(1) We eliminate in consolidation those patient service revenues earned by our health care facilities attributable to services provided to enrollees in our owned health plans and eliminate the corresponding medical claims expenses incurred by our 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 or loss, 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 the performance of our 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 our segments. Management believes that Segment EBITDA provides useful information to investors, lenders, financial analysts and rating agencies about the financial performance of our segments. Additionally, management believes that investors and lenders view Segment EBITDA as an important factor in making investment decisions concerning us. 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)|
|Quarter ended September 30, 2012|
|Acute Care||% of||Health||% of|
|Patient service revenues, net (1)||$||1,304.5||100.0||%||$||—||—||%||$||(10.2||)||$||1,294.3|
Salaries and benefits (excludes stock compensation)
|Health plan claims expense (1)||—||—||144.5||81.9||(10.2||)||134.3|
|Other operating expenses||299.2||22.9||11.2||6.3||—||310.4|
Medicare and Medicaid EHR incentives
|Segment EBITDA (2)||121.4||9.3||11.8||6.7||—||133.2|
|Depreciation and amortization||64.6||5.0||1.0||0.6||—||65.6|
|Equity method income||(0.6||)||—||—||—||—||(0.6||)|
|Gain on disposal of assets||(0.9||)||(0.1||)||—||—||—||(0.9||)|
|Realized losses on investments||0.2||—||—||—||—||0.2|
Income from continuing operations before income taxes
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