2011 acquisitions, including the acquisition of The Detroit Medical Center effective January 1, 2011. Same hospital patient service revenues increased $44.4 million or 6.9% during the current year quarter compared to the prior year quarter. Health plan premium revenues increased $2.5 million or 1.2% from the prior year quarter. The increase in same hospital patient service revenues was primarily attributable to a 4.0% increase in same hospital adjusted discharges and a 2.8% increase in same hospital patient revenue per adjusted discharge during the current year quarter compared to the prior year quarter.

Vanguard reported income from continuing operations of $6.8 million for the quarter ended March 31, 2011 compared to a loss from continuing operations of $31.9 million during the prior year quarter. During the current year quarter, net income attributable to Vanguard Health Systems, Inc. stockholders was $2.8 million compared to a loss of $32.8 million during the prior year quarter. The prior year quarter amount included $73.2 million of debt extinguishment costs resulting from our comprehensive debt refinancing in January 2010. Several individual cost and expense line items were significantly impacted by the fiscal year 2011 acquisitions. Salaries and benefits as a percentage of total revenues increased to 42.8% during the current year quarter compared to 38.1% during the prior year quarter. On a same hospital basis, salaries and benefits as a percentage of total revenues was slightly lower during the current year quarter compared to the prior year quarter. Purchased services as a percentage of total revenues increased to 8.2% during the current year quarter from 5.2% during the prior year quarter, of which 210 basis points of the increase related to the fiscal year 2011 acquisitions. The provision for doubtful accounts as a percentage of acute care services segment revenues (prior to charity and uninsured discounts) increased to 7.8% during the current year quarter compared to 5.5% during the prior year quarter. On a same hospital basis, the provision for doubtful accounts as a percentage of acute care services segment revenues (prior to charity and uninsured discounts) was 6.9% during the current year quarter. On a same hospital basis, total uncompensated care as a percentage of acute care services segment revenues (prior to charity and uninsured revenue deductions) was 17.6% during the current year quarter compared to 15.0% during the prior year quarter. Same hospital self-pay patient days were up only slightly compared to the prior year quarter, but increased pricing and higher levels of patient deductibles and co-insurance continue to make collecting patient receivables more difficult. Impairment and restructuring charges were $5.1 million during the current year quarter, which represent severance and benefit costs associated with a re-alignment of certain of our corporate functions to a regional market basis. Acquisition related expenses were $6.9 million during the current year quarter, which represent $4.8 million of real estate transfer taxes associated with the DMC acquisition effective January 1, 2011 and other expenses incurred to complete our fiscal year 2011 acquisitions.

Adjusted EBITDA for the quarter ended March 31, 2011 was $128.6 million, a 42.1% increase compared to the prior year quarter. A reconciliation of Adjusted EBITDA to net income (loss) attributable to Vanguard Health Systems, Inc. stockholders as determined in accordance with generally accepted accounting principles for the quarters ended March 31, 2010 and 2011 is included in the attached supplemental financial information.

The consolidated operating results for the quarter ended March 31, 2011 reflect a 58.4% increase in discharges and a 62.9% increase in adjusted discharges compared to the prior year quarter. On a same hospital basis, discharges increased 1.6% and adjusted discharges increased 4.0% during the current year quarter compared to the prior year quarter. During the current year quarter, same hospital emergency room visits increased 13.1%, while same hospital inpatient surgeries and outpatient surgeries decreased 1.7% and 4.1%, respectively, compared to the prior year quarter. We continue to be impacted by weak consumer demand for elective surgeries and also have experienced continuing declines in same hospital deliveries during the current year quarter compared to the prior year quarter.

Total revenues for the nine months ended March 31, 2011 were $3,394.1 million, an increase of $875.6 million or 34.8% from the prior year period. Patient service revenues increased $857.3 million from the prior year period. Total revenues and patient service revenues were positively impacted by the previously mentioned fiscal year 2011 acquisitions. Health plan premium revenues increased $18.3 million or 2.9% from the prior year period. Our Phoenix Health Plan had higher enrollment during the current year period compared to the prior year period. Same hospital patient service revenues increased $101.4 million or 5.4% during the current year period compared to the prior year period primarily due to a 3.0% increase in same hospital adjusted discharges and a 2.3% increase in same hospital patient revenue per adjusted discharge.

Vanguard reported income from continuing operations of $7.0 million for the nine months ended March 31, 2011 compared to a $48.0 million loss from continuing operations during the prior year period. During the nine months ended March 31, 2011, net loss attributable to Vanguard Health Systems, Inc. stockholders was $1.0 million compared to $52.0 million during the prior year period.

Adjusted EBITDA for the nine months ended March 31, 2011 was $292.7 million, a 20.1% increase compared to the prior year period. A reconciliation of Adjusted EBITDA to net income (loss) attributable to Vanguard Health Systems, Inc. stockholders as determined in accordance with generally accepted accounting principles for the nine months ended March 31, 2010 and 2011 is included in the attached supplemental financial information.

The consolidated operating results for the nine months ended March 31, 2011 reflect a 25.8% increase in discharges and a 28.9% increase in adjusted discharges compared to the prior year period. On a same hospital basis, discharges increased 0.5% and adjusted discharges increased 3.0% during the current year period compared to the prior year period. During the current year period, same hospital emergency room visits increased 6.5%, while same hospital inpatient surgeries and outpatient surgeries decreased 4.6% and 5.2%, respectively, compared to the prior year period.

