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Community Health SystemsMorningstar® Document Research℠ FORM 10-KTENET HEALTHCARE CORP - THCFiled: February 28, 2012 (period: December 31, 2011)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549 Form 10-K xxAnnual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2011 OR ooTransition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to Commission File Number 1-7293 TENET HEALTHCARE CORPORATION(Exact name of Registrant as specified in its charter) Nevada(State of Incorporation)95-2557091(IRS Employer Identification No.) 1445 Ross Avenue, Suite 1400Dallas, TX 75202(Address of principal executive offices, including zip code)(469) 893-2200(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each className of each exchange on which registeredCommon stockNew York Stock ExchangeSeries A Junior Participating Preferred StockNew York Stock Exchange6% Senior Notes due 2012New York Stock Exchange7% Senior Notes due 2013New York Stock Exchange9% Senior Notes due 2014New York Stock Exchange9¼% Senior Notes due 2015New York Stock Exchange6% Senior Notes due 2031New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90. Yes x No o Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required tosubmit and post such files). Yes x No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to thebest of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. o Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (asdefined in Exchange Act Rule 12b-2). Large accelerated filer xAccelerated filer o Non-accelerated filer oSmaller reporting company o 12 38 78 78Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes o No x As of June 30, 2011, there were 478,731,869 shares of common stock, $0.05 par value, outstanding. The aggregate market value of the shares ofcommon stock held by non-affiliates of the Registrant as of June 30, 2011, based on the closing price of the Registrant’s shares on the New York StockExchange on that day, was approximately $2,576,016,843. For the purpose of the foregoing calculation only, all directors and the executive officers who wereSEC reporting persons of the Registrant as of June 30, 2011 have been deemed affiliates. As of January 31, 2012, there were 409,993,592 shares of commonstock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant’s definitive proxy statement for the 2012 annual meeting of shareholders are incorporated by reference into Part III of thisForm 10-K. Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents TABLE OF CONTENTS PagePART IItem 1.Business1Item 1A.Risk Factors17Item 1B.Unresolved Staff Comments23Item 2.Properties23Item 3.Legal Proceedings23Item 4.Mine Safety Disclosures23 PART IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities24Item 6.Selected Financial Data26Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations27Item 7A.Quantitative and Qualitative Disclosures About Market Risk79Item 8.Financial Statements and Supplementary Data80Consolidated Financial Statements83Notes to Consolidated Financial Statements88Supplemental Financial Information122Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure123Item 9A.Controls and Procedures123Item 9B.Other Information123 PART IIIItem 10.Directors, Executive Officers and Corporate Governance124Item 11.Executive Compensation124Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters124Item 13.Certain Relationships and Related Transactions, and Director Independence124Item 14.Principal Accounting Fees and Services124 PART IVItem 15.Exhibits and Financial Statement Schedules125 iSource: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents PART I. ITEM 1. BUSINESS DESCRIPTION OF BUSINESS Tenet Healthcare Corporation is an investor-owned health care services company whose subsidiaries and affiliates own and operate acute carehospitals, ambulatory surgery centers, diagnostic imaging centers and related health care facilities. Unless the context otherwise requires, Tenet and itssubsidiaries are referred to herein as “Tenet,” the “Company,” “we” or “us.” Our core business is focused on providing acute care treatment, including inpatient care, intensive care, cardiac care, radiology services andemergency medical treatment, as well as outpatient services. In supporting our core business, we seek to offer superior quality and patient services, to makecapital and other investments in our facilities and technology to remain competitive, to recruit and retain physicians, and to negotiate favorable contracts withmanaged care and other commercial payers. At December 31, 2011, our subsidiaries operated 50 hospitals, including four academic medical centers and a critical access hospital, with acombined total of 13,453 licensed beds, serving primarily urban and suburban communities in 11 states. Of those hospitals, 45 were owned by oursubsidiaries and five were owned by third parties and leased by our subsidiaries. In addition, at December 31, 2011, our subsidiaries operated a long-termacute care hospital and owned or leased and operated 32 medical office buildings, all of which were located on, or nearby, our hospital campuses. Our subsidiaries also operated 98 free-standing and provider-based diagnostic imaging centers, ambulatory surgery centers and urgent care centers,as well as one free-standing emergency department, in 12 states at December 31, 2011. In recent years, we have increased our efforts to expand our outpatientservices through organic growth and the acquisition of selected outpatient businesses. Historically, our outpatient business has generated significantly highermargins for us than other business lines. By expanding our outpatient business, we expect to increase our profitability over time. Furthermore, we intend to continue expanding our revenue cycle management, health care information management, and patient communicationsservices businesses under our Conifer Health Solutions (“Conifer”) subsidiary by marketing these services to non-Tenet hospitals and other health care-relatedentities. We are also seeking to develop Conifer’s management services business, which provides network development, utilization management, claimsprocessing and contract negotiation services to physician organizations and hospitals that assume managed care risk. At December 31, 2011, Conifer providedservices to more than 300 Tenet and non-Tenet hospitals and other health care organizations. We believe Conifer has the potential over time to generate highmargins and improve our results of operations. In addition, our subsidiaries own an interest in a health maintenance organization and operate occupational and rural health care clinics, physicianpractices, and captive insurance companies. All of these pursuits comprise a minor portion of our business. We are committed to providing the communities our hospitals, outpatient centers and other health care facilities serve with high quality, cost-effectivehealth care while growing our business, increasing our profitability and creating long-term value for our shareholders. Our operating strategies foraccomplishing this mission in the complex and competitive health care industry are discussed in detail in Item 7, Management’s Discussion and Analysis ofFinancial Condition and Results of Operations, of this report. We adjust our strategies as necessary in response to changes in the economic and regulatoryclimates in which we operate and the results achieved by our various efforts. OPERATIONS Our continuing operations are structured as follows: · Our California region includes all of our hospitals in California, as well as our hospital in Nebraska; · Our Central region includes all of our hospitals in Missouri, Tennessee and Texas; · Our Florida region includes all of our hospitals in Florida; and · Our Southern States region includes all of our hospitals in Alabama, Georgia, North Carolina, Pennsylvania and South Carolina. Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents The regions described above report directly to our president of hospital operations. Major decisions, including capital resource allocations, are made at theconsolidated level, not at the regional, market or hospital level. We seek to operate our hospitals in a manner that positions them to compete effectively in an evolving health care environment. From time to time, wealso: build new hospitals; make strategic acquisitions of hospitals, outpatient businesses, physician practices, and other health care assets and companies;and enter into partnerships or affiliations with health care businesses – in each case in markets where we believe our operating strategies can improveperformance and create shareholder value. During the year ended December 31, 2011, we acquired 15 outpatient centers – four diagnostic imaging centers, amajority interest in one other diagnostic imaging center, three oncology centers, an urgent care center, a majority interest in five ambulatory surgery centers,and a majority interest in one other ambulatory surgery center in which we previously held a minority interest. In 2011, we also acquired 26 physicianpractice entities. All of these acquisitions were in furtherance of our efforts to expand our outpatient services and increase our outpatient revenues. Our hospitals classified in continuing operations for financial reporting purposes generated in excess of 96% of our net operating revenues beforeprovision for doubtful accounts for all periods presented in our Consolidated Financial Statements. Factors that affect patient volumes and, thereby, ourresults of operations at our hospitals and related health care facilities include, but are not limited to: (1) the business environment, economic conditions anddemographics of local communities; (2) the number of uninsured and underinsured individuals in local communities treated at our hospitals; (3) seasonalcycles of illness; (4) climate and weather conditions; (5) physician recruitment, retention and attrition; (6) advances in technology and treatments that reducelength of stay; (7) local health care competitors; (8) managed care contract negotiations or terminations; (9) any unfavorable publicity about us, whichimpacts our relationships with physicians and patients; (10) changes in health care regulations; and (11) the timing of elective procedures. Each of our general hospitals offers acute care services, operating and recovery rooms, radiology services, respiratory therapy services, clinicallaboratories and pharmacies; in addition, most offer intensive care, critical care and/or coronary care units, physical therapy, and orthopedic, oncology andoutpatient services. A number of our hospitals