Tenet Healthcare Corporation (NYSE:THC) reported Adjusted EBITDA of $613 million for the first quarter of 2016, an increase of $84 million, or 15.9 percent, compared to $529 million in the first quarter of 2015.

"I am delighted with Tenet's very strong start to 2016. Our hospitals and outpatient centers generated strong growth, and the benefits of our diversified strategy are becoming increasingly evident," said Trevor Fetter, chairman and chief executive officer. "Adjusted EBITDA was ahead of our Outlook range for the first quarter, putting us on a solid path to deliver our 2016 Outlook."

Hospital Operations and Other Segment

Net operating revenue in the hospital operations and other segment increased to $4.397 billion, up 5.9 percent from $4.151 billion in the first quarter of 2015. On a same-hospital basis, patient revenue increased to $4.016 billion, up 6.0 percent from $3.790 billion in the first quarter of 2015. The increase was driven by a 2.2 percent increase in adjusted patient admissions and a 3.7 percent increase in net patient revenue per adjusted admission.

Adjusted EBITDA in Tenet's hospital segment was $414 million, representing a decline of 1.0 percent as compared to $418 million in the first quarter of 2015. The decline was primarily driven by divestitures and a decline in electronic health record incentives, and was partially offset by acquisitions. After adjusting for these items, hospital segment EBITDA increased approximately 8 percent.

Total hospital segment selected operating expenses, defined as the sum of salaries, wages and benefits, supplies and other operating expenses, increased 2.5 percent per adjusted admission in the quarter.

Exchanges

Tenet's same-hospital exchange admissions were 5,351 in the first quarter of 2016, up 27.6 percent from the first quarter of 2015. Same-hospital exchange outpatient visits were 46,058, up 45.9% from the first quarter of 2015.

Uncompensated Care

Tenet's bad debt expense ratio was 6.9 percent of revenues before bad debt in the first quarter of 2016, down from 7.6 percent in the first quarter of 2015. Uncompensated care represented 20.6 percent of adjusted revenue in the first quarter of 2016, down from 21.8 percent in the first quarter of 2015. Tenet's uncompensated care cost was $1.309 billion and $1.236 billion in the first quarters of 2016 and 2015, respectively, including $933 million and $873 million, respectively, of charity care write-offs and uninsured discounts that were offered through Tenet's Compact with Uninsured Patients. Nearly all of Tenet's uncompensated care is associated with the hospital segment.

Uninsured plus charity admissions declined by 374 admissions, or 3.8 percent on a same-hospital basis in the first quarter of 2016 compared to the first quarter of 2015. Uninsured plus charity outpatient visits increased by 2,093 visits, or 1.5 percent.

Ambulatory Segment

The results of many of the facilities in which the Ambulatory segment has an investment are not consolidated by Tenet. To help analyze results of operations, management uses system-wide measures which include revenues and cases of both consolidated and unconsolidated facilities. Tenet's acquisition of a majority interest in USPI and all of Aspen on June 16, 2015 makes the year-over-year comparisons less meaningful since they were not owned for the entire year. In order to improve comparability, Tenet is presenting the results for the ambulatory segment on a pro forma basis, including the results of USPI and Aspen in each comparable period.

During the first quarter of 2016, on a pro forma basis, the ambulatory segment delivered net operating revenue of $429 million, representing an increase of 45.4 percent as compared to $295 million in the first quarter of 2015. On a pro forma same-facility system-wide basis, revenue in the ambulatory segment increased 11.0 percent, with cases increasing 8.6 percent and revenue per case increasing 2.2 percent.

Tenet's ambulatory segment generated Adjusted EBITDA of $136 million in the first quarter of 2016, up 44.7 percent from $94 million in the first quarter of 2015 on a pro forma basis. After subtracting $46 million and $27 million of net income attributable to noncontrolling interests in the first quarters of 2016 and 2015, respectively, and prior to subtracting noncontrolling interests expense related to minority shareholders in the Company's USPI joint venture, Adjusted EBITDA less NCI increased 34.3 percent to $90 million in the first quarter of 2016, up from $67 million in the first quarter of 2015. After subtracting an additional $11 million of noncontrolling interests expense in the first quarter of 2016 and $7 million in the first quarter of 2015 on a pro forma basis related to minority shareholders in the USPI joint venture, Adjusted EBITDA less NCI increased 31.7 percent to $79 million in the first quarter of 2016, up from $60 million in the first quarter of 2015. The above noncontrolling interests amounts in the first quarter of 2016 exclude $18 million of noncontrolling interests expense recorded by USPI related to $29 million of gains on the consolidation of certain businesses and an associated $7 million favorable income tax adjustment.

Conifer Segment

During the first quarter of 2016, Conifer's revenue increased 12.6 percent to $385 million, up from $342 million in the first quarter of 2015. Excluding revenue from Tenet, Conifer's revenue from third party customers increased by 19.8 percent to $218 million. Conifer generated $63 million of Adjusted EBITDA in the first quarter of 2016, representing an EBITDA margin of 16.4%. In the first quarter of 2015, Conifer generated $82 million of Adjusted EBITDA which included a non-recurring benefit from the extended and expanded contract with Catholic Health Initiatives.

