| BASIS OF PRESENTATION | BASIS OF PRESENTATION Description of Business and Basis of Presentation Tenet Healthcare Corporation (together with our subsidiaries, referred to herein as “Tenet,” “we” or “us”) is a diversified healthcare services company headquartered in Dallas, Texas. Our expansive, nationwide care delivery network 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 our 61 acute care and specialty hospitals, a network of employed physicians and 107 outpatient facilities, including imaging centers, ancillary emergency facilities and micro‑hospitals. Our Ambulatory Care segment is comprised of the operations of our subsidiary USPI Holding Company, Inc. (“USPI”), which held indirect ownership interests in 457 ambulatory surgery centers and 24 surgical hospitals at September 30, 2023. USPI held noncontrolling interests in 157 of these facilities, which are recorded using the equity method of accounting. Effective June 30, 2022, we purchased all of the shares in USPI that Baylor University Medical Center (“Baylor”) held on that date for $406 million, which increased our ownership interest in USPI’s voting shares from 95% to 100% (see Note 13 for additional information about this transaction). Our Conifer segment provides revenue cycle management and value-based care services to hospitals, health systems, physician practices, employers and other clients. Almost all of the services comprising the operations of our Conifer segment are provided by Conifer Health Solutions, LLC, in which we own an interest of approximately 76% through our Conifer Holdings, Inc. subsidiary (“Conifer”), or by one of its direct or indirect wholly owned subsidiaries. In addition, we operate a Global Business Center (“GBC”) in Manila, Philippines. This quarterly report supplements our Annual Report on Form 10‑K for the year ended December 31, 2022 (“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 dollar amounts presented in our Condensed Consolidated Financial Statements and these accompanying notes are expressed in millions (except per‑share amounts), and all share amounts are expressed in thousands. We adopted the Financial Accounting Standards Board’s Accounting Standards Update (“ASU”) 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), effective as of January 1, 2022 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 approximately 2,095 thousand shares and 2,330 thousand shares for the three and nine-month periods ended September 30, 2023, respectively, and diluted earnings per share available to Tenet common shareholders decreased by $0.05 and $0.16, respectively, for these same periods. For the three and nine months ended September 30, 2022, the adoption of ASU 2020-06 resulted in an increase in diluted weighted average shares outstanding of 1,134 thousand shares and 3,564 thousand shares, respectively, and a decrease in diluted earnings per share available to Tenet common shareholders of $0.04 and $0.02, respectively. Certain prior-year amounts have been reclassified to conform to the current-year presentation. Contract liabilities – long-term are no longer significant enough to present separately. These obligations are now included in other long-term liabilities in the accompanying Condensed Consolidated Balance Sheets. Although our Condensed Consolidated Financial Statements and these related notes are unaudited, we believe all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us 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. The 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 the amounts presented herein. Although we make every effort to ensure that the information we report to those agencies is accurate, complete and consistent with applicable reporting guidelines, we cannot be responsible for the accuracy of the information they make available to the public. Operating results for the three and nine‑month periods ended September 30, 2023 are not necessarily indicative of the results that may be expected for the full year. Reasons for this include, but are not limited to: the impact of the COVID-19 pandemic on our operations, business, financial condition and cash flows; the impact of the demand for, and availability of, qualified medical personnel on compensation costs; the impact of cybersecurity incidents on our operations; 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 price concessions; fluctuations in interest rates; levels of malpractice insurance expense and settlement trends; impairment of long‑lived assets and goodwill; restructuring charges; losses, costs and insurance recoveries related to cybersecurity incidents, natural disasters and 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. Our hospitals and outpatient facilities are subject to various factors that affect our service mix, revenue mix and patient volumes and, thereby, impact our net patient service revenues and results of operations. These factors include, among others: changes in federal, state and local healthcare and business regulations; changes in general economic conditions nationally and regionally, including inflation and the impacts of the COVID-19 pandemic and other factors on the business environment, the economy and the financial markets; the number of uninsured and underinsured individuals in local communities treated at our facilities; 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 or permit procedures to be performed in an outpatient rather than inpatient setting; local healthcare competitors; utilization pressure by managed care organizations, as well as managed care contract negotiations or terminations; 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 comparisons as well. COVID ‑ 19 Pandemic For the duration of the COVID‑19 pandemic public health emergency, which began in January 2020 and expired in May 2023, federal, state and local authorities undertook several actions designed to assist healthcare providers in delivering care to COVID‑19 and other patients and to mitigate the adverse economic impact of the pandemic. Among other things, federal legislation (collectively, the “COVID Acts”) authorized grant payments to be distributed through the Public Health and Social Services Emergency Fund (“PRF”) to healthcare providers who experienced lost revenues and increased expenses as a result of the pandemic. The COVID Acts also revised the Medicare accelerated payment program (“MAPP”). Our participation in these programs and the related accounting policies are summarized below. Grant Income– Our Hospital Operations segment received cash payments from COVID‑19 relief programs totaling $9 million during the nine months ended September 30, 2023 and, during the same period in 2022, our Hospital Operations and Ambulatory Care segments together received funds totaling $155 million. These grant funds are included in cash flows from operating activities in our condensed consolidated statements of cash flows. To receive distributions, providers agreed to certain terms and conditions, including, among other things, that the funds would be used for lost revenues and unreimbursed pandemic‑related costs as defined by the U.S. Department of Health