Cash flows from operating activities were $210.0 million for the nine months ended March 31, 2011, a decrease of $8.7 million from the prior year period. This decrease was primarily due to a $57.1 million increase in net cash paid for interest and income taxes during the current year period compared to the prior year period. Cash interest payments were higher as a result of Vanguard’s comprehensive refinancing completed in January 2010 and the additional senior notes issued in July 2010.

Vanguard will host a conference call for investors at 11:00 am EDT on May 10, 2011. All interested investors are invited to access a live audio broadcast of the call, via webcast. The live webcast can be accessed on the home page of Vanguard’s Web site atwww.vanguardhealth.com by clicking on “Third Quarter Webcast” or athttp://visualwebcaster.com/event.asp?id=78448. If you are unable to participate during the live webcast, the call will be available on a replay basis on Vanguard’s Web sitewww.vanguardhealth.com. To access the replay, click on the Latest News link on the Investor Relations page ofwww.vanguardhealth.com. The replay will be available via this link for one year.

Vanguard owns and operates 26 acute care and specialty hospitals and complementary facilities and services in Chicago, Illinois; Phoenix, Arizona; San Antonio, Texas; Detroit, Michigan and Massachusetts. Vanguard’s strategy is to develop locally branded, comprehensive healthcare delivery networks in urban markets. Vanguard will pursue acquisitions where there are opportunities to partner with leading delivery systems in new urban markets or to increase its presence in existing markets. Upon acquiring a facility or network of facilities, Vanguard implements strategic and operational improvement initiatives including expanding services, strengthening relationships with physicians and managed care organizations, recruiting new physicians and upgrading information systems and other capital equipment. These strategies improve quality and network coverage in a cost effective and accessible manner for the communities Vanguard serves.

This press release contains “forward-looking statements” within the meaning of the federal securities laws which are intended to be covered by the safe harbors created thereby. Forward-looking statements are those statements that are based upon management’s current plans and expectations as opposed to historical and current facts and are often identified in this release by use of words including but not limited to “may,” “believe,” “will,” “project,” “expect,” “estimate,” “anticipate,” and “plan.” These statements are based upon estimates and assumptions made by Vanguard’s management that, although believed to be reasonable, are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected. These factors, risks and uncertainties include, among others, Vanguard’s high degree of leverage and interest rate risk; Vanguard’s ability to incur substantially more debt; operating and financial restrictions in Vanguard’s debt agreements; Vanguard’s ability to generate cash necessary to service Vanguard’s debt; weakened economic conditions and volatile capital markets; post-payment claims reviews by governmental agencies; Vanguard’s ability to successfully implement Vanguard’s business strategies; Vanguard’s ability to successfully integrate the acquisition of substantially all of the assets of The Detroit Medical Center, Westlake Hospital and West Suburban Medical Center and future acquisitions; conflicts of interest that may arise as a result of Vanguard’s control by a small number of stockholders; the highly competitive nature of the healthcare industry; governmental regulation of the industry, including Medicare and Medicaid reimbursement levels; pressures to contain costs by managed care organizations and other insurers and Vanguard’s ability to negotiate acceptable terms with these third party payers; Vanguard’s ability to attract and retain qualified management and healthcare professionals, including physicians and nurses; potential federal or state reform of healthcare, implementation of existing reform legislation and potential modifications to such legislation; future governmental investigations; Vanguard’s ability to adequately enhance its facilities with technologically advanced equipment; the availability of capital to fund Vanguard’s corporate growth strategy; potential lawsuits or other claims asserted against Vanguard; Vanguard’s ability to maintain or increase patient membership and control costs of its managed healthcare plans; changes in general economic conditions; Vanguard’s exposure to the increased amounts of and collection risks associated with uninsured accounts and the co-pay and deductible portions of insured accounts; dependence on Vanguard’s senior management team and local management personnel; volatility of professional and general liability insurance for Vanguard and the physicians who practice at its hospitals and increases in the quantity and severity of professional liability claims; Vanguard’s ability to maintain and increase patient volumes and control the costs of providing services, including salaries and benefits, supplies and bad debts; increased costs from further government regulation of healthcare and Vanguard’s failure to comply, or allegations of Vanguard’s failure to comply, with applicable laws and regulations; the geographic concentration of Vanguard’s operations; technological and pharmaceutical improvements that increase the cost of providing, or reduce the demand for, healthcare services and shift demand for inpatient services to outpatient settings; a failure of Vanguard’s information systems would adversely impact its ability to manage its operations; costs and compliance risks associated with Section 404 of the Sarbanes-Oxley Act of 2002; material non-cash charges to earnings from impairment of goodwill associated with declines in the fair market values of Vanguard’s reporting units; volatility of materials and labor costs for potential construction projects that may be necessary for future growth; and those factors, risks and uncertainties detailed in Vanguard’s filings from time to time with the Securities and Exchange Commission, including, among others, Vanguard’s Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q .

Although Vanguard believes that the assumptions underlying the forward-looking statements contained in this press release are reasonable, any of these assumptions could prove to be inaccurate, and, therefore, there can be no assurance that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, you should not regard the inclusion of such information as a representation by Vanguard that its objectives and plans anticipated by the forward-looking statements will occur or be achieved, or if any of them do, what impact they will have on Vanguard’s results of operations and financial condition. Vanguard undertakes no obligation to publicly release any revisions to any forward-looking statements contained herein to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.