Net Income and Earnings Per Share

During the first quarter of 2016, Tenet generated Adjusted net income from continuing operations of $45 million, or $0.45 per diluted share. This excludes $100 in after-tax expense for items such as impairment charges, restructuring charges, acquisition-related costs, litigation and investigation costs, gains on sales, consolidation and deconsolidation of facilities, and the related impact on noncontrolling interests. During the first quarter of 2015, the company generated Adjusted net income from continuing operations of $67 million, or $0.67 per diluted share, excluding $21 million of after-tax expense for comparable items.

On a GAAP basis in the first quarter of 2016, including the results of both continuing and discontinued operations, Tenet reported a net loss of $59 million, or $0.60 per share, compared to net income of $47 million, or $0.47 per diluted share, in the first quarter of 2015.

A reconciliation of GAAP net income available (loss attributable) to Tenet Healthcare Corporation common shareholders to Adjusted net income and Adjusted diluted EPS is contained in Table #2.

Cash Flow and Liquidity

Cash and cash equivalents were $728 million at March 31, 2016 compared to $356 million at December 31, 2015. Tenet's cash and debt balances as of March 31, 2016 reflect the $575 million in cash proceeds that the company received from the sale of our Atlanta-area hospitals which was completed on March 31, 2016. The company had no outstanding borrowings on its $1 billion credit line as of March 31, 2016.

Accounts receivable days outstanding were 50.6 at March 31, 2016 compared to 49.5 at December 31, 2015. The increase in accounts receivable days outstanding is primarily attributable to receivables that were retained from divested hospitals, including the transactions in Atlanta, North Carolina and St. Louis. Adjusted net cash provided by operating activities in the first quarter of 2016 was $219 million, representing a $239 million improvement compared to a $20 million outflow in the first quarter of 2015. After subtracting $208 million and $184 million of capital expenditures in the first quarters of 2016 and 2015, respectively, Adjusted Free Cash Flow was $11 million in the first quarter of 2016, representing a $215 million improvement compared to a $204 million outflow in the first quarter of 2015.

A reconciliation of net cash provided by (used in) operating activities to Adjusted Free Cash Flow from continuing operations is contained in Table #3.

Increase in Litigation Reserves

As previously disclosed, the Company commenced discussions in January 2016 with the U.S. Department of Justice and the State of Georgia regarding potential resolution of the Clinica de la Mama criminal investigation and civil litigation. While these matters remain unresolved, the Company now believes that it has made significant progress toward reaching an agreement in principle on the monetary terms of a global resolution. In the three months ended March 31, 2016, the Company increased its aggregate reserve for the Clinica de la Mama criminal investigation and civil litigation from $238 million to $407 million to reflect an offer made to resolve the matters. This amount is reflected in the consolidated balance sheet as of March 31, 2016 as accrued legal settlement costs. The increase in the reserve and other litigation costs lowered net income by approximately $135 million during the first quarter of 2016. For additional information, see Note 10 to the Consolidated Financial Statements included in the Company's Form 10-Q for the quarter ended March 31, 2016.

Outlook

The company confirmed its existing Outlook for 2016, including:
  • Revenue of $18.8 billion to $19.2 billion,
  • Adjusted EBITDA of $2.4 billion to $2.5 billion,
  • Adjusted Free Cash Flow of $400 million to $600 million, and
  • Adjusted earnings per diluted share of $1.18 to $2.25.

The Outlook for calendar year 2016 assumes equity in earnings of unconsolidated affiliates of $150 million to $170 million, electronic health record incentives of $25 million to $35 million, net income attributable to noncontrolling interests of $320 million to $340 million (excluding the additional $18 million of noncontrolling interests recorded by USPI in the first quarter of 2016, as discussed above) and an average diluted share count of 102 million.

During the second quarter of 2016, Tenet expects to deliver:

  • Revenue of $4.8 billion to $5.0 billion,
  • Adjusted EBITDA of $600 million to $650 million, and
  • Adjusted earnings per diluted share of $0.20 to $0.73.

The Outlook for the second quarter assumes equity in earnings of unconsolidated affiliates of approximately $30 million, electronic health record incentives of approximately $15 million, net income attributable to noncontrolling interests of $80 million to $90 million and an average diluted share count of 102 million.

Additional details on Tenet's Outlook for both the second quarter and calendar year 2016 are available in Tables 4, 5 and 6 at the end of this press release and in an accompanying slide presentation that is accessible through the company's website at www.tenethealth.com/investors.

Management's Webcast Discussion of First Quarter Results

Tenet management will discuss the Company's first quarter 2016 results on a webcast scheduled for 10:00 a.m. EDT (9:00 a.m. CDT) on May 3, 2016. Investors can access the webcast through Tenet's website at www.tenethealth.com/investors. A set of slides, which will be referred to on the conference call, is available on the Quarterly Results section of the Company's website.

Additional information regarding Tenet's quarterly results of operations is contained in its Form 10-Q report for the three months ended March 31, 2016, which will be filed with the Securities and Exchange Commission and posted on the Tenet website before the webcast. This press release includes certain non-GAAP measures, such as Adjusted EBITDA. A reconciliation of Adjusted EBITDA to net income attributable to Tenet common shareholders is included in the financial tables at the end of this release.