also offer tertiary care services such as open-heart surgery, neonatal intensive care and neuroscience. Two of ourhospitals — St. Louis University Hospital and Hahnemann University Hospital — offer quaternary care in areas such as heart, liver, kidney and bonemarrow transplants. St. Christopher’s Hospital for Children provides tertiary and quaternary pediatric services, including bone marrow and kidneytransplants, as well as burn services. Sierra Medical Center and Good Samaritan Medical Center offer gamma-knife brain surgery; and St. Louis UniversityHospital offers cyberknife radiation therapy for tumors and lesions nearly anywhere in the body, including in the brain, lung, neck and spine, that may havebeen previously considered inoperable or inaccessible by traditional radiation therapy. In addition, our hospitals will continue their efforts to deliver anddevelop those outpatient services that can be provided on a quality, cost-effective basis and that we believe will meet the needs of the communities served by thefacilities. Many of our hospitals also offer a wide range of clinical research studies, giving patients access to innovative care. We are committed to supportingthis innovation, while ensuring that billing compliance and other regulations are followed. Current clinical research programs relate to a wide array of ailments,including cardiovascular disease, pulmonary disease, musculoskeletal disorders, neurological disorders, genitourinary disease and various cancers, as wellas medical device studies. By supporting clinical research, our hospitals are actively involved in medical advancements that can lead to improvements inpatient safety and clinical care. Each of our acute care hospitals is accredited by the Joint Commission (formerly, the Joint Commission on Accreditation of HealthcareOrganizations) or the American Osteopathic Association (in the case of one hospital). With such accreditation, our hospitals are deemed to meet the MedicareConditions of Participation and are eligible to participate in government-sponsored provider programs, such as the Medicare and Medicaid programs. 2Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents The following table lists, by state, the hospitals owned or leased and operated by our subsidiaries as of December 31, 2011: HospitalLocationLicensedBedsStatusAlabamaBrookwood Medical CenterBirmingham631Owned CaliforniaDesert Regional Medical Center(1)Palm Springs387LeasedDoctors Hospital of MantecaManteca73OwnedDoctors Medical CenterModesto461OwnedFountain Valley Regional Hospital & Medical CenterFountain Valley400OwnedJohn F. Kennedy Memorial HospitalIndio156OwnedLakewood Regional Medical CenterLakewood172OwnedLos Alamitos Medical CenterLos Alamitos167OwnedPlacentia Linda HospitalPlacentia114OwnedSan Ramon Regional Medical CenterSan Ramon123OwnedSierra Vista Regional Medical CenterSan Luis Obispo164OwnedTwin Cities Community HospitalTempleton122Owned FloridaCoral Gables HospitalCoral Gables245OwnedDelray Medical CenterDelray Beach493OwnedGood Samaritan Medical CenterWest Palm Beach333OwnedHialeah HospitalHialeah378OwnedNorth Shore Medical CenterMiami357OwnedNorth Shore Medical Center — FMC CampusLauderdale Lakes459OwnedPalm Beach Gardens Medical Center(2)Palm Beach Gardens199LeasedPalmetto General HospitalHialeah360OwnedSaint Mary’s Medical CenterWest Palm Beach463OwnedWest Boca Medical CenterBoca Raton195Owned GeorgiaAtlanta Medical CenterAtlanta460OwnedNorth Fulton Regional Hospital(2)Roswell202LeasedSouth Fulton Medical CenterEast Point338OwnedSpalding Regional HospitalGriffin160OwnedSylvan Grove Hospital(3)Jackson25Leased MissouriDes Peres HospitalSt. Louis143OwnedSt. Louis University HospitalSt. Louis356Owned NebraskaCreighton University Medical Center(4)Omaha334Owned North CarolinaCentral Carolina HospitalSanford137OwnedFrye Regional Medical Center(2)Hickory355Leased PennsylvaniaHahnemann University HospitalPhiladelphia496OwnedSt. Christopher’s Hospital for ChildrenPhiladelphia189Owned South CarolinaCoastal Carolina HospitalHardeeville41OwnedEast Cooper Medical CenterMount Pleasant140OwnedHilton Head HospitalHilton Head93OwnedPiedmont Medical CenterRock Hill288Owned 3Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents HospitalLocationLicensedBedsStatusTennesseeSaint Francis HospitalMemphis519OwnedSaint Francis Hospital — BartlettBartlett100Owned TexasCentennial Medical CenterFrisco118OwnedCypress Fairbanks Medical CenterHouston181OwnedDoctors Hospital at White Rock LakeDallas218OwnedHouston Northwest Medical Center(5)Houston430OwnedLake Pointe Medical Center(6)Rowlett112OwnedNacogdoches Medical CenterNacogdoches153OwnedPark Plaza HospitalHouston444OwnedProvidence Memorial HospitalEl Paso508OwnedSierra Medical CenterEl Paso351OwnedSierra Providence East Medical CenterEl Paso110Owned (1)Lease expires in 2027.(2)The current lease terms for Palm Beach Gardens Medical Center, North Fulton Regional Hospital and Frye Regional Medical Center expire inFebruary 2014, but may be renewed through at least February 2039, in each case subject to certain conditions contained in the respective leases.(3)Designated by the Centers for Medicare and Medicaid Services (“CMS”) as a critical access hospital. Although it has not sought to be accredited, thehospital participates in the Medicare and Medicaid programs by otherwise meeting the Medicare Conditions of Participation. The current lease term forthis facility expires in December 2016, but may be renewed through December 2046, subject to certain conditions contained in the lease.(4)Owned by a limited liability company in which a Tenet subsidiary owned a 74.06% interest at December 31, 2011 and is the managing member.(5)Owned by a limited liability company in which a Tenet subsidiary owned an 86.18% interest at December 31, 2011 and is the managing member.(6)Owned by a limited liability company in which a Tenet subsidiary owned a 94.59% interest at December 31, 2011 and is the managing member. As of December 31, 2011, the largest concentrations of licensed beds in our hospitals were in Florida (25.9%), Texas (19.5%) and California(17.4%). Strong concentrations of hospital beds within market areas help us contract more successfully with managed care payers, reduce management,marketing and other expenses, and more efficiently utilize resources. However, these concentrations increase the risk that, should any adverse economic,regulatory, environmental or other condition occur in these areas, our overall business, financial condition, results of operations or cash flows could bematerially adversely affected. None of our individual hospitals represented more than 5% of our net operating revenues for the year ended December 31, 2011,and only one of our individual hospitals represented more than 5% (approximately 5.8%) of our total assets, excluding goodwill and intercompanyreceivables, at December 31, 2011. The following table presents the number of hospitals operated by our subsidiaries, as well as the total number of licensed beds at those facilities, atDecember 31, 2011, 2010 and 2009: December 31,201120102009Total number of facilities(1)505051Total number of licensed beds(2)13,45313,42813,601 (1) Includes all general hospitals and our critical access facility, as well as one facility at December 31, 2009 that is classified in discontinued operations forfinancial reporting purposes as of December 31, 2011.(2) Information regarding utilization of licensed beds and other operating statistics can be found in Item 7, Management’s Discussion and Analysis ofFinancial Condition and Results of Operations, of this report. PROPERTIES Description of Real Property. The locations of our hospitals and the number of licensed beds at each hospital at December 31, 2011 are set forth inthe table beginning on page 3. At December 31, 2011, our subsidiaries also operated 32 medical office buildings, all of which were located on, or nearby, ourhospital campuses. Of those medical office buildings, 23 were owned by our subsidiaries and 9 were owned by third parties and leased by our subsidiaries. Our corporate headquarters are located in Dallas, Texas. We have other corporate administrative offices in Anaheim, California and Coral Springs,Florida. One of our subsidiaries leases our corporate headquarters space under an operating lease agreement that expires in December 2019. Other subsidiarieslease the space for our offices in Anaheim and Coral Springs under operating lease agreements. We believe that all of our properties, including theadministrative and medical office buildings described above, are suitable for their intended purposes. 4Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Obligations Relating to Real Property. As of December 31, 2011, we had approximately $7 million of outstanding loans secured by property andequipment, and we had approximately $25 million of capital lease obligations. In addition, from time to time, we lease real property to third-party developersfor the construction of medical office buildings. Under our current practice, the financing necessary to construct the medical office buildings encumbers onlythe leasehold and not our fee interest in the real estate. In years past, however, we have at times subordinated our fee interest and allowed our property to bepledged as collateral for third-party loans. We have no contractual obligation to make payments on these third-party loans, but our property could be subject toloss in the case of default by the lessee. Regulations Affecting Real Property. We are subject to a number of laws and regulations affecting our use of, and purchase and sale of, realproperty. Among these are California’s seismic standards, the Americans with Disabilities Act, and various environmental laws and regulations. The State of California has established standards intended to ensure that all hospitals in the state withstand earthquakes and other seismic activitywithout collapsing or posing the threat of significant loss of life. To date, we have spent a total of approximately $28 million to comply with the requirementsunder California’s seismic regulations. We do not expect to incur material additional costs, however, because all of our general acute care hospitals inCalifornia are now in compliance with the current seismic requirements. In addition to safety standards, over time, hospitals must also meet performancestandards meant to ensure that they are generally capable of providing medical services to the public after an earthquake or other disaster. Ultimately, allgeneral acute care hospitals in California must meet these seismic performance standards by 2030 to remain open. We expect