VANGUARD HEALTH SYSTEMS, INC.
Condensed Consolidated Statements of Operations (Unaudited)
(In millions)

	Quarter ended March 31,
	2010					2011
Patient service revenues	$	646.7		75.4	%	$	1,305.7		85.9	%
Premium revenues		211.4		24.6			213.9		14.1
Total revenues		858.1		100.0			1,519.6		100.0
Costs and expenses:
Salaries and benefits (includes stock compensation of $0.6 and $0.7, respectively)		327.0		38.1			650.9		42.8
Health plan claims expense		168.1		19.6			169.1		11.1
Supplies		114.0		13.3			207.8		13.7
Provision for doubtful accounts		40.8		4.7			111.1		7.3
Purchased services		44.5		5.2			124.4		8.2
Non-income taxes		13.9		1.6			30.9		2.0
Rents and leases		10.9		1.3			15.2		1.0
Other operating expenses		49.0		5.7			82.3		5.4
Depreciation and amortization		34.3		4.0			55.8		3.7
Interest, net		29.9		3.5			48.0		3.2
Acquisition related expenses		—		—			6.9		0.4
Debt extinguishment costs		73.2		8.5			—		—
Impairment and restructuring charges		—		—			5.1		0.3
Other		0.9		0.1			0.9		0.1
Total costs and expenses		906.5		105.6			1,508.4		99.3
Income (loss) from continuing operations before income taxes		(48.4	)	(5.6	)		11.2		0.7
Income tax benefit (expense)		16.5		1.9			(4.4	)	(0.3	)
Income (loss) from continuing operations		(31.9	)	(3.7	)		6.8		0.4
Loss from discontinued operations, net of taxes		(0.5	)	(0.1	)		(3.2	)	(0.2	)
Net income (loss)		(32.4	)	(3.8	)		3.6		0.2
Less: Net loss attributable to non-controlling interests		(0.4	)	—			(0.8	)	—
Net income (loss) attributable to Vanguard Health Systems, Inc. stockholders	$	(32.8	)	(3.8	)%	$	2.8		0.2	%

VANGUARD HEALTH SYSTEMS, INC.
Condensed Consolidated Statements of Operations (Unaudited)
(In millions)

	Nine months ended March 31,
	2010					2011
Patient service revenues	$	1,890.5		75.1	%	$	2,747.8		81.0	%
Premium revenues		628.0		24.9			646.3		19.0
Total revenues		2,518.5		100.0			3,394.1		100.0
Costs and expenses:
Salaries and benefits (includes stock compensation of $3.5 and $3.6, respectively)		962.6		38.2			1,381.2		40.7
Health plan claims expense		499.9		19.8			508.0		15.0
Supplies		339.4		13.5			462.3		13.6
Provision for doubtful accounts		113.0		4.5			214.1		6.3
Purchased services		135.0		5.4			237.9		7.0
Non-income taxes		38.8		1.6			64.1		1.9
Rents and leases		32.8		1.3			37.9		1.1
Other operating expenses		156.8		6.2			199.5		5.9
Depreciation and amortization		101.9		4.0			131.6		3.9
Interest, net		84.7		3.4			117.9		3.5
Acquisition related expenses		—		—			11.9		0.3
Debt extinguishment costs		73.2		2.9			—		—
Impairment and restructuring charges		43.1		1.7			6.0		0.2
Other		3.5		0.1			3.0		0.1
Total costs and expenses		2,584.7		102.6			3,375.4		99.5
Income (loss) from continuing operations before income taxes		(66.2	)	(2.6	)		18.7		0.5
Income tax benefit (expense)		18.2		0.7			(11.7	)	(0.3	)
Income (loss) from continuing operations		(48.0	)	(1.9	)		7.0		0.2
Loss from discontinued operations, net of taxes		(1.9	)	(0.1	)		(5.4	)	(0.1	)
Net income (loss)		(49.9	)	(2.0	)		1.6		0.1
Less: Net income attributable to non-controlling interests		(2.1	)	(0.1	)		(2.6	)	(0.1	)
Net loss attributable to Vanguard Health Systems, Inc. stockholders	$	(52.0	)	(2.1	)%	$	(1.0	)	—	%

Vanguard Health Systems, Inc.
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted EBITDA to Net Income (Loss)
Attributable to Vanguard Health Systems, Inc. Stockholders
(In millions)

	Quarter ended						Nine months ended
	March 31,						March 31,
	2010			2011			2010			2011
Net income (loss) attributable to Vanguard Health Systems, Inc. stockholders	$	(32.8	)	$	2.8		$	(52.0	)	$	(1.0	)
Interest, net		29.9			48.0			84.7			117.9
Income tax expense (benefit)		(16.5	)		4.4			(18.2	)		11.7
Depreciation and amortization		34.3			55.8			101.9			131.6
Non-controlling interests		0.4			0.8			2.1			2.6
Loss on disposal of assets		—			0.8			0.4			0.9
Equity method income		(0.3	)		—			(0.8	)		(0.6	)
Stock compensation		0.6			0.7			3.5			3.6
Monitoring fees and expenses		1.2			1.2			3.9			3.7
Realized losses on investments		—			—			—			0.1
Acquisition related expenses		—			6.9			—			11.9
Debt extinguishment costs		73.2			—			73.2			—
Impairment and restructuring charges		—			5.1			43.1			6.0
Pension credits		—			(1.1	)		—			(1.1	)
Discontinued operations, net of taxes		0.5			3.2			1.9			5.4
Adjusted EBITDA (1)	$	90.5		$	128.6		$	243.7		$	292.7