Tenet Healthcare Corporation is a diversified healthcare services company with 130,000 employees united around a common mission: to help people live happier, healthier lives. Through its subsidiaries, partnerships and joint ventures, including United Surgical Partners International, the company operates 79 general acute care hospitals, 20 short-stay surgical hospitals and over 470 outpatient centers in the United States, as well as nine facilities in the United Kingdom. Tenet's Conifer Health Solutions subsidiary provides technology-enabled performance improvement and health management solutions to hospitals, health systems, integrated delivery networks, physician groups, self-insured organizations and health plans. For more information, please visit www.tenethealth.com.

The terms "THC," "Tenet Healthcare Corporation," "the company," "we," "us" or "our" refer to Tenet Healthcare Corporation or one or more of its subsidiaries or affiliates as applicable.

This release contains "forward-looking statements" - that is, statements that relate to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "expect," "assume," "anticipate," "intend," "plan," "believe," "seek," "see," or "will." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include, but are not limited to, the factors disclosed under "Forward-Looking Statements" and "Risk Factors" in our Form 10-K for the year ended December 31, 2015 and other filings with the Securities and Exchange Commission. Among other things, these factors include adverse regulatory developments, government investigations or litigation, including any significant monetary resolution or other undesirable consequences of the Clinica de la Mama qui tam action and criminal investigation described in Note 10 to the Consolidated Financial Statements included in our Form 10-Q for the three months ended March 31, 2016. The terms of a final resolution, if any, of the Clinica de la Mama matter may require us to pay significant fines and penalties and give rise to other costs or adverse consequences that materially exceed the reserve we have established and could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Tenet uses its company website to provide important information to investors about the company including the posting of important announcements regarding financial performance and corporate developments.
 
 
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
(Dollars in millions except per share amounts)     Three Months Ended March 31,
2016     %     2015     %     Change
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 5,420 $ 4,787 13.2 %
Less: Provision for doubtful accounts   376     363   3.6 %
Net operating revenues 5,044 100.0 % 4,424 100.0 % 14.0 %
Equity in earnings of unconsolidated affiliates 24 0.5 % 4 0.1 % 500.0 %
Operating expenses:
Salaries, wages and benefits 2,402 47.6 % 2,125 48.0 % 13.0 %
Supplies 811 16.1 % 687 15.5 % 18.0 %
Other operating expenses, net 1,242 24.6 % 1,093 24.7 % 13.6 %
Electronic health record incentives % (6 ) (0.2 )% (100.0 ) %
Depreciation and amortization 212 4.2 % 207 4.7 %
Impairment and restructuring charges, and acquisition-related costs 28 0.6 % 29 0.7 %
Litigation and investigation costs 173 3.4 % 3 0.1 %
Gains on sales, consolidation and deconsolidation of facilities   (147 ) (2.9 )%     %
Operating income 347 6.9 % 290 6.6 %
Interest expense (243 ) (199 )
Investment earnings   1      
Net income from continuing operations, before income taxes 105 91
Income tax expense   (67 )   (16 )

Net income from continuing operations, before discontinued operations
38 75
Discontinued operations:
Loss from operations (5 ) (1 )
Litigation and investigation costs 3
Income tax benefit (expense)   1     (1 )
Net income (loss) from discontinued operations   (4 )   1  
Net income 34 76
Less: Net income attributable to noncontrolling interests   93     29  
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders $ (59 ) $ 47  
Amounts available (attributable) to Tenet Healthcare Corporation common shareholders
Net income (loss) from continuing operations, net of tax $ (55 ) $ 46
Net income (loss) from discontinued operations, net of tax   (4 )   1  
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders $ (59 ) $ 47  
Earnings (loss) per share available (attributable) to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations $ (0.56 ) $ 0.47
Discontinued operations   (0.04 )   0.01  
$ (0.60 ) $ 0.48  
Diluted
Continuing operations $ (0.56 ) $ 0.46
Discontinued operations   (0.04 )   0.01  
$ (0.60 ) $ 0.47  
Weighted average shares and dilutive securities outstanding (in thousands):
Basic 98,768 98,699
Diluted* 98,768 100,872
*Had we generated income from continuing operations in the three months ended March 31, 2016 the effect of employee stock options, restricted stock units and deferred compensation units on the diluted shares calculation would have been an increase of 1,567 shares.
 
 
TENET HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
    March 31,     December 31,
(Dollars in millions)   2016     2015  
ASSETS
Current assets:
Cash and cash equivalents $ 728 $ 356
Accounts receivable, less allowance for doubtful accounts 2,807 2,704
Inventories of supplies, at cost 312 309
Income tax receivable 7
Assets held for sale 2 550
Other current assets   1,280     1,245  
Total current assets 5,129 5,171
Investments and other assets 1,142 1,175
Deferred income taxes 726 776
Property and equipment, at cost, less accumulated depreciation and amortization 7,961 7,915
Goodwill 7,122 6,970
Other intangible assets, at cost, less accumulated amortization   1,686     1,675  
Total assets $ 23,766   $ 23,682  
 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 172 $ 127
Accounts payable 1,228 1,380
Accrued compensation and benefits 772 880
Professional and general liability reserves 161 177
Accrued interest payable 307 205
Liabilities held for sale 101
Accrued legal settlement costs 423 294
Other current liabilities   1,205     1,144  
Total current liabilities 4,268 4,308
Long-term debt, net of current portion 14,350 14,383
Professional and general liability reserves 623 578
Defined benefit plan obligations 593 595
Other long-term liabilities   625     594  
Total liabilities 20,459 20,458
Commitments and contingencies
Redeemable noncontrolling interests in equity of consolidated subsidiaries 2,381 2,266
Equity:
Shareholders' equity:
Common stock 7 7
Additional paid-in capital 4,804 4,815
Accumulated other comprehensive loss (160 ) (164 )
Accumulated deficit (1,609 ) (1,550 )
Common stock in treasury, at cost   (2,417 )   (2,417 )
Total shareholders' equity 625 691
Noncontrolling interests   301     267  
Total equity   926     958  
Total liabilities and equity $ 23,766   $ 23,682  
 