and Human Services (“HHS”), and that the providers would 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 delivered by an in‑network provider. All recipients of PRF payments were 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, will be recouped by HHS. We recognize grant payments as income when there is reasonable assurance that we have complied with the conditions associated with the grant. The table below summarizes grant income recognized by our Hospital Operations and Ambulatory Care segments, which is presented in grant income in our condensed consolidated statements of operations: Three Months Ended Nine Months Ended 2023 2022 2023 2022 Grant income recognized from COVID-19 relief programs: Hospital Operations $ 3 $ 54 $ 13 $ 150 Ambulatory Care — — 1 4 $ 3 $ 54 $ 14 $ 154 We did not have any remaining deferred grant payments at September 30, 2023. Our liability related to deferred grant payments was $7 million at December 31, 2022, which amount was recorded in other current liabilities in the accompanying Condensed Consolidated Balance Sheets for that period. Medicare Accelerated Payment Program (MAPP)– In certain circumstances, when a healthcare facility 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 MAPP. The COVID Acts revised the MAPP to disburse payments to healthcare providers more quickly and to allow recipients to retain the advance payments for one year from the date of receipt before recoupment commenced through offsets of Medicare claims payments. Recipients were also permitted to repay the advance payments at any time. Our Hospital Operations and Ambulatory Care segments both received advance payments from the MAPP following its expansion under the COVID Acts in the year ended December 31, 2020; however, no additional advances were received during the nine months ended September 30, 2023 or 2022. Advances received by our Hospital Operations and Ambulatory Care segments were recouped through reductions of their respective Medicare claims payments. No advances were recouped or repaid during the nine months ended September 30, 2023, and there was no outstanding liability related to MAPP advances at September 30, 2023 or December 31, 2022. During the nine months ended September 30, 2022, $876 million of advances received in prior periods by our Hospital Operations segment and $4 million of advances received in prior periods by those facilities in our Ambulatory Care segment that we consolidate were repaid or recouped. Amounts recouped from our Hospital Operations segment and those facilities in our Ambulatory Care segment that we consolidate, together with any amounts we voluntarily repaid in advance of recoupment, are presented in cash flows from operating activities in our condensed consolidated statements of cash flows. Leases During the nine months ended September 30, 2023 and 2022, we recorded right‑of‑use assets related to non‑cancellable finance leases of $42 million and $64 million, respectively, and related to non‑cancellable operating leases of $116 million and $296 million, respectively. During the nine months ended September 30, 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, included in other operating expenses, net in the accompanying Condensed Consolidated Statement of Operations, and we recognized right-of-use assets and operating lease obligations of $109 million, in each case in the nine months ended September 30, 2022. 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 $1.054 billion and $858 million at September 30, 2023 and December 31, 2022, respectively. At September 30, 2023 and December 31, 2022, our book overdrafts were $150 million and $266 million, respectively, which were classified as accounts payable. At September 30, 2023 and December 31, 2022, $101 million and $140 million, respectively, of total cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets were intended for the operations of our insurance‑related subsidiaries. Also at September 30, 2023 and December 31, 2022, we had $61 million and $196 million, respectively, of property and equipment purchases accrued for items received but not yet paid. Of these amounts, $46 million and $191 million, respectively, were included in accounts payable. Other Intangible Assets The following table provides information regarding other intangible assets, which were included in the accompanying Condensed Consolidated Balance Sheets: Gross Accumulated Net Book Value At September 30, 2023: Other intangible assets with finite useful lives: Capitalized software costs $ 1,760 $ (1,227) $ 533 Contracts 295 (159) 136 Other 90 (77) 13 Total other intangible assets with finite lives 2,145 (1,463) 682 Other intangible assets with indefinite useful lives: Trade names 105 — 105 Contracts 609 — 609 Other 4 — 4 Total other intangible assets with indefinite lives 718 — 718 Total other intangible assets $ 2,863 $ (1,463) $ 1,400 At December 31, 2022: Other intangible assets with finite useful lives: Capitalized software costs $ 1,751 $ (1,206) $ 545 Contracts 295 (146) 149 Other 92 (76) 16 Total other intangible assets with finite lives 2,138 (1,428) 710 Other intangible assets with indefinite useful lives: Trade names 105 — 105 Contracts 603 — 603 Other 6 — 6 Total other intangible assets with indefinite lives 714 — 714 Total other intangible assets $ 2,852 $ (1,428) $ 1,424 Estimated future amortization of intangible assets with finite useful lives at September 30, 2023 was as follows: Three Months Ending Years Ending Later Years December 31, Total 2023 2024 2025 2026 2027 Amortization of intangible assets $ 682 $ 49 $ 133 $ 111 $ 98 $ 81 $ 210 We recognized amortization expense of $128 million and $132 million in the accompanying Condensed Consolidated Statements of Operations for the nine months ended September 30, 2023 and 2022, respectively. Other Current Assets The principal components of other current assets in the accompanying Condensed Consolidated Balance Sheets were as follows: September 30, 2023 December 31, 2022 Prepaid expenses $ 392 $ 400 Contract assets 190 200 California provider fee program receivables 350 367 Receivables from other government programs 220 187 Guarantees 302 143 Non-patient receivables 314 390 Other 87 88 Total other current assets $ 1,855 $ 1,775 Investments in Unconsolidated Affiliates As of September 30, 2023, we controlled 324 of the facilities in our Ambulatory Care segment and, therefore, consolidate their results. We account for many of the facilities in which our Ambulatory Care segment holds ownership interests (157 of 481 at September 30, 2023), 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 our condensed consolidated statements of operations. Summarized financial information for these equity method investees is included in the following table. For investments acquired during the reported periods, amounts in the table include 100% of the investee’s results beginning on the date of our acquisition of the investment. Three Months Ended Nine Months Ended 2023 2022 2023 2022 Net operating revenues $ 818 $ 788 $ 2,431 $ 2,351 Net income $ 198 $ 192 $ 586 $ 554 Net income available to the investees $ 114 $ 109 $ 342 $ 316 |