(1) Adjusted EBITDA is defined as income (loss) before interest expense (net of interest income), income taxes, depreciation and amortization, non-controlling interests, gain or loss on disposal of assets, equity method income, stock compensation, monitoring fees and expenses, realized gains or losses on investments, acquisition related expenses, debt extinguishment costs, impairment and restructuring charges, pension expense (credits) and discontinued operations, net of taxes. Adjusted EBITDA is not intended as a substitute for net income (loss) attributable to Vanguard Health Systems, Inc. stockholders, operating cash flows or other cash flow data determined in accordance with accounting principles generally accepted in the United States. Due to varying methods of calculation, Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies.

VANGUARD HEALTH SYSTEMS, INC.
Condensed Consolidated Balance Sheets
(In millions)

				(Unaudited)
	June 30,			March 31,
	2010			2011
ASSETS
Current assets:
Cash and cash equivalents	$	257.6		$	502.6
Restricted cash		2.3			2.3
Accounts receivable, net of allowance for doubtful accounts of approximately $75.6 and $165.0, respectively		270.4			517.0
Inventories		49.6			83.8
Deferred tax assets		21.9			18.3
Prepaid expenses and other current assets		119.2			164.6
Total current assets		721.0			1,288.6
Property, plant and equipment, net of accumulated depreciation		1,203.8			1,795.9
Goodwill		649.1			786.9
Intangible assets, net of accumulated amortization		66.0			96.2
Deferred tax assets, noncurrent		50.0			48.1
Investments in securities		19.8			81.6
Other assets		19.9			64.9
Total assets	$	2,729.6		$	4,162.2
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	194.8		$	313.8
Accrued salaries and benefits		144.9			243.4
Accrued health plan claims and settlements		149.8			168.3
Accrued interest		41.4			32.0
Other accrued expenses and current liabilities		76.9			161.6
Current maturities of long-term debt and capital leases		8.2			13.0
Total current liabilities		616.0			932.1
Professional and general liability and workers compensation reserves		83.6			320.3
Pension benefit obligation, less current portion		—			202.8
Other liabilities		31.6			127.5
Long-term debt and capital leases, less current maturities		1,743.8			2,766.1
Commitments and contingencies
Equity (deficit):
Vanguard Health Systems, Inc. stockholders’ equity (deficit):
Common stock		—			—
Additional paid-in capital (distributions in excess of paid-in capital)		354.9			(88.5	)
Accumulated other comprehensive income (loss)		(2.5	)		0.9
Retained deficit		(105.9	)		(106.9	)
Total Vanguard Health Systems, Inc. stockholders’ equity (deficit)		246.5			(194.5	)
Non-controlling interests		8.1			7.9
Total equity (deficit)		254.6			(186.6	)
Total liabilities and equity	$	2,729.6		$	4,162.2

VANGUARD HEALTH SYSTEMS, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In millions)

	Nine months ended
	March 31,
	2010			2011
Operating activities:
Net income (loss)	$	(49.9)		$	1.6
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Loss from discontinued operations		1.9			5.4
Depreciation and amortization		101.9			131.6
Provision for doubtful accounts		113.0			214.1
Amortization of loan costs and accretion of principal on notes		10.2			14.9
Loss on disposal of assets		0.4			0.9
Debt extinguishment costs		73.2			—
Stock compensation		3.5			3.6
Deferred income taxes		(20.0	)		6.5
Acquisition related expenses		—			11.9
Impairment loss		43.1			0.9
Realized loss on investments		—			0.1
Changes in operating assets and liabilities, net of the impact of acquisitions:
Accounts receivable		(132.5	)		(326.2	)
Inventories		(0.9	)		(1.3	)
Prepaid expenses and other current assets		(12.8	)		39.2
Accounts payable and other current liabilities		89.5			112.2
Net cash provided by operating activities — continuing operations		220.6			215.4
Net cash used in operating activities — discontinued operations		(1.9	)		(5.4	)
Net cash provided by operating activities		218.7			210.0
Investing activities:
Acquisitions and related expenses		(1.5	)		(463.9	)
Capital expenditures		(111.1	)		(139.1	)
Proceeds from asset dispositions		1.5			1.6
Net proceeds from sales of investments in securities		—			110.9
Other		(0.3	)		(3.7	)
Net cash used in investing activities		(111.4	)		(494.2	)
Financing activities:
Payments of long-term debt and capital leases		(1,557.4	)		(6.6	)
Proceeds from debt borrowings		1,751.3			1,011.2
Payments of refinancing costs and fees		(90.1	)		(25.7	)
Dividends paid to equity holders		—			(447.2	)
Repurchases of stock		(300.6	)		—
Distributions paid to non-controlling interests and other		(8.4	)		(2.5	)
Net cash provided by (used in) financing activities		(205.2	)		529.2
Net increase (decrease) in cash and cash equivalents		(97.9	)		245.0
Cash and cash equivalents, beginning of year		308.2			257.6
Cash and cash equivalents, end of year	$	210.3		$	502.6
Net cash paid for interest	$	72.7		$	116.1
Net cash paid (received) for income taxes	$	(13.2	)	$	0.5