 
TENET HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
 
    Three Months Ended
(Dollars in millions) March 31,
  2016         2015  
Net Income $ 34 $ 76
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 212 207
Provision for doubtful accounts 376 363
Deferred income tax expense 31 12
Stock-based compensation expense 16 15
Impairment and restructuring charges, and acquisition-related costs 28 29
Litigation and investigation costs 173 3
Gains on sales, consolidation and deconsolidation of facilities (147 )
Equity in earnings of unconsolidated affiliates, net of distributions received 12 (4 )
Amortization of debt discount and debt issuance costs 10 7
Pre-tax loss (income) from discontinued operations 5 (2 )
Other items, net 2 (4 )
Changes in cash from operating assets and liabilities:
Accounts receivable (453 ) (484 )
Inventories and other current assets (18 ) (74 )
Income taxes 28 8
Accounts payable, accrued expenses and other current liabilities (114 ) (200 )
Other long-term liabilities 24 28
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements (69 ) (33 )
Net cash used in operating activities from discontinued operations, excluding income taxes   (3 )   (4 )
Net cash provided by (used in) operating activities 147 (57 )
Cash flows from investing activities:
Purchases of property and equipment — continuing operations (208 ) (184 )
Purchases of businesses or joint venture interests, net of cash acquired (29 ) (11 )
Proceeds from sales of facilities and other assets 573
Proceeds from sales of marketable securities, long-term investments and other assets 12 6
Purchases of equity investments (18 )
Other long-term assets   (10 )   2  
Net cash provided by (used in) investing activities 320 (187 )
Cash flows from financing activities:
Repayments of borrowings under credit facility (995 ) (690 )
Proceeds from borrowings under credit facility 995 820
Repayments of other borrowings (38 ) (32 )
Proceeds from other borrowings 1 401
Debt issuance costs (4 )
Distributions paid to noncontrolling interests (44 ) (11 )
Contributions from noncontrolling interests 2
Purchase of noncontrolling interests (254 )
Proceeds from exercise of stock options 7
Other items, net   (14 )   (3 )
Net cash provided by (used in) financing activities   (95 )   236  
Net increase in cash and cash equivalents 372 (8 )
Cash and cash equivalents at beginning of period   356     193  
Cash and cash equivalents at end of period $ 728   $ 185  
Supplemental disclosures:
Interest paid, net of capitalized interest $ (132 ) $ (117 )
Income tax refunds (payments), net $ (6 ) $ 1
 
 
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS - CONTINUING TOTAL HOSPITALS (1)
(Unaudited)
 
(Dollars in millions except per patient day,              
per admission, per adjusted admission Three Months Ended March 31,
and per visit amounts)   2016     2015   Change
 
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 80 80 *
Total admissions 211,799 208,333 1.7 %
Adjusted patient admissions 362,819 349,097 3.9 %
Paying admissions (excludes charity and uninsured) 201,436 197,383 2.1 %
Charity and uninsured admissions 10,363 10,950 (5.4 )%
Admissions through emergency department 136,056 133,544 1.9 %
Paying admissions as a percentage of total admissions 95.1 94.7 0.4 % *
Charity and uninsured admissions as a percentage of total admissions 4.9 5.3 (0.4 )% *
Emergency department admissions as a percentage of total admissions 64.2 64.1 0.1 % *
Surgeries — inpatient 55,755 53,710 3.8 %
Surgeries — outpatient 76,829 67,693 13.5 %
Total surgeries 132,584 121,403 9.2 %
Patient days — total 1,010,514 975,912 3.5 %
Adjusted patient days 1,714,369 1,618,516 5.9 %
Average length of stay (days) 4.77 4.68 1.9 %
Licensed beds (at end of period) 21,529 20,826 3.4 %
Average licensed beds 21,524 20,823 3.4 %
Utilization of licensed beds 51.6 52.1 (0.5 )% *
Outpatient Visits
Total visits 2,146,618 1,994,573 7.6 %
Paying visits (excludes charity and uninsured) 1,984,515 1,837,376 8.0 %
Charity and uninsured visits 162,103 157,197 3.1 %
Emergency department visits 789,916 741,533 6.5 %
Paying visits as a percentage of total visits 92.4 92.1 0.3 % *
Charity and uninsured visits as a percentage of total visits 7.6 7.9 (0.3 )% *
Revenues
Net inpatient revenues $ 2,781 $ 2,691 3.3 %
Net outpatient revenues $ 1,514 $ 1,412 7.2 %
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission $ 13,130 $ 12,917 1.6 %
Net inpatient revenue per patient day $ 2,752 $ 2,757 (0.2 )%
Net outpatient revenue per visit $ 705 $ 708 (0.4 )%
Net patient revenue per adjusted patient admission $ 11,838 $ 11,750 0.7 %
Net patient revenue per adjusted patient day $ 2,505 $ 2,534 (1.1 )%
Total selected operating expenses (salaries, wages and benefits, supplies and other operating expenses) per adjusted patient admission $ 10,537 $ 10,284 2.5 %
 