to meet California’s seismicperformance standards by the 2030 deadline; however, we are unable to estimate the cost of compliance at this time. The Americans with Disabilities Act generally requires that public accommodations, including hospitals and other health care facilities, be madeaccessible to disabled persons. Through December 31, 2011, we spent approximately $41 million on corrective work to improve disability access at ourfacilities, and we expect to spend approximately $88 million more on such improvements over the next four years pursuant to the terms of a negotiated consentdecree. Our properties are also subject to various federal, state and local environmental laws, rules and regulations, including with respect to asbestosabatement and the treatment of underground storage tanks, among other matters. We believe it is unlikely that the cost of complying with such laws, rules andregulations will have a material effect on our future capital expenditures, results of operations or competitive position. MEDICAL STAFF AND EMPLOYEES General. Our hospitals are staffed by licensed physicians who have been admitted to the medical staffs of individual hospitals. Under state lawsand other licensing standards, hospital medical staffs are generally self-governing organizations subject to ultimate oversight by the hospital’s local governingboard. Members of the medical staffs of our hospitals also often serve on the medical staffs of hospitals not owned by us. Members of our medical staffs arefree to terminate their affiliation with our hospitals or admit their patients to competing hospitals at any time. Although we operate some physician practicesand, where permitted by law, employ some physicians, the overwhelming majority of the physicians who practice at our hospitals are not our employees.However, nurses, therapists, lab technicians, facility maintenance workers and the administrative staffs of hospitals normally are our employees. We aresubject to federal minimum wage and hour laws and various state labor laws, and maintain a number of different employee benefit plans. Our operations depend on the efforts, abilities and experience of the physicians on the medical staffs of our hospitals, most of whom have nocontractual relationship with us. It is essential to our ongoing business that we attract and retain an appropriate number of quality physicians in all specialtieson our medical staffs. Although we had a net overall gain in physicians added to our medical staffs in each of the last three years, in some of our markets,physician recruitment and retention are still affected by a shortage of physicians in certain sought-after specialties and the difficulties that physiciansexperience in obtaining affordable malpractice insurance or finding insurers willing to provide such insurance. Other issues facing physicians, such asproposed decreases in Medicare payments, are causing them to consider alternatives, including leaving private practice for employed physician arrangements,relocating their practices or retiring sooner than expected. We continue to take steps to successfully attract and retain key employees, qualified physicians and other health care professionals. One of ourinitiatives is our Physician Relationship Program, which is centered on understanding the needs of physicians who admit patients both to our hospitals andto our competitors’ hospitals and responding to those needs with changes and improvements in our hospitals and operations. In general, the loss of some or allof our key employees or the 5Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents inability to attract or retain sufficient numbers of qualified physicians and other health care professionals could have a material adverse effect on patientvolumes and, thereby, our business, financial condition, results of operations or cash flows. The number of our employees (of which approximately 24% were part-time employees) at December 31, 2011 was as follows: Hospitals, outpatient centers and other related health care facilities(1)56,961Administrative offices744Total57,705 (1) Includes employees whose employment related to the operations of our general hospitals, critical access facility, long-term acute care hospital, ambulatorysurgery centers, diagnostic imaging centers, occupational and rural health care clinics, physician practices, Conifer collection agency subsidiary andother health care operations. At December 31, 2011, the largest concentrations of our employees (excluding employees in our administrative offices) were in those states where wehad the largest concentrations of licensed hospital beds, as shown in the table below: % of Employees% of Licensed BedsFlorida21.3%25.9%California20.6%17.4.%Texas16.5%19.5% Union Activity and Labor Relations. As of December 31, 2011, approximately 25% of our employees were represented by various labor unions.These employees — primarily registered nurses and service and maintenance workers — were located at 22 of our hospitals, the majority of which are inCalifornia and Florida. We are in the process of renegotiating the collective bargaining agreements for all of the facilities whose contracts have expired andnegotiating new contracts where employees chose union representation in 2011. At this time, we are unable to predict the outcome of the negotiations, butincreases in salaries, wages and benefits could result from these agreements. Moreover, there is a possibility that strikes could occur during the negotiationprocess, which could increase our labor costs and have an adverse effect on our patient admissions and net operating revenues. Organizing activities by laborunions and certain potential changes in federal labor laws and regulations could increase the likelihood of employee unionization in the future. Shortage of Experienced Nurses and Mandatory Nurse-Staffing Ratios. In addition to union activity, factors that adversely affect our labor costsinclude the nationwide shortage of experienced nurses and the enactment of state laws regarding nurse-staffing ratios. Like others in the health care industry,we continue to experience a shortage of experienced nurses in certain key specialties and geographic areas. In addition, state-mandated nurse-staffing ratios inCalifornia affect not only our labor costs, but, if we are unable to hire the necessary number of experienced nurses to meet the required ratios, they may alsocause us to limit patient admissions with a corresponding adverse effect on our net operating revenues. We continually monitor our nurse-staffing ratios inCalifornia in an effort to achieve full compliance with the state-mandated nurse-staffing ratios there. Nurse-staffing ratio legislation has been proposed in, butnot yet enacted by, Congress and other states besides California in which we operate hospitals, including Florida and Pennsylvania. In 2009, Texas passed theHospital Safe Staffing Law, which mandates the creation of nurse staffing committees at Texas hospitals and outlines each hospital’s responsibility to adopt,implement and enforce an official nurse staffing plan, but does not mandate staffing ratios. Also in 2009, the Missouri Department of Health and SeniorServices adopted hospital nursing services regulations that are similar to the Texas requirements with respect to nurse staffing. We cannot predict the degree to which we will be affected by the future availability or cost of nursing personnel, but we expect to continue toexperience salary, wage and benefit pressures created by the shortage of experienced nurses throughout the country and state-mandated nurse-staffing ratios,particularly in California. In response, we have increased our efforts to recruit and retain experienced nurses and also to address workforce development withlocal schools of nursing. We expect that 24 of our hospitals will participate in the Versant RN Residency Program in 2012 by providing an 18- to 22-weekresidency program for new nursing school graduates to help ease the transition from student to professional practicing nurse, give nurses evidence-basedexperience and skills needed to increase their competency and confidence, reduce first-year nurse turnover and decrease the use of contract labor. COMPETITION Health Care Services. In general, competition among health care providers occurs primarily at the local level. A hospital’s position within thegeographic area in which it operates is affected by a number of competitive factors, including, but 6TMSource: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents not limited to: (1) the scope, breadth and quality of services a hospital offers to its patients and physicians; (2) the number, quality and specialties of thephysicians who admit and refer patients to the hospital; (3) nurses and other health care professionals employed by the hospital or on the hospital’s staff;(4) the hospital’s reputation; (5) its managed care contracting relationships; (6) its location and the location and number of competitive facilities and otherhealth care alternatives; (7) the physical condition of the hospital’s buildings and improvements; (8) the quality, age and state-of-the-art of its medicalequipment; (9) its parking or proximity to public transportation; (10) the length of time it has been a part of the community; and (11) the charges for itsservices. Overall, our hospitals, outpatient centers and other health care businesses operate in competitive environments. Generally, other hospitals andoutpatient centers in the local communities we serve provide services similar to those we offer, and, in some cases, competing facilities are more establishedthan ours. We also face increased competition from specialty hospitals (some of which are physician-owned) and unaffiliated freestanding outpatient centersfor market share in high margin services and for quality physicians and personnel. Furthermore, some of the hospitals that compete with our hospitals areowned by government agencies or not-for-profit organizations. These tax-exempt competitors may have certain financial advantages not available to ourfacilities, such as endowments, charitable contributions, tax-exempt financing, and exemptions from sales, property and income taxes. In addition, in certainmarkets in which we operate, large teaching hospitals provide highly specialized facilities, equipment and services that may not be available at our hospitals. Another major factor in the competitive position of a hospital is the ability to negotiate service contracts with managed care plans. Our future successdepends, in part, on our ability to retain and renew our managed care contracts and enter into