VANGUARD HEALTH SYSTEMS, INC.
Segment Information (Unaudited)
(In millions)

	Quarter ended March 31, 2010
	Acute
	Care			% of			Health			% of
	Services			Revenues			Plans			Revenues			Eliminations			Consolidated
Patient service revenues(1)	$	657.4			100.0	%	$	—			—	%	$	(10.7	)	$	646.7
Premium revenues		—			—			211.4			100.0			—			211.4
Total revenues		657.4			100.0			211.4			100.0			(10.7	)		858.1
Salaries and benefits (excludes stock compensation)		318.0			48.4			8.4			4.0			—			326.4
Health plan claims expense(1)		—			—			178.8			84.6			(10.7	)		168.1
Supplies		114.0			17.3			—			—			—			114.0
Provision for doubtful accounts		40.8			6.2			—			—			—			40.8
Other operating expenses		109.0			16.6			9.3			4.4			—			118.3
Total operating expenses		581.8			88.5			196.5			93.0			(10.7	)		767.6
Segment EBITDA(2)		75.6			11.5			14.9			7.0			—			90.5
Less:
Interest, net		30.1			4.6			(0.2	)		(0.0	)		—			29.9
Depreciation and amortization		33.2			5.0			1.1			0.5			—			34.3
Equity method income		(0.3	)		(0.0	)		—			—			—			(0.3	)
Stock compensation		0.6			0.1			—			—			—			0.6
Monitoring fees and expenses		1.2			0.2			—			—			—			1.2
Debt extinguishment costs		73.2			11.1			—			—			—			73.2
Income (loss) from continuing operations before income taxes	$	(62.4	)		(9.5	)%	$	14.0			6.6	%	$	—		$	(48.4	)

(1)

Vanguard eliminates in consolidation those patient service revenues earned by its healthcare facilities attributable to services provided to enrollees in its owned health plans and eliminates the corresponding medical claims expenses incurred by the health plans for those services.

(2)

Segment EBITDA is defined as income (loss) from continuing operations before income taxes less interest expense (net of interest income), depreciation and amortization, equity method income, stock compensation, gain or loss on disposal of assets, realized gains or losses on investments, monitoring fees and expenses, acquisition related expenses, debt extinguishment costs, impairment and restructuring charges and pension expense (credits). Management uses Segment EBITDA to measure performance for Vanguard’s segments and develop strategic objectives and operating plans for those segments. Segment EBITDA eliminates the uneven effect of non-cash depreciation of tangible assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting. Segment EBITDA also eliminates the effects of changes in interest rates which management believes relate to general trends in global capital markets, but are not necessarily indicative of the operating performance of Vanguard’s segments. Management believes that Segment EBITDA provides useful information about the financial performance of Vanguard’s segments to investors, lenders, financial analysts and rating agencies. Additionally, management believes that investors and lenders view Segment EBITDA as an important factor in making investment decisions assessing the value of Vanguard. Segment EBITDA is not a substitute for net income (loss), operating cash flows or other cash flow statement data determined in accordance with accounting principles generally accepted in the United States. Segment EBITDA, as presented, may not be comparable to similar measures of other companies.

VANGUARD HEALTH SYSTEMS, INC.
Segment Information (Unaudited) — (continued)
(In millions)

	Quarter ended March 31, 2011
	Acute
	Care			% of			Health		% of
	Services			Revenues			Plans		Revenues			Eliminations			Consolidated
Patient service revenues(1)	$	1,317.1			100.0	%	$	—		—	%	$	(11.4	)	$	1,305.7
Premium revenues		—			—			213.9		100.0			—			213.9
Total revenues		1,317.1			100.0			213.9		100.0			(11.4	)		1,519.6
Salaries and benefits (excludes stock compensation)		641.6			48.7			8.6		3.9			—			650.2
Health plan claims expense(1)		—			—			180.5		84.4			(11.4	)		169.1
Supplies		207.8			15.8			—		—			—			207.8
Provision for doubtful accounts		111.1			8.4			—		—			—			111.1
Other operating expenses		242.6			18.4			10.2		4.8			—			252.8
Total operating expenses		1,203.1			91.3			199.3		93.2			(11.4	)		1,391.0
Segment EBITDA(2)		114.0			8.7			14.6		6.8			—			128.6
Less:
Interest, net		47.8			3.6			0.2		0.1			—			48.0
Depreciation and amortization		54.7			4.2			1.1		0.5			—			55.8
Stock compensation		0.7			0.1			—		—			—			0.7
Loss on disposal of assets		0.8			0.1			—		—			—			0.8
Monitoring fees and expenses		1.2			0.1			—		—			—			1.2
Acquisition related expenses		6.9			0.5			—		—			—			6.9
Impairment and restructuring charges		5.1			0.4			—		—			—			5.1
Pension credits		(1.1	)		(0.1	)		—		—			—			(1.1	)
Income (loss) from continuing operations before income taxes	$	(2.1	)		0.1	%	$	13.3		6.2	%	$	—		$	11.2

(1)

Vanguard eliminates in consolidation those patient service revenues earned by its healthcare facilities attributable to services provided to enrollees in its owned health plans and eliminates the corresponding medical claims expenses incurred by the health plans for those services.