Net Patient Revenues from:
Medicare 20.0 % 21.9 % (1.9 )% *
Medicaid 8.7 % 9.4 % (0.7 )% *
Managed care 61.1 % 58.6 % 2.5 % *
Indemnity, self-pay and other 10.2 % 10.1 % 0.1 % *
(1)   Represents the results of Tenet's Hospital Operations and other segment.
* This change is the difference between the 2016 and 2015 amounts shown
 
 
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS - CONTINUING SAME HOSPITALS (1)
(Unaudited)
 
(Dollars in millions except per patient day,              
per admission, per adjusted admission Three Months Ended March 31,
and per visit amounts)   2016     2015   Change
 
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 72 72 *
Total admissions 193,980 194,143 (0.1 )%
Adjusted patient admissions 330,575 323,577 2.2 %
Paying admissions (excludes charity and uninsured) 184,436 184,225 0.1 %
Charity and uninsured admissions 9,544 9,918 (3.8 )%
Admissions through emergency department 125,004 124,492 0.4 %
Paying admissions as a percentage of total admissions 95.1 94.9 0.2 % *
Charity and uninsured admissions as a percentage of total admissions 4.9 5.1 (0.2 )% *
Emergency department admissions as a percentage of total admissions 64.4 64.1 0.3 % *
Surgeries — inpatient 50,563 50,447 0.2 %
Surgeries — outpatient 66,467 62,949 5.6 %
Total surgeries 117,030 113,396 3.2 %
Patient days — total 911,651 909,116 0.3 %
Adjusted patient days 1,537,812 1,499,932 2.5 %
Average length of stay (days) 4.70 4.68 0.4 %
Licensed beds (at end of period) 19,293 19,393 (0.5 )%
Average licensed beds 19,288 19,390 (0.5 )%
Utilization of licensed beds 52.5 52.1 0.4 % *
Outpatient Visits
Total visits 1,949,159 1,852,780 5.2 %
Paying visits (excludes charity and uninsured) 1,804,947 1,710,661 5.5 %
Charity and uninsured visits 144,212 142,119 1.5 %
Emergency department visits 726,730 688,242 5.6 %
Paying visits as a percentage of total visits 92.6 92.3 0.3 % *
Charity and uninsured visits as a percentage of total visits 7.4 7.7 (0.3 )% *
Revenues
Net inpatient revenues $ 2,616 $ 2,501 4.6 %
Net outpatient revenues $ 1,400 $ 1,289 8.6 %
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission $ 13,486 $ 12,882 4.7 %
Net inpatient revenue per patient day $ 2,870 $ 2,751 4.3 %
Net outpatient revenue per visit $ 718 $ 696 3.2 %
Net patient revenue per adjusted patient admission $ 12,149 $ 11,713 3.7 %
Net patient revenue per adjusted patient day $ 2,612 $ 2,527 3.4 %
 
Net Patient Revenues from:
Medicare 20.6 % 21.8 % (1.2 )% *
Medicaid 8.2 % 9.0 % (0.8 )% *
Managed care 61.5 % 59.1 % 2.4 % *
Indemnity, self-pay and other 9.7 % 10.1 % (0.4 )% *
(1)   Represents the results of Tenet's Hospital Operations and other segment.
* This change is the difference between the 2016 and 2015 amounts shown
 
 
TENET HEALTHCARE CORPORATION

SELECTED STATISTICS - CONTINUING SAME HOSPITALS (1)
(Unaudited)
 
(Dollars in millions except per patient day,                    
per admission, per adjusted admission Three Months Ended Year Ended
and per visit amounts)   03/31/15     06/30/15     9/30/2015     12/31/2015     12/31/2015  
 