new managed care contracts on terms favorable to us. Otherhealth care providers may impact our ability to enter into acceptable managed care contractual arrangements or negotiate increases in our reimbursement andother favorable terms and conditions. For example, some of our competitors may negotiate exclusivity provisions with managed care plans or otherwise restrictthe ability of managed care companies to contract with us. Moreover, state laws that require findings of need for construction and expansion of health care facilities or services (as described in “Health CareRegulation and Licensing — Certificate of Need Requirements” below) may also have the effect of restricting competition. In addition, in those states that donot have certificate of need requirements or that do not require review of health care capital expenditure amounts below a relatively high threshold, competitionin the form of new services, facilities and capital spending is more prevalent. Our strategies are designed to help our hospitals remain competitive. Broadly speaking, we attract physicians by providing high-quality care to ourpatients and otherwise creating an environment within which physicians prefer to practice. One of our specific initiatives is our Physician RelationshipProgram, which is centered on understanding the needs of physicians who admit patients both to our hospitals and to our competitors’ hospitals andresponding to those needs with changes and improvements in our hospitals and operations. We have targeted capital spending in order to address specificneeds or growth opportunities of our hospitals, which is expected to have a positive impact on their volumes. We have also sought to include all of ourhospitals and an increased number of our affiliated physicians in the affected geographic area or nationally when negotiating new managed care contracts,which should result in additional volumes at facilities that were not previously a part of such managed care networks. In addition, we have completed clinicalservice line market demand analyses and profitability assessments to determine which services are highly valued that can be emphasized and marketed toimprove our operating results. This Targeted Growth Initiative (“TGI”) has resulted in some reductions in unprofitable service lines in several locations.However, the de-emphasis or elimination of certain unprofitable service lines as a result of our TGI analyses will allow us to focus more resources on servicesthat are in higher demand and are more profitable. We have also increased our focus on operating outpatient services with improved accessibility and moreconvenient service for patients, as well as increased predictability and efficiency for physicians. Our Commitment to Quality and Medicare Performance Improvement initiatives are further helping position us competitively. We continue towork with physicians to implement the most current evidence-based medicine techniques to improve the way we provide care, while using labor managementtools and supply chain initiatives to reduce variable costs. We believe the use of these practices will promote the most effective and efficient utilization ofresources and result in shorter lengths of stay, as well as reductions in redundant ancillary services and readmissions for hospitalized patients. As a result ofour efforts, our hospitals have improved substantially in quality metrics reported by the government and have been recognized by several managed carecompanies for their quality of care. Leveraging off of these initiatives, we expect to benefit over time from provisions in the Patient Protection and AffordableCare Act as amended by the Health Care and Education Reconciliation Act of 2010 (“Affordable Care Act”) that tie certain payments to quality measures,establish a value-based purchasing system, and adjust hospital payment rates based on hospital-acquired conditions and hospital readmissions. In general, webelieve that quality of care improvements may have the effect of reducing costs, increasing payments from Medicare and certain managed care payers for ourservices, and increasing physician and patient satisfaction, which may potentially improve our volumes. 7Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Further, each hospital has a local governing board, consisting primarily of community members and physicians, that develops short-term and long-term plans for the hospital to foster a desirable medical environment. Each local governing board also reviews and approves, as appropriate, actions of themedical staff, including staff appointments, credentialing, peer review and quality assurance. While physicians may terminate their association with ourhospitals at any time, we believe that by striving to maintain and improve the quality of care at our hospitals and by maintaining ethical and professionalstandards, we will attract and retain qualified physicians with a variety of specialties. Revenue Cycle Management Solutions. Our Conifer subsidiary faces competition from existing participants and new entrants to the revenue cyclemanagement market (including software vendors and other technology-supported revenue cycle management outsourcing companies, traditional consultantsand information technology outsourcers), as well as from the staffs of hospitals that handle these processes internally. To be successful, Conifer must respondmore quickly and effectively than its competitors to new or changing opportunities, technologies, standards, regulations or customer requirements. Moreover,existing or new competitors may introduce technologies or services that render Conifer’s technologies or services obsolete or less marketable. Even if Conifer’stechnologies and services are more effective than the offerings of its competitors, current or potential customers might prefer competitive technologies orservices to Conifer’s technologies and services. Furthermore, increased competition may result in pricing pressures, which could negatively impact Conifer’smargins, growth rate or market share. HEALTH CARE REGULATION AND LICENSING AFFORDABLE CARE ACT The Affordable Care Act, which was signed into law in March 2010, is expected to result in sweeping changes across the health care industry. Theprimary goal of this comprehensive legislation is to extend health coverage to approximately 32 million uninsured legal U.S. residents through a combination ofpublic program expansion and private sector health insurance reforms. To fund the expansion of insurance coverage, the legislation contains measuresdesigned to promote quality and cost efficiency in health care delivery and to generate budgetary savings in the Medicare and Medicaid programs. We areunable to predict with certainty the full impact of the Affordable Care Act on our future revenues and operations at this time due to the law’s complexity, thelimited amount of implementing regulations and interpretive guidance, gradual or potentially delayed implementation, the pending U.S. Supreme Court review,and possible amendment. However, we expect that several provisions of the Affordable Care Act, including those described below, will have a material effecton our business. Public Program Reforms. The Affordable Care Act expands eligibility under existing Medicaid programs to non-pregnant adults with incomes up to138% of the federal poverty level beginning in 2014. Further, the law permits states to create federally funded, non-Medicaid plans for low-income residents noteligible for Medicaid. However, the Affordable Care Act also contains a number of provisions designed to reduce Medicare and Medicaid program spending bysignificant amounts, including: · negative adjustments to the annual input price index, or “market basket,” updates for Medicare’s inpatient, outpatient, long-term acute andinpatient rehabilitation prospective payment systems, which began in 2010, as well as additional “productivity adjustments,” which began in2011; and · reductions to Medicare and Medicaid disproportionate share hospital payments beginning in 2013 as the number of uninsured individualsdeclines. Any reductions to our reimbursement under the Medicare and Medicaid programs by the Affordable Care Act could adversely affect our business and resultsof operations to the extent such reductions are not offset by increased revenues from providing care to previously uninsured individuals. In addition, the Affordable Care Act contains a number of provisions intended to improve the quality and efficiency of medical care provided toMedicare and Medicaid beneficiaries. For example, the legislation expands payment penalties based on a hospital’s rates of hospital-acquired conditions(“HACs”). Currently, Medicare no longer assigns an inpatient hospital discharge to a higher paying Medicare severity-adjusted diagnosis-related group if aselected HAC was not present on admission. Effective July 1, 2011, the Affordable Care Act likewise prohibits the use of federal funds under the Medicaidprogram to reimburse providers for medical assistance provided to treat HACs. Beginning in federal fiscal year (“FFY”) 2015, hospitals that fall into the top25% of national risk-adjusted HAC rates for all hospitals in the previous year will also receive a 1% reduction in Medicare payment rates. For dischargesoccurring during FFYs beginning on or after October 1, 2012, hospitals with excessive readmissions for certain conditions will receive reduced Medicarepayments for all inpatient admissions. 8Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Separately, under a Medicare value-based purchasing program that will be launched in FFY 2013, hospitals that satisfy certain performance standards willreceive increased payments for discharges during the following fiscal year. These payments will be funded by decreases in payments to all hospitals forinpatient services. For discharges occurring during FFY 2014 and after, the performance standards must assess hospital efficiency, including Medicarespending per beneficiary. In addition, the Affordable Care Act directed CMS to launch a national pilot program to study the use of bundled payments tohospitals, physicians and post-acute care providers relating to a single admission to promote collaboration and alignment on quality and efficiencyimprovement; implementation of the pilot program is currently ongoing through the newly established Center for Medicare and Medicaid Innovation withinCMS, which has the authority to develop and test new payment methodologies designed to improve quality of care and lower costs. The Affordable Care Act also contains provisions relating to recovery audit contractors (“RACs”), which are third-party organizations under contractwith CMS that identify underpayments and overpayments under the Medicare program and recoup any overpayments on behalf of the government. TheAffordable Care Act expanded the RAC program’s scope to include Medicaid claims by requiring all states to enter into contracts with RACs byDecember 31, 2010. Health Insurance Market Reforms. The Affordable Care Act contains provisions, which do not become effective until 2014, requiring individualsto obtain, and employers to provide, insurance coverage. In addition, the law requires states to establish a health insurance exchange. The Affordable Care Actalso establishes a number of health insurance market reforms, including bans on lifetime limits and pre-existing condition exclusions, new benefit mandates,and increased dependent coverage. Specifically, group health plans and health insurance issuers offering group or individual coverage (“Plans”): · may not establish lifetime limits or, beginning January 1, 2014, annual limits on the dollar value of benefits; · may not rescind coverage of an enrollee, except in instances where the individual has performed an act or practice that constitutes fraud ormakes an intentional misrepresentation of material fact; · must reimburse hospitals for emergency services provided to enrollees without prior authorization and without regard to whether a participatingprovider contract is in place; and · must continue to make dependent coverage available to unmarried dependents until age 26 (coverage for the dependents of unmarried adultchildren is not required) effective for health plan policy years beginning on or after September 23, 2010 (for Plans that offer dependentcoverage). It is not clear what impact, if any, the increased obligations on managed care payers and other payers imposed by the Affordable Care Act will have on ourcommercial managed care volumes and payment rates. The Affordable Care Act also contains a number of other additional provisions, including provisions relating to the Medicare and Medicaid anti-kickback and anti-fraud and abuse amendments, Section 1877 of the Social Security Act (commonly referred to as the “Stark” law), and qui tam or“whistleblower” actions, each of which is described in detail below, as well as provisions regarding: · the creation of an Independent Payment Advisory Board that will make recommendations to Congress regarding additional changes to providerpayments and other aspects of the nation’s health care system; and · new taxes on manufacturers and distributors of pharmaceuticals and medical devices used by our hospitals, as well as a requirement thatmanufacturers file annual reports of payments made to physicians. Many of the law’s provisions will not take effect for months or several years, while others became effective immediately or have become effectivemore recently. Many provisions also will require the federal government and individual state governments to interpret and implement the new requirements. Inaddition, the Affordable Care Act remains the subject of significant debate and efforts to repeal, block or amend the law by Congress and many statelegislatures. Finally, a number of state attorneys general and other parties have filed legal challenges to the Affordable Care Act seeking to block itsimplementation on constitutional grounds. Some federal court judges have issued rulings declaring all or key parts of the Affordable Care Act unconstitutional,including the mandate that individuals purchase insurance, while several other federal courts have upheld the law. In light of the disagreement among the lowerfederal courts, in November 2011, the U.S. Supreme Court agreed to review the law and issue a final ruling, which is expected in June 2012, on itsconstitutionality. The Court could uphold the law, strike down some or all or its provisions, or determine that a definitive decision is premature at this time. Because of the many variables involved, we are unable to predict with certainty the net effect on us of the reductions in Medicare and Medicaidspending, the expected increase in revenues and expected decrease in bad debt expense from providing 9Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents care to previously uninsured and underinsured individuals, and numerous other provisions in the law that may affect us. In addition, we are unable to predictthe future course of federal, state and local health care regulation or legislation, including Medicare and Medicaid statutes and regulations. Further changes inthe regulatory framework affecting health care providers could have a material adverse effect on our business, financial condition, results of operations or cashflows. ANTI-KICKBACK AND SELF-REFERRAL REGULATIONS Medicare and Medicaid anti-kickback and anti-fraud and abuse amendments codified under Section 1128B(b) of the Social Security Act (the “Anti-kickback Statute”) prohibit certain business practices and relationships that might affect the provision and cost of health care services payable under theMedicare and Medicaid programs and other government programs, including the payment or receipt of remuneration for the referral of patients whose care willbe paid for by such programs. The Affordable Care Act amended the Anti-kickback Statute to provide that knowledge of the law or the intent to violate the lawis not required. Sanctions for violating the Anti-kickback Statute include criminal and civil penalties, as well as fines and possible exclusion from governmentprograms, such as Medicare and Medicaid. In addition, under the Affordable Care Act, submission of a claim for services or items generated in violation ofthe Anti-kickback Statute constitutes a false or fraudulent claim and may be subject to additional penalties under the federal False Claims Act (“FCA”). Manystates have statutes similar to the federal Anti-kickback Statute, except that the state statutes usually apply to referrals for services reimbursed by all third-party payers, not just federal programs. In addition, it is a violation of the federal Civil Monetary Penalties Law to offer or transfer anything of value toMedicare or Medicaid beneficiaries that is likely to influence their decision to obtain covered goods or services from one provider or service over another. The federal government has also issued regulations that describe some of the conduct and business relationships that are permissible under the Anti-kickback Statute. These regulations are often referred to as the “Safe Harbor” regulations. The fact that certain conduct or a given business arrangement doesnot meet a Safe Harbor does not necessarily render the conduct or business arrangement illegal under the Anti-kickback Statute. Rather, such conduct andbusiness arrangements may be subject to increased scrutiny by government enforcement authorities and should be reviewed on a case-by-case basis. In addition to addressing other matters, as discussed below, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) alsoamended Title XI (42 U.S.C. Section 1301 et seq.) to broaden the scope of fraud and abuse laws to include all health plans, whether or not payments undersuch health plans are made pursuant to a federal program. The Stark law generally restricts referrals by physicians of Medicare or Medicaid patients to entities with which the physician or an immediatefamily member has a financial relationship, unless one of several exceptions applies. The referral prohibition applies to a number of statutorily defined“designated health services,” such as clinical laboratory, physical therapy, radiology, and inpatient and outpatient hospital services. The exceptions to thereferral prohibition cover a broad range of common financial relationships. These statutory, and the subsequent regulatory, exceptions are available to protectcertain permitted employment relationships, relocation arrangements, leases, group practice arrangements, medical directorships, and other commonrelationships between physicians and providers of designated health services, such as hospitals. A violation of the Stark law may result in a denial ofpayment, required refunds to patients and the Medicare program, civil monetary penalties of up to $15,000 for each violation, civil monetary penalties of upto $100,000 for “sham” arrangements, civil monetary penalties of up to $10,000 for each day that an entity fails to report required information, and exclusionfrom participation in the Medicare and Medicaid programs and other federal programs. In addition, the submission of a claim for services or items generatedin violation of the Stark law may constitute a false or fraudulent claim, and thus be subject to additional penalties under the FCA. Many states have adoptedself-referral statutes similar to the Stark Law, some of which extend beyond the related state Medicaid program to prohibit the payment or receipt ofremuneration for the referral of patients and physician self-referrals regardless of the source of the payment for the care. Our participation in and developmentof joint ventures and other financial relationships with physicians could be adversely affected by the Stark law and similar state enactments. The Affordable Care Act also made changes to the “whole hospital” exception in the Stark law, effectively preventing new physician-owned hospitalsafter March 23, 2010 and limiting the capacity and amount of physician ownership in existing physician-owned hospitals. As revised, the Stark law prohibitsphysicians from referring Medicare patients to a hospital in which they have an ownership or investment interest unless the hospital has physician ownershipand a Medicare provider agreement as of March 23, 2010 (or, for those hospitals under development at the time of the Affordable Care Act’s enactment, as ofDecember 31, 2010). A physician-owned hospital that meets these requirements will still be subject to restrictions that limit the hospital’s aggregate physicianownership and, with certain narrow exceptions for hospitals with a high percentage of Medicaid patients, prohibit expansion of the number of operating rooms,procedure rooms or beds. The legislation also subjects a physician-owned hospital to reporting requirements and extensive disclosure requirements on thehospital’s website and in any public advertisements. 10Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents In accordance with our ethics and compliance program, which is described in detail under “Compliance and Ethics” below, we have policies andprocedures in place concerning compliance with the Anti-kickback Statute and the Stark law, among others. In addition, our ethics and compliance, law andaudit services departments systematically review a substantial number of our arrangements with referral sources to determine the extent to which they complywith our policies and procedures and with the Anti-kickback Statute, the Stark law and similar state statutes. HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT Title II, Subtitle F of the Health Insurance Portability and Accountability Act mandates the adoption of specific standards for electronic transactionsand code sets that are used to transmit certain types of health information. HIPAA’s objective is to encourage efficiency and reduce the cost of operations withinthe health care industry. To protect the information transmitted using the mandated standards and the patient information used in the daily operations of acovered entity, HIPAA also sets forth federal rules protecting the privacy and security of protected health information (“PHI”). The privacy and securityregulations address the use and disclosure of individually identifiable health information and the rights of patients to understand and control how theirinformation is used and disclosed. The law provides both criminal and civil fines and penalties for covered entities that fail to comply with HIPAA. To receive reimbursement from CMS for electronic claims, health care providers must use HIPAA’s electronic data transmission (transaction andcode set) standards when transmitting certain health care information electronically. Our electronic data transmissions are compliant with current standards. InJanuary 2009, CMS published a final rule changing the formats used for certain electronic transactions and requiring the use of updated standard code setsfor certain diagnoses and procedures known as ICD-10 code sets. At this time, use of the ICD-10 code sets is not mandatory until October 1, 2013, and CMShas announced it is considering delaying that date. Nonetheless, we have begun modifying our payment systems and processes to prepare for ICD-10implementation. Although use of the ICD-10 code sets will require significant administrative changes, we believe that the cost of compliance with theseregulations has not had and is not expected to have a material adverse effect on our business, financial condition, results of operations or revenues. However,we may experience a short-term adverse impact on our cash flows due to claims processing delays related to payer implementation of the new code sets.Furthermore, the Affordable Care Act requires HHS to adopt standards for additional electronic transactions and to establish operating rules to promoteuniformity in the implementation of each standardized electronic transaction. All covered entities, including those we operate, are also required to comply with the privacy and security requirements of HIPAA. We are in materialcompliance with the privacy and security regulations. Further, all covered entities, including those we operate, have been assigned unique 10-digit numericidentifiers and otherwise currently comply with the National Provider Identifier requirements of HIPAA. We have developed a comprehensive set of policies and procedures in our efforts to comply with HIPAA, and similar state privacy laws, under theguidance of our ethics and compliance department. Hospital and Conifer compliance officers and information security officers are responsible forimplementing and monitoring compliance with our HIPAA privacy and security policies and procedures at our hospitals and Conifer. We have also created aninternal web-based HIPAA training program, which is mandatory for all employees. Based on existing regulations and our experience with HIPAA to this point,we continue to believe that the ongoing costs of complying with HIPAA will not have a material adverse effect on our business, financial condition, results ofoperations or cash flows. In May 2011, the Office for Civil Rights of the U.S. Department of Health and Human Services (“HHS”) proposed new regulations to implementchanges to the HIPAA requirements set forth in the Health Information Technology for Economic and Clinical Health (“HITECH”) Act that state that coveredentities and business associates must account for disclosures of PHI to carry out treatment, payment and health care operations if such disclosures are throughan electronic health record. The proposed regulations seek to expand the scope of the requirements under the HITECH Act and create a new patient right to an“access report,” which would be required to list every person who has accessed, for any reason, PHI about the individual contained in any electronicdesignated record set. Because our hospitals currently utilize multiple, independent modules that may meet the definition of “electronic designated record set,”our ability to produce an access report that satisfies the proposed regulatory requirements would likely require new technology solutions to map across thosemultiple record sets. It is our understanding that many providers have expressed significant concerns to CMS regarding the access report requirement createdby the proposed rule. Because we cannot predict the requirements of the final rule on this topic, we are unable to estimate the costs of compliance, if any, atthis time. 11Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents GOVERNMENT ENFORCEMENT EFFORTS AND QUI TAM LAWSUITS Both federal and state government agencies continue heightened and coordinated civil and criminal enforcement efforts against the health careindustry. The operational mission of the Office of Inspector General (“OIG”) of HHS is to protect the integrity of the Medicare and Medicaid programs and thewell-being of program beneficiaries by: detecting and preventing waste, fraud and abuse; identifying opportunities to improve program economy, efficiencyand effectiveness; and holding accountable those who do not meet program requirements or who violate federal laws. The OIG carries out its mission byconducting audits, evaluations and investigations and, when appropriate, imposing civil monetary penalties, assessments and administrative sanctions.Although we have extensive policies and procedures in place to facilitate compliance in all material respects with the laws, rules and regulations affecting thehealth care industry, if a determination is made that we were in material violation of such laws, rules or regulations, our business, financial condition, resultsof operations or cash flows could be materially adversely affected. Health care providers are also subject to qui tam or “whistleblower” lawsuits under the federal False Claims Act, which allows private individuals tobring actions on behalf of the government, alleging that a hospital or health care provider has defrauded a government program, such as Medicare or Medicaid.If the government intervenes in the action and prevails, the defendant may be required to pay three times the actual damages sustained by the government, plusmandatory civil penalties for each false claim submitted to the government. As part of the resolution of a qui tam case, the party filing the initial complaintmay share in a portion of any settlement or judgment. If the government does not intervene in the action, the qui tam plaintiff may continue to pursue the actionindependently. There are many potential bases for liability under the FCA. Liability often arises when an entity knowingly submits a false claim forreimbursement to the federal government. The FCA defines the term “knowingly” broadly. Though simple negligence will not give rise to liability under theFCA, submitting a claim with reckless disregard to its truth or falsity constitutes a “knowing” submission under the FCA and, therefore, will qualify forliability. The Fraud Enforcement and Recovery Act of 2009 expanded the scope of the FCA by, among other things, creating liability for knowingly andimproperly avoiding repayment of an overpayment received from the government and broadening protections for whistleblowers. Under the Affordable CareAct, the knowing failure to report and return an overpayment within 60 days of identifying the overpayment or by the date a corresponding cost report is due,whichever is later, constitutes a violation of the FCA. Further, the Affordable Care Act expands the scope of the FCA to cover payments in connection with thenew health insurance exchanges to be created by the legislation, if those payments include any federal funds. Qui tam actions can also be filed under certainstate false claims laws if the fraud involves Medicaid funds or funding from state and local agencies. Like other companies in the health care industry, we aresubject to qui tam actions from time to time; however, we are unable to predict the future impact of such actions on our business, financial condition, resultsof operations or cash flows. HEALTH CARE FACILITY LICENSING REQUIREMENTS In order to maintain their operating licenses, health care facilities must comply with strict governmental standards concerning medical care,equipment and cleanliness. Various licenses and permits also are required in order to dispense narcotics, operate pharmacies, handle radioactive materials andoperate certain equipment. Our health care facilities hold all required governmental approvals, licenses and permits material to the operation of their business. UTILIZATION REVIEW COMPLIANCE AND HOSPITAL GOVERNANCE In addition to certain statutory coverage limits and exclusions, federal laws and regulations, specifically the Medicare Conditions of Participation,generally require health care providers, including hospitals that furnish or order health care services that may be paid for under the Medicare program or statehealth care programs, to ensure that claims for reimbursement are for services or items that are (1) provided economically and only when, and to the extent,they are medically reasonable and necessary, (2) of a quality that meets professionally recognized standards of health care, and (3) supported by appropriateevidence of medical necessity and quality. The Social Security Act established the Utilization and Quality Control Peer Review Organization program, nowknown as the Quality Improvement Organization (“QIO”) program, to promote the effectiveness, efficiency, economy and quality of services delivered toMedicare beneficiaries and to ensure that those services are reasonable and necessary. CMS administers the QIO program through a network of QIOs thatwork with consumers, physicians, hospitals and other caregivers to refine care delivery systems to ensure patients receive the appropriate care at theappropriate time, particularly among underserved populations. The QIO program also safeguards the integrity of the Medicare trust fund by reviewingMedicare patient admissions, treatments and discharges, and ensuring payment is made only for medically necessary services, and investigates beneficiarycomplaints about quality of care. The QIOs have the authority to deny payment for services provided and recommend to HHS that a provider that is insubstantial noncompliance with certain standards be excluded from participating in the Medicare program. 12Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Medical and surgical services and practices are extensively supervised by committees of staff doctors at each of our health care facilities, are overseenby each facility’s local governing board, the members of which primarily are community members and physicians, and are reviewed by our clinical qualitypersonnel. The local hospital governing board also helps maintain standards for quality care, develop short-term and long-range plans, and establish, reviewand enforce practices and procedures, as well as approves the credentials, disciplining and, if necessary, the termination of privileges of medical staffmembers. CERTIFICATE OF NEED REQUIREMENTS Some states require state approval for construction, expansion and closure of health care facilities, including findings of need for additional orexpanded health care facilities or services. Certificates of need, which are issued by governmental agencies with jurisdiction over health care facilities, are attimes required for capital expenditures exceeding a prescribed amount, changes in bed capacity or services, and certain other matters. As ofDecember 31, 2011, we operated hospitals in seven states that require a form of state approval under certificate of need programs applicable to those hospitals.We are unable to predict whether we will be required or able to obtain any additional certificates of need in any jurisdiction where they are required, or if anyjurisdiction will eliminate or alter its certificate of need requirements in a manner that will increase competition and, thereby, affect our competitive position. Inthose states that do not have certificate of need requirements or that do not require review of health care capital expenditure amounts below a relatively highthreshold, competition in the form of new services, facilities and capital spending is more prevalent. ENVIRONMENTAL MATTERS Our health care operations are subject to a number of federal, state and local environmental laws, rules and regulations that govern, among otherthings, our disposal of solid waste, as well as our use, storage, transportation and disposal of hazardous and toxic materials (including radiological materials).Our operations also generate medical waste that must be disposed of in compliance with laws and regulations that vary from state to state. In addition,although we are not engaged in manufacturing or other activities that produce meaningful levels of greenhouse gas emissions, our operating expenses could beadversely affected if legal and regulatory developments related to climate change or other initiatives result in increased energy or other costs. We could also beaffected by climate change and other environmental issues to the extent such issues adversely affect the general economy or result in severe weather or climatechange events affecting the communities in which our facilities are located. At this time, based on current climate conditions and our assessment of existingand pending environmental rules and regulations, as well as treaties and international accords relating to climate change, we do not believe that the costs ofcomplying with environmental laws and regulations, including regulations relating to climate change issues, will have a material adverse effect on our futurecapital expenditures, results of operations or cash flows. Consistent with our commitment to meet the highest standards of corporate responsibility, we have formed a sustainability committee consisting ofcorporate and hospital leaders to regularly evaluate our environmental outcomes and share best practices among our hospitals and other facilities. In 2011, wepublished our first sustainability report, using the industry-standard Global Reporting Initiative framework. In addition, we are a sponsor of the HealthierHospitals Initiative and will work with each of our hospitals in adopting the initiative’s agenda, which focuses on improvements in (1) energy consumption,(2) waste, (3) safe chemicals and (4) purchasing. We are committed to report the results of our sustainability efforts on an annual basis. COMPLIANCE AND ETHICS General. Our ethics and compliance department maintains our multi-faceted, values-based ethics and compliance program, which is designed to(1) help staff in our corporate and Conifer offices, hospitals, outpatient centers and physician practices meet or exceed applicable standards established byfederal and state laws and regulations, as well as industry practice, and (2) monitor and raise awareness of ethical issues among employees and others, andstress the importance of understanding and complying with our Standards of Conduct. The ethics and compliance department operates with independence —it has its own operating budget; it has the authority to hire outside counsel, access any Tenet document and interview any of our personnel; and our chiefcompliance officer reports directly to the quality, compliance and ethics committee of our board of directors. Program Charter. Following the expiration of our five-year Corporate Integrity Agreement (the “CIA”) with the OIG on September 27, 2011, thequality, compliance and ethics committee of our board of directors approved an updated Quality, Compliance and Ethics Program Charter intended tocontinue certain of the safeguards implemented by the CIA and, among other things: 13Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents · support and maintain our present and future responsibilities with regard to participation in federal health care programs; and · further our goals of (1) fostering and maintaining the highest ethical standards among all employees, officers and directors, physicianspracticing at Tenet facilities and contractors that furnish health care items or services, and (2) valuing our compliance with all state and federallaws and regulations as a foundation of our corporate philosophy. The primary focus of our quality, compliance and ethics program is compliance with the requirements of Medicare, Medicaid and other federally fundedhealth care programs. Pursuant to the terms of the charter, our ethics and compliance department is responsible for the following activities: (1) annuallyassessing, critiquing and (as appropriate) drafting and distributing company policies and procedures; (2) developing, providing and tracking ethics trainingfor all employees, directors, contractors and agents; (3) developing, providing and tracking job-specific training to those who work in clinical quality, coding,billing, cost reporting and referral source arrangements; (4) developing, providing and tracking annual training on ethics and clinical quality oversight to themembers of each hospital governing board; (5) creating and disseminating the company’s Standards of Conduct and obtaining certifications of adherence tothe Standards of Conduct as a condition of employment; (6) maintaining and promoting Tenet’s Ethics Action Line, which allows confidential reporting ofissues on an anonymous basis and emphasizes Tenet’s no retaliation policy; (7) responding to and resolving all compliance-related issues that arise from theEthics Action Line and compliance reports received from our facilities, hospital compliance officers or any other source; (8) ensuring that appropriatecorrective and disciplinary actions are taken when non-compliant conduct or improper contractual relationships are identified; (9) monitoring and measuringthe Company’s adherence to all applicable Tenet policies and legal and regulatory requirements related to federal health care programs; (10) directing an annualscreening of individuals for exclusion from federal health care program participation as required by federal regulations; (11) maintaining a database of allarrangements involving the payment of anything of value between Tenet and any physician or other actual or potential source of health care business orreferrals to or from Tenet; and (12) overseeing annual audits of clinical quality, referral source arrangements, outliers, charging, coding, billing and othercompliance risk areas as may be identified from time to time. Standards of Conduct. All of our employees, including our chief executive officer, chief financial officer and principal accounting officer, arerequired to abide by our Standards of Conduct to advance our mission that our business be conducted in a legal and ethical manner. The members of ourboard of directors and many of our contractors are also required to abide by our Standards of Conduct. The standards reflect our basic values and form thefoundation of a comprehensive process that includes compliance with all corporate policies, procedures and practices. Our standards cover such areas asquality patient care, compliance with all applicable laws and regulations, appropriate use of our assets, protection of patient information and avoidance ofconflicts of interest. As part of the program, we provide annual training sessions to every employee, as well as our board of directors and certain physicians andcontractors. All employees are required to report incidents that they believe in good faith may be in violation of the Standards of Conduct, and are encouragedto contact our 24-hour toll-free Ethics Action Line when they have questions about the standards or any ethics concerns. All reports to the Ethics Action Lineare kept confidential to the extent allowed by law, and employees have the option to remain anonymous. Incidents of alleged financial improprieties reported tothe Ethics Action Line or the ethics and compliance department are communicated to the audit committee of our board of directors. Reported cases that involvea possible violation of the law or regulatory policies and procedures are referred to the ethics and compliance department for investigation. Retaliation againstemployees in connection with reporting ethical concerns is considered a serious violation of our Standards of Conduct, and, if it occurs, it will result indiscipline, up to and including termination of employment. Availability of Documents. The full text of our Quality, Compliance and