(2)

Segment EBITDA is defined as income (loss) from continuing operations before income taxes less interest expense (net of interest income), depreciation and amortization, equity method income, stock compensation, gain or loss on disposal of assets, realized gains or losses on investments, monitoring fees and expenses, acquisition related expenses, debt extinguishment costs, impairment and restructuring charges and pension expense (credits). Management uses Segment EBITDA to measure performance for Vanguard’s segments and develop strategic objectives and operating plans for those segments. Segment EBITDA eliminates the uneven effect of non-cash depreciation of tangible assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting. Segment EBITDA also eliminates the effects of changes in interest rates which management believes relate to general trends in global capital markets, but are not necessarily indicative of the operating performance of Vanguard’s segments. Management believes that Segment EBITDA provides useful information about the financial performance of Vanguard’s segments to investors, lenders, financial analysts and rating agencies. Additionally, management believes that investors and lenders view Segment EBITDA as an important factor in making investment decisions assessing the value of Vanguard. Segment EBITDA is not a substitute for net income (loss), operating cash flows or other cash flow statement data determined in accordance with accounting principles generally accepted in the United States. Segment EBITDA, as presented, may not be comparable to similar measures of other companies.

VANGUARD HEALTH SYSTEMS, INC.
Segment Information (Unaudited) — (continued)
(In millions)

	Nine months ended March 31, 2010
	Acute
	Care			% of			Health			% of
	Services			Revenues			Plans			Revenues			Eliminations			Consolidated
Patient service revenues(1)	$	1,922.2			100.0	%	$	—			—	%	$	(31.7	)	$	1,890.5
Premium revenues		—			—			628.0			100.0			—			628.0
Total revenues		1,922.2			100.0			628.0			100.0			(31.7	)		2,518.5
Salaries and benefits (excludes stock compensation)		933.9			48.6			25.2			4.0			—			959.1
Health plan claims expense(1)		—			—			531.6			84.7			(31.7	)		499.9
Supplies		339.3			17.6			0.1			—			—			339.4
Provision for doubtful accounts		113.0			5.9			—			—			—			113.0
Other operating expenses		336.2			17.5			27.2			4.3			—			363.4
Total operating expenses		1,722.4			89.6			584.1			93.0			(31.7	)		2,274.8
Segment EBITDA(2)		199.8			10.4			43.9			7.0			—			243.7
Less:
Interest, net		85.3			4.4			(0.6	)		(0.1	)		—			84.7
Depreciation and amortization		98.6			5.1			3.3			0.5			—			101.9
Equity method income		(0.8	)		—			—			—			—			(0.8	)
Stock compensation		3.5			0.2			—			—			—			3.5
Loss on disposal of assets		0.4			—			—			—			—			0.4
Monitoring fees and expenses		3.9			0.2			—			—			—			3.9
Debt extinguishment costs		73.2			3.8			—			—			—			73.2
Impairment and restructuring charges		43.1			2.3			—			—			—			43.1
Income (loss) from continuing operations before income taxes	$	(107.4	)		(5.6	)%	$	41.2			6.6	%	$	—		$	(66.2	)

(1)

Vanguard eliminates in consolidation those patient service revenues earned by its healthcare facilities attributable to services provided to enrollees in its owned health plans and eliminates the corresponding medical claims expenses incurred by the health plans for those services.

(2)

Segment EBITDA is defined as income (loss) from continuing operations before income taxes less interest expense (net of interest income), depreciation and amortization, equity method income, stock compensation, gain or loss on disposal of assets, realized gains or losses on investments, monitoring fees and expenses, acquisition related expenses, debt extinguishment costs, impairment and restructuring charges and pension expense (credits). Management uses Segment EBITDA to measure performance for Vanguard’s segments and develop strategic objectives and operating plans for those segments. Segment EBITDA eliminates the uneven effect of non-cash depreciation of tangible assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting. Segment EBITDA also eliminates the effects of changes in interest rates which management believes relate to general trends in global capital markets, but are not necessarily indicative of the operating performance of Vanguard’s segments. Management believes that Segment EBITDA provides useful information about the financial performance of Vanguard’s segments to investors, lenders, financial analysts and rating agencies. Additionally, management believes that investors and lenders view Segment EBITDA as an important factor in making investment decisions assessing the value of Vanguard. Segment EBITDA is not a substitute for net income (loss), operating cash flows or other cash flow statement data determined in accordance with accounting principles generally accepted in the United States. Segment EBITDA, as presented, may not be comparable to similar measures of other companies.

VANGUARD HEALTH SYSTEMS, INC.
Segment Information (Unaudited) — (continued)
(In millions)