Admissions, Patient Days and Surgeries
Number of hospitals (at end of period) 72

72

72

72

72
Total admissions 194,143

187,983

185,752

184,959

752,837
Adjusted patient admissions 323,577 322,882 320,880 320,338 1,287,677
Paying admissions (excludes charity and uninsured) 184,225 178,501 175,537 175,025 713,288
Charity and uninsured admissions 9,918 9,482 10,215 9,934 39,549
Admissions through emergency department 124,492 119,793 116,402 116,573 477,260
Paying admissions as a percentage of total admissions 94.9 % 94.9 % 94.9 % 94.9 % 94.9 %
Charity and uninsured admissions as a percentage of total admissions 5.1 % 5.1 % 5.1 % 5.1 % 5.1 %
Emergency department admissions as a percentage of total admissions 64.1 % 63.7 % 62.7 % 63.0 % 63.4 %
Surgeries — inpatient 50,447 51,618 51,879 51,469 205,413
Surgeries — outpatient 62,949 67,113 67,528 67,806 265,396
Total surgeries 113,396 118,731 119,407 119,275 470,809
Patient days — total 909,116 864,961 850,411 850,561 3,475,049
Adjusted patient days 1,499,932 1,469,406 1,451,654 1,458,288 5,879,280
Average length of stay (days) 4.68 % 4.60 % 4.58 % 4.60 % 4.62 %
Licensed beds (at end of period) 19,393 19,393 19,350 19,279 19,279
Average licensed beds 19,390 19,393 19,382 19,303 19,366
Utilization of licensed beds 52.1 % 49.0 % 47.7 % 47.9 % 49.2 %
Outpatient Visits
Total visits 1,852,780 1,911,152 1,890,417 1,903,228 7,557,577
Paying visits (excludes charity and uninsured) 1,710,661 1,767,482 1,737,062 1,758,284 6,973,489
Charity and uninsured visits 142,119 143,670 153,355 144,944 584,088
Emergency department visits 688,242 687,398 681,754 681,941 2,739,335
Paying visits as a percentage of total visits 92.3 % 92.5 % 91.9 % 92.4 % 92.3 %
Charity and uninsured visits as a percentage of total visits 7.7 % 7.5 % 8.1 % 7.6 % 7.7 %
Revenues
Net inpatient revenues $ 2,501 $ 2,430 $ 2,408 $ 2,477 $ 9,816
Net outpatient revenues $ 1,289 $ 1,347 $ 1,358 $ 1,381 $ 5,375
Revenues on a Per Admission, Per Patient Day and Per Visit Basis
Net inpatient revenue per admission $ 12,882 $ 12,927 $ 12,964 $ 13,392 $ 13,039
Net inpatient revenue per patient day $ 2,751 $ 2,809 $ 2,832 $ 2,912 $ 2,825
Net outpatient revenue per visit $ 696 $ 705 $ 718 $ 726 $ 711
Net patient revenue per adjusted patient admission $ 11,713 $ 11,698 $ 11,736 $ 12,044 $ 11,797
Net patient revenue per adjusted patient day $ 2,527 $ 2,570 $ 2,594 $ 2,646 $ 2,584
 
Net Patient Revenues from:
Medicare 21.8 % 20.7 % 20.1 % 19.9 % 20.6 %
Medicaid 9.0 % 8.1 % 8.4 % 7.8 % 8.3 %
Managed care 59.1 % 61.4 % 61.9 % 61.7 % 61.1 %
Indemnity, self-pay and other 10.1 % 9.8 % 9.6 % 10.6 % 10.0 %
(1)  

Represents the results of Tenet's Hospital Operations and other segment.
* This change is the difference between the 2016 and 2015 amounts shown
 
 
TENET HEALTHCARE CORPORATION
SEGMENT REPORTING
(Unaudited)
 

(Dollars in millions)
    March 31,     December 31,
  2016     2015  
Assets
Hospital Operations and other $ 17,131 $ 17,353
Ambulatory Care 5,467 5,159
Conifer   1,168     1,170  
Total

$

23,766
 

$

23,682
 
 
Three Months Ended
March 31,
  2016     2015  
Capital expenditures:
Hospital Operations and other $ 191 $ 176
Ambulatory Care 12 4
Conifer   5     4  
Total $ 208   $ 184  
 
Net operating revenues:
Hospital Operations and other $ 4,397 $ 4,151
Ambulatory Care 429 91
Conifer
Tenet 167 160
Other customers   218     182  
Total Conifer revenues   385     342  
Intercompany eliminations   (167 )   (160 )
Total $ 5,044   $ 4,424  
 
Adjusted EBITDA:
Hospital Operations and other $ 414 $ 418
Ambulatory Care 136 29
Conifer   63     82  
Total $ 613   $ 529  
 
Depreciation and amortization:
Hospital Operations and other $ 174 $ 192
Ambulatory Care 25 4
Conifer   13     11  
Total $ 212   $ 207  
 
Adjusted EBITDA $ 613 $ 529
Depreciation and amortization (212 ) (207 )
Impairments and restructuring charges, and acquisition-related costs (28 ) (29 )
Litigation and investigation costs (173 ) (3 )
Interest expense (243 ) (199 )
Gains on sales, consolidation and deconsolidation of facilities 147
Investment Earnings   1      
Income from continuing operations before income taxes $ 105   $ 91  
 
 
TENET HEALTHCARE CORPORATION
STATEMENT OF OPERATIONS - AMBULATORY CARE SEGMENT
INCLUDING PRO FORMA USPI AND ASPEN FOR ALL PERIODS
(Unaudited)
 