Ethics Program Charter, our Standards of Conduct, and a number ofour ethics and compliance policies and procedures are published on our website, at www.tenethealth.com, under the “Ethics and Compliance” caption in the“About” section. A copy of our Standards of Conduct is also available upon written request to our corporate secretary. Information about how to contact ourcorporate secretary is set forth under “Company Information” below. Amendments to the Standards of Conduct and any grant of a waiver from a provision ofthe Standards of Conduct requiring disclosure under applicable Securities and Exchange Commission (“SEC”) rules will be disclosed at the same location asthe Standards of Conduct on our website. PROPERTY AND PROFESSIONAL AND GENERAL LIABILITY INSURANCE Property Insurance. We have property, business interruption and related insurance coverage to mitigate the financial impact of catastrophic eventsor perils that is subject to deductible provisions based on the terms of the policies. These policies 14Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents are on an occurrence basis. For the policy periods April 1, 2010 through March 31, 2011 and April 1, 2011 through March 31, 2012, we have coveragetotaling $600 million per occurrence, after deductibles and exclusions, with annual aggregate sub-limits of $100 million each for floods and earthquakes and aper-occurrence sub-limit of $100 million for windstorms with no annual aggregate. With respect to fires and other perils, excluding floods, earthquakes andwindstorms, the total $600 million limit of coverage per occurrence applies. Deductibles are 5% of insured values up to a maximum of $25 million for floods,California earthquakes and wind-related claims, and 2% of insured values for New Madrid fault earthquakes, with a maximum per claim deductible of$25 million. Other covered losses, including fires and other perils, have a minimum deductible of $1 million. Professional and General Liability Insurance. As is typical in the health care industry, we are subject to claims and lawsuits in the ordinarycourse of business. The health care industry has seen significant increases in the cost of professional liability insurance due to increased litigation. Inresponse, we formed and maintain captive insurance companies to self-insure a substantial portion of our professional and general liability risk. Claims inexcess of our self-insurance retentions are insured with commercial insurance companies. For the policy period June 1, 2010 through May 31, 2011, our hospitals generally have a self-insurance retention of $5 million per occurrence for allclaims incurred. Our captive insurance company, The Healthcare Insurance Corporation (“THINC”), retains $10 million per occurrence coverage above ourhospitals’ $5 million self-insurance retention level. The next $10 million of claims in excess of these aggregate self-insurance retentions of $15 million peroccurrence are 55% reinsured by THINC with independent reinsurance companies, with THINC retaining 45% or a maximum of $4.5 million. Claims inexcess of $25 million are covered by our excess professional and general liability insurance policies with major independent insurance companies, on aclaims-made basis, subject to an aggregate limit of $175 million. For the policy period June 1, 2011 through May 31, 2012, our hospitals generally have a self-insurance retention of $5 million per occurrence for allclaims incurred. THINC retains $10 million per occurrence coverage above our hospitals’ $5 million self-insurance retention level. The next $10 million ofclaims in excess of these aggregate self-insurance retentions of $15 million per occurrence are 65% reinsured by THINC with independent reinsurancecompanies, with THINC retaining 35% or a maximum of $3.5 million. Claims in excess of $25 million are covered by our excess professional and generalliability insurance policies with major independent insurance companies, on a claims-made basis, subject to an aggregate limit of $175 million. If the aggregate limit of any of our professional and general liability policies is exhausted, in whole or in part, it could deplete or reduce the limitsavailable to pay any other material claims applicable to that policy period. Any losses not covered by or in excess of the amounts maintained under insurancepolicies will be funded from our working capital. In addition to the reserves recorded by our captive insurance subsidiaries, we maintain reserves, including reserves for incurred but not reportedclaims, for our self-insured professional liability retentions and claims in excess of the policies’ aggregate limits, based on actuarial estimates of losses andrelated expenses. Also, we provide standby letters of credit to certain of our insurers, which can be drawn upon under certain circumstances, to collateralize thedeductible and self-insured retentions under a selected number of our professional and general liability insurance programs. EXECUTIVE OFFICERS Information about our executive officers, as of February 17, 2012, is as follows: NamePositionAgeTrevor FetterPresident and Chief Executive Officer52Britt T. ReynoldsPresident of Hospital Operations46Biggs C. PorterChief Financial Officer58Gary RuffSenior Vice President and General Counsel52Cathy FraserSenior Vice President, Human Resources47 Mr. Fetter was named Tenet’s president in November 2002 and was appointed chief executive officer and a director in September 2003. FromMarch 2000 to November 2002, Mr. Fetter was chairman and chief executive officer of Broadlane, Inc., a provider of cost management services to hospitalsthat was founded by Tenet and several other major health care providers. From October 1995 to February 2000, he served in several senior managementpositions at Tenet, including chief financial officer. Mr. Fetter began his career with Merrill Lynch Capital Markets, where he concentrated on corporate financeand advisory services for the entertainment and health care industries. In 1988, he joined Metro-Goldwyn-Mayer, Inc., where he had a broad range ofcorporate and operating responsibilities, rising to executive vice president and chief financial officer. Mr. Fetter 15Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents holds an M.B.A. from Harvard Business School and a bachelor’s degree in economics from Stanford University. He is a member of the board of directors ofThe Hartford Financial Services Group, Inc. and a member of The Business Roundtable. Mr. Fetter served as chair of the Federation of American Hospitalsfrom March 2009 to March 2010 and remains a trustee. Mr. Reynolds was appointed president of hospital operations in January 2012. From December 2008 through December 2011, he served as seniorvice president and division president of Health Management Associates, Inc. (“HMA”), overseeing HMA’s largest division, with 20 hospitals and relatedfacilities in seven states. Prior to joining HMA, Mr. Reynolds served as a multi-facility divisional vice president of Community Health Systems, Inc. fromDecember 2002 to December 2008, primarily in the northeast, midwest and southeast. Mr. Reynolds holds an M.B.A. from Baker University in BaldwinCity, Kansas, and a bachelor’s degree in psychology from the University of Louisville. He is a Fellow of the American College of Healthcare Executives(FACHE). Mr. Porter joined Tenet as chief financial officer in June 2006. From May 2003 until June 2006, he served as vice president and corporate controllerof Raytheon Company. In addition, Mr. Porter served as acting chief financial officer for Raytheon from April 2005 to March 2006. From December 2000 toMay 2003, he was senior vice president and corporate controller of TXU Corp. and, from August 1994 to December 2000, he was chief financial officer ofNorthrop Grumman Corporation’s integrated systems sector and its commercial aircraft division. Mr. Porter has also served as vice president, controller andassistant treasurer of Vought Aircraft Company, corporate manager of external financial reporting for LTV Corporation, and audit principal at ArthurYoung & Co. He is a certified public accountant. Mr. Porter holds a master’s degree in accounting from the University of Texas/Austin and a bachelor’s degreein accounting from Duke University. Mr. Ruff was appointed senior vice president and general counsel in July 2008. From 2003 until his promotion, he served as vice president andassistant general counsel for hospital operations. In addition, Mr. Ruff acted as the company’s interim general counsel from March 2008 to July 2008.Mr. Ruff joined Tenet in 1992 as associate counsel of the company’s former Gulf States region, which included 12 hospitals. Before joining Tenet, he was atax manager for Deloitte & Touche LLP. Mr. Ruff received his master’s degree in management from Northwestern University’s Kellogg School of Management,his master of laws degree in taxation from Georgetown University, his J.D. from Pepperdine University and his bachelor’s degree in accounting from GonzagaUniversity. Ms. Fraser joined Tenet as senior vice president, human resources, in September 2006. From June 2000 to September 2006, she served as amanagement consultant with McKinsey & Co. Inc., the international consulting firm. In that role, Ms. Fraser counseled senior executives at a number of largecompanies on organizational design, talent management and retention strategies, recruiting and related human resources topics. Prior to her work withMcKinsey, Ms. Fraser served as a vice president of Sabre Holdings Inc., a major provider of travel product distribution and technology solutions for the travelindustry, from 1994 to 2000. She has also worked for American Airlines and General Motors Acceptance Corp. Ms. Fraser holds an M.B.A. from theUniversity of Michigan and a bachelor’s degree in business administration from the University of Washington in Seattle. She is a board member of WorkforceSolutions of Greater Dallas and the JKU Foundation, a family non-profit foundation. Ms. Fraser also serves as a volunteer on various committees in the Cityof Coppell, Texas. COMPANY INFORMATION Tenet Healthcare Corporation was incorporated in the State of Nevada in 1975. We file annual, quarterly and current reports, proxy statements andother documents with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our reports, proxy statements and otherdocuments filed electronically with the SEC are available at the website maintained by the SEC at www.sec.gov. Our website, www.tenethealth.com, also offers, free of charge, access to our annual, quarterly and current reports (and amendments to such reports)and other filings