	Nine months ended March 31, 2011
	Acute
	Care			% of			Health			% of
	Services			Revenues			Plans			Revenues			Eliminations			Consolidated
Patient service revenues(1)	$	2,781.0			100.0	%	$	—			—	%	$	(33.2	)	$	2,747.8
Premium revenues		—			—			646.3			100.0			—			646.3
Total revenues		2,781.0			100.0			646.3			100.0			(33.2	)		3,394.1
Salaries and benefits (excludes stock compensation)		1,352.5			48.6			25.1			3.9			—			1,377.6
Health plan claims expense(1)		—			—			541.2			83.7			(33.2	)		508.0
Supplies		462.2			16.6			0.1			—			—			462.3
Provision for doubtful accounts		214.1			7.7			—			—			—			214.1
Other operating expenses		508.5			18.3			30.9			4.8			—			539.4
Total operating expenses		2,537.3			91.2			597.3			92.4			(33.2	)		3,101.4
Segment EBITDA(2)		243.7			8.8			49.0			7.6			—			292.7
Less:
Interest, net		118.9			4.3			(1.0	)		(0.1	)		—			117.9
Depreciation and amortization		128.3			4.6			3.3			0.5			—			131.6
Equity method income		(0.6	)		—			—			—			—			(0.6	)
Stock compensation		3.6			0.1			—			—			—			3.6
Loss on disposal of assets		0.9			—			—			—			—			0.9
Monitoring fees and expenses		3.7			0.1			—			—			—			3.7
Realized loss on investments		0.1			—			—			—			—			0.1
Acquisition related expenses		11.9			0.4			—			—			—			11.9
Impairment and restructuring charges		6.0			0.3			—			—			—			6.0
Pension credits		(1.1	)		—			—			—			—			(1.1	)
Income (loss) from continuing operations before income taxes	$	(28.0	)		(1.0	)%	$	46.7			7.2	%	$	—		$	18.7

(1)

Vanguard eliminates in consolidation those patient service revenues earned by its healthcare facilities attributable to services provided to enrollees in its owned health plans and eliminates the corresponding medical claims expenses incurred by the health plans for those services.

(2)

Segment EBITDA is defined as income (loss) from continuing operations before income taxes less interest expense (net of interest income), depreciation and amortization, equity method income, stock compensation, gain or loss on disposal of assets, realized gains or losses on investments, monitoring fees and expenses, acquisition related expenses, debt extinguishment costs, impairment and restructuring charges and pension expense (credits). Management uses Segment EBITDA to measure performance for Vanguard’s segments and develop strategic objectives and operating plans for those segments. Segment EBITDA eliminates the uneven effect of non-cash depreciation of tangible assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting. Segment EBITDA also eliminates the effects of changes in interest rates which management believes relate to general trends in global capital markets, but are not necessarily indicative of the operating performance of Vanguard’s segments. Management believes that Segment EBITDA provides useful information about the financial performance of Vanguard’s segments to investors, lenders, financial analysts and rating agencies. Additionally, management believes that investors and lenders view Segment EBITDA as an important factor in making investment decisions assessing the value of Vanguard. Segment EBITDA is not a substitute for net income (loss), operating cash flows or other cash flow statement data determined in accordance with accounting principles generally accepted in the United States. Segment EBITDA, as presented, may not be comparable to similar measures of other companies.

VANGUARD HEALTH SYSTEMS, INC.
Selected Operating Statistics
(Unaudited)

	Quarter ended
	March 31,
CONSOLIDATED:	2010			2011			% Change
Number of hospitals at end of period		15			26
Licensed beds at end of period		4,135			6,280
Discharges		42,293			66,990			58.4	%
Adjusted discharges		73,419			119,573			62.9
Adjusted discharges — hospitals		69,646			111,692			60.4
Average length of stay		4.27			4.60			7.7
Patient days		180,672			308,183			70.6
Adjusted patient days		313,638			550,086			75.4
Adjusted patient days — hospitals		297,522			513,833			72.7
Patient revenue per adjusted discharge	$	8,624		$	10,507			21.8
Patient revenue per adjusted discharge — hospitals	$	8,737		$	10,733			22.8
Inpatient surgeries		9,188			15,181			65.2
Outpatient surgeries		18,425			28,932			57.0
Emergency room visits		154,987			291,722			88.2	%
Charity care and uninsured discounts as a percent of acute care segment revenues (prior to these discounts)		9.5	%		7.7	%
Provision for doubtful accounts as a percent of acute care services segment revenues (prior to charity and uninsured discounts)		5.5	%		7.8	%
Net patient revenue payer mix:
Medicare		26.2	%		25.5	%
Medicaid		7.5			15.2
Managed Medicare		14.9			9.9
Managed Medicaid		9.2			9.4
Managed care		34.6			30.3
Commercial		1.1			0.7
Self-pay		6.5			9.0
Total		100.0	%		100.0	%
Discharges by payer:
Medicare		28.3	%		29.2	%
Medicaid		8.7			10.1
Managed Medicare		16.7			13.6
Managed Medicaid		15.1			18.0
Managed care		26.2			22.8
Commercial		0.4			0.5
Self-pay		4.6			5.8
Total		100.0	%		100.0	%

VANGUARD HEALTH SYSTEMS, INC.
Selected Operating Statistics
(Unaudited) (continued)