(Dollars in millions)
    Three Months Ended March 31,
2016     2015
       
Ambulatory Care as Reported Under GAAP Unconsolidated Affiliates Ambulatory Care as Reported Under GAAP Unconsolidated Affiliates
Net operating revenues:
Net operating revenues before provision for doubtful accounts $ 437 $ 479 $ 300 $ 486
Less: Provision for doubtful accounts   (8 )   (14 )   (5 )   (12 )
Net operating revenues (1) 429 465 295 474
Equity in earnings of unconsolidated affiliates (2) 25 21
Operating expenses:
Salaries, wages and benefits 146 118 98 120
Supplies 86 123 51 123
Other operating expenses, net 86 102 73 108
Depreciation and amortization 25 18 13 20
Impairment and restructuring charges, and acquisition-related costs 1
Gains on sales, consolidation and deconsolidation of facilities   (29 )   (4 )        
Operating income 139 108 81 103
Interest expense   (35 )   (6 )   (34 )   (7 )
Net income from continuing operations, before income taxes 104 102 47 96
Income tax expense   (8 )   (2 )   (9 )   (2 )
Net income 96 $ 100   38 $ 94  
Less: Net income attributable to noncontrolling interests (3)   75     34  
Net income attributable to Tenet Healthcare Corporation common shareholders $ 21   $ 4  
Equity in earnings of unconsolidated affiliates $ 25 $ 21
(1)   On a same-facility system-wide basis, net revenue in Tenet's Ambulatory Care segment increased 11.0% during the three months ended March 31, 2016, with cases increasing 8.6% and revenue per case increasing 2.2%.
(2) At March 31, 2016, 122 of the 335 facilities in the Company's newly formed Ambulatory segment were not consolidated based on the nature of the segment's joint venture relationships with physicians and prominent healthcare systems. Although revenues of the segment's unconsolidated facilities are not recorded as revenues by the Company, equity in earnings of unconsolidated affiliates is nonetheless a significant portion of the Company's overall earnings. To help analyze results of operations, management also uses system-wide operating measures such as system-wide revenue growth, which includes revenues of both consolidated and unconsolidated facilities. We control our remaining 213 facilities and account for these investments as consolidated subsidiaries.
(3) During the three months ended March 31, 2016, the Company recorded $18 million of noncontrolling interests expense related to a $29 million gain on the consolidation of facilities (the gain is not included in Adjusted EBITDA) and an associated $7 million income tax benefit.
 

(1) Reconciliation of Non-GAAP Financial Measurers

Adjusted EBITDA, a non-GAAP term, is defined by the company as net income (loss) attributable to Tenet Healthcare Corporation common shareholders before (1) the cumulative effect of changes in accounting principle, net of tax, (2) net loss (income) attributable to noncontrolling interests, (3) preferred stock dividends, (4) income (loss) from discontinued operations, net of tax, (5) income tax benefit (expense), (6) investment earnings (loss), (7) gain (loss) from early extinguishment of debt, (8) net gain (loss) on sales of investments, (9) interest expense, (10) litigation and investigation (costs) benefit, net of insurance recoveries, (11) hurricane insurance recoveries, net of costs, (12) net gains (losses) on sales, consolidation and deconsolidation of facilities, (13) impairment and restructuring charges and acquisition-related costs, and (14) depreciation and amortization. The company's Adjusted EBITDA may not be comparable to EBITDA reported by other companies.

Adjusted Free Cash Flow, a non-GAAP term, is defined by the company as (1) Adjusted net cash provided by (used in) operating activities from continuing operations, less (2) purchases of property and equipment from continuing operations. Adjusted net cash provided by (used in) operating activities is defined as cash provided by (used in) operating activities prior to (1) payments for restructuring charges, acquisition-related costs and litigation costs and settlements, and, (2) net cash provided by (used in) operating activities from discontinued operations. The company's Adjusted Free Cash Flow may not be comparable to free cash flow reported by other companies.

The company provides this information as a supplement to GAAP information to assist itself and investors in understanding the impact of various items on its financial statements, some of which are recurring or involve cash payments. The company uses this information in its analysis of the performance of its business excluding items that it does not consider as relevant in the performance of its continuing operations. The Company and investors also use this information to compare our operating results with other companies in the health care industry. In addition, from time to time the company uses these measures to define certain performance targets under our compensation programs. Neither Adjusted EBITDA nor Adjusted Free Cash Flow are measures of liquidity, but are measures of operating performance that management uses in its business as an alternative to net income (loss) attributable to Tenet Healthcare Corporation common shareholders. Because Adjusted EBITDA and Adjusted Free Cash Flow exclude many items that are included in our financial statements, they do not provide a complete measure of our operating performance. Accordingly, investors are encouraged to use GAAP measures when evaluating the company's financial performance.

The reconciliation of net income (loss) attributable to Tenet Healthcare Corporation common shareholders, the most comparable GAAP term to Adjusted EBITDA, is set forth in the table below for the three months ended March 31, 2016 and 2015.
 
 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures
Table #1 - Reconciliation of Non-GAAP Financial Measurers to Net Income Available
(Loss Attributable) to Tenet Healthcare Corporation Common Shareholders

(Unaudited)
 

(Dollars in millions)
    Three Months Ended
March 31,
  2016         2015  
 
Net income available (loss attributable) to Tenet Healthcare Corporation common shareholders $ (59 ) $ 47
Less: Net income attributable to noncontrolling interests (93 ) (29 )
Net income (loss) from discontinued operations, net of tax   (4 )   1  
Net income from continuing operations 38 75
Income tax expense (67 ) (16 )
Investment earnings 1
Interest expense   (243 )   (199 )
Operating income 347 290
Litigation and investigation costs (173 ) (3 )
Gains on sales, consolidation and deconsolidation of facilities 147
Impairment and restructuring charges, and acquisition-related costs (28 ) (29 )
Depreciation and amortization   (212 )   (207 )
Adjusted EBITDA $ 613   $ 529  
 
Net operating revenues $ 5,044   $ 4,424  
 
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) 12.2 % 12.0 %
 
 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures
Table #2 - Pre-Tax, After-Tax and Earnings Per Share Impact of Certain Items
on Continuing Operations

(Unaudited)
 
    Three Months Ended
(Dollars in millions except per share amounts) March 31,
  2016         2015  
Adjustments to calculate Adjusted Diluted EPS (Expense) Income
Impairment and restructuring charges, and acquisition-related costs $ (28 ) $ (29 )
Litigation and investigation costs (173 ) (3 )
Gain on sales, consolidation and deconsolidation of facilities   147      
Pre-tax impact (54 ) (32 )
Total after-tax impact (82 ) (21 )
Noncontrolling interests impact   (18 )    
Total income (loss) from items above $ (100 ) $ (21 )
 
Net income available (loss attributable) to common shareholders $ (59 ) $ 47
Less net income (loss) discontinued operations, net of tax   (4 )   1  
Net income (loss) from continuing operations, net of tax (55 ) 46
Net loss (income) from adjustments above   100     21  
Adjusted net income (loss) $ 45   $ 67  
 
Weighted average dilutive shares outstanding (in thousands) 100,335 100,872
 
Adjusted diluted EPS $ 0.45 $ 0.67
 
 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures
Table #3 - Reconciliation of Adjusted Free Cash Flow

(Unaudited)
 
    Three Months Ended
(Dollars in millions) March 31,
  2016         2015  
Net cash provided by (used in) operating activities $ 147 $ (57 )
Less:
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements (69 ) (33 )
Net cash used in operating activities from discontinued operations   (3 )   (4 )
Adjusted net cash provided by operating activities - continuing operations 219 (20 )
Purchases of property and equipment - continuing operations   (208 )   (184 )
Adjusted free cash flow - continuing operations $ 11   $ (204 )
 
 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures
Table #4 - Reconciliation of Outlook Adjusted EBITDA to
Outlook Net Income Attributable to Tenet Healthcare Corporation Common Shareholders
for the Year Ending December 31, 2016

(Unaudited)
 
(Dollars in millions)     Q2 2016     2016
Low     High Low     High
Net income attributable to Tenet Healthcare Corporation common shareholders $ 18 $ 75 $ 26 $ 141
Less: Net income attributable to noncontrolling interests (90 ) (80 ) (360 ) (340 )
Net loss from discontinued operations, net of tax   (2 )   -     (10 )   (5 )
Income from continuing operations 110 155 396 486
Income tax expense   (25 )   (60 )   (130 )   (200 )
Income from continuing operations, before income taxes 135 215 526 686
Interest expense   (245 )   (235 )   (970 )   (950 )
Operating income 380 450 1,496 1,636
Gains on sales, consolidation and deconsolidation of facilities (a) - - 147 147
Impairment and restructuring charges, acquisition-related costs
and litigation costs and settlements (a) - - (201 ) (201 )
Depreciation and amortization   (220 )   (200 )   (850 )   (810 )
Adjusted EBITDA $ 600   $ 650   $ 2,400   $ 2,500  
     
Net operating revenues $ 4,800   $ 5,000   $ 18,800   $ 19,200  
 
Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) 12.5 % 13.0 % 12.8 % 13.0 %

(a)
  Company does not forecast impairment and restructuring charges, acquisition-related costs and litigation costs and settlements and gains on sales, consolidation and deconsolidation of facilities.
 
 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures
Table #5 - Reconciliation of Outlook Adjusted EBITDA to
Outlook Normalized Income from Continuing Operations
for the Year Ending December 31, 2016

(Unaudited)
 
(Dollars in millions except per share amounts)     Q2 2016     2016
Low     High Low     High
Adjusted EBITDA $ 600 $ 650 $ 2,400 $ 2,500
Depreciation and amortization (220 ) (200 ) (850 ) (810 )
Interest expense   (245 )   (235 )   (970 )   (950 )
Normalized income from continuing operations before income taxes 135 215 580 740
Income tax expense   (25 )   (60 )   (120 )   (190 )
Normalized income from continuing operations 110 155 460 550
Net income attributable to noncontrolling interests   (90 )   (80 )   (340 )   (320 )
Normalized net income attributable to common shareholders $ 20   $ 75   $ 120   $ 230  
 
Fully diluted weighted average share outstanding (in millions) 102 102 102 102
 
Normalized fully diluted earnings per share - continuing operations $ 0.20 $ 0.73 $ 1.18 $ 2.25
 
 

TENET HEALTHCARE CORPORATION

Additional Supplemental Non-GAAP disclosures
Table #6 - Reconciliation of Outlook Adjusted Free Cash Flow
for the Year Ending December 31, 2016
 
(Dollars in millions)     2016
Low   High
Net cash provided by operating activities $ 1,206 $ 1,366
Less:
Payments for restructuring charges, acquisition-related costs and litigation costs and settlements (a) (69 ) (69 )
Net cash used in operating activities from discontinued operations   (25 )   (15 )
Adjusted net cash provided by operating activities - continuing operations $ 1,300 $ 1,450
Purchases of property and equipment - continuing operations   (900 )   (850 )
Adjusted free cash flow - continuing operations $ 400   $ 600  

(a)
  Company does not forecast impairment and restructuring charges, acquisition-related costs and litigation costs and settlements

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