	Nine Months Ended
	March 31,
CONSOLIDATED:	2010			2011			% Change
Number of hospitals at end of period		15			26
Licensed beds at end of period		4,135			6,280
Discharges		126,211			158,770			25.8	%
Adjusted discharges		220,063			283,739			28.9
Adjusted discharges — hospitals		208,763			267,584			28.2
Average length of stay		4.19			4.35			3.8
Patient days		528,877			690,560			30.6
Adjusted patient days		922,157			1,234,103			33.8
Adjusted patient days — hospitals		874,803			1,163,840			33.0
Patient revenue per adjusted discharge	$	8,410		$	9,392			11.7
Patient revenue per adjusted discharge — hospitals	$	8,502		$	9,172			7.9
Inpatient surgeries		28,076			34,764			23.8
Outpatient surgeries		56,885			67,823			19.2
Emergency room visits		465,714			643,085			38.1	%
Charity care and uninsured discounts as a percent of acute care segment revenues (prior to these discounts)		10.5	%		9.3	%
Provision for doubtful accounts as a percent of acute care services segment revenues (prior to charity and uninsured discounts)		5.2	%		7.0	%
Net patient revenue payer mix:
Medicare		25.6	%		25.6	%
Medicaid		7.3			11.4
Managed Medicare		14.9			12.3
Managed Medicaid		9.6			9.2
Managed care		34.8			32.2
Commercial		1.1			0.9
Self-pay		6.7			8.4
Total		100.0	%		100.0	%
Discharges by payer:
Medicare		27.5	%		28.5	%
Medicaid		8.7			10.3
Managed Medicare		16.3			14.8
Managed Medicaid		15.3			16.1
Managed care		26.9			24.2
Commercial		0.4			0.5
Self-pay		4.9			5.6
Total		100.0	%		100.0	%

VANGUARD HEALTH SYSTEMS, INC.
Selected Operating Statistics
(Unaudited) (continued)

	Quarter ended
	March 31,
SAME HOSPITAL (1):	2010			2011			% Change
Number of hospitals at end of period		15			15
Licensed beds at end of period		4,135			4,029
Patient service revenues (in millions)	$	646.7		$	691.1			6.9	%
Discharges		42,293			42,979			1.6
Adjusted discharges		73,419			76,335			4.0
Adjusted discharges — hospitals		69,646			72,092			3.5
Average length of stay		4.27			4.27			0.0
Patient days		180,672			183,721			1.7
Adjusted patient days		313,638			326,309			4.0
Adjusted patient days — hospitals		297,522			308,168			3.6
Patient revenue per adjusted discharge	$	8,624		$	8,863			2.8
Patient revenue per adjusted discharge — hospitals	$	8,737		$	8,813			0.9
Inpatient surgeries		9,188			9,034			(1.7	)
Outpatient surgeries		18,425			17,675			(4.1	)
Emergency room visits		154,987			175,274			13.1	%
Charity care and uninsured discounts as a percent of acute care services segment revenues (prior to these discounts)		9.5	%		10.7	%
Provision for doubtful accounts as a percent of acute care services segment revenues (prior to charity and uninsured discounts)		5.5	%		6.9	%
Net patient revenue payer mix:
Medicare		26.2	%		23.9	%
Medicaid		7.5			8.5
Managed Medicare		14.9			15.5
Managed Medicaid		9.2			9.3
Managed care		34.6			33.3
Commercial		1.1			1.3
Self-pay		6.5			8.2
Total		100.0	%		100.0	%
Discharges by payer:
Medicare		28.3	%		27.9	%
Medicaid		8.7			8.5
Managed Medicare		16.7			18.5
Managed Medicaid		15.1			15.0
Managed care		26.2			24.9
Commercial		0.4			0.5
Self-pay		4.6			4.7
Total		100.0	%		100.0	%

(1) Same hospital results exclude those facilities that were not part of Vanguard for the full quarters of both years.

VANGUARD HEALTH SYSTEMS, INC.
Selected Operating Statistics
(Unaudited) (continued)

	Nine Months Ended
	March 31,
SAME HOSPITAL (1):	2010			2011			% Change
Number of hospitals at end of period		15			15
Licensed beds at end of period		4,135			4,029
Patient service revenues (in millions)	$	1,890.5		$	1,991.9			5.4	%
Discharges		126,211			126,848			0.5
Adjusted discharges		220,063			226,648			3.0
Adjusted discharges — hospitals		208,763			214,432			2.7
Average length of stay		4.19			4.18			(0.0	)
Patient days		528,877			530,194			0.2
Adjusted patient days		922,157			947,336			2.7
Adjusted patient days — hospitals		874,803			896,272			2.5
Patient revenue per adjusted discharge	$	8,410		$	8,605			2.3
Patient revenue per adjusted discharge — hospitals	$	8,502		$	8,642			1.6
Inpatient surgeries		28,076			26,780			(4.6	)
Outpatient surgeries		56,885			53,928			(5.2	)
Emergency room visits		465,714			496,209			6.5	%
Charity care and uninsured discounts as a percent of acute care services segment revenues (prior to these discounts)		10.5	%		10.8	%
Provision for doubtful accounts as a percent of acute care services segment revenues (prior to charity and uninsured discounts)		5.2	%		6.5	%
Net patient revenue payer mix:
Medicare		25.6	%		24.6	%
Medicaid		7.3			7.7
Managed Medicare		14.9			15.3
Managed Medicaid		9.6			9.4
Managed care		34.8			34.4
Commercial		1.1			1.1
Self-pay		6.7			7.5
Total		100.0	%		100.0	%
Discharges by payer:
Medicare		27.5	%		27.6	%
Medicaid		8.7			8.6
Managed Medicare		16.3			17.4
Managed Medicaid		15.3			15.4
Managed care		26.9			25.6
Commercial		0.4			0.4
Self-pay		4.9			5.0
Total		100.0	%		100.0	%

(1) Same hospital results exclude those facilities that were not part of Vanguard for the nine-month periods of both years.

Contact:	Vanguard Health Systems, Inc.
	Gary Willis
	Senior Vice President and Chief Accounting Officer
	(615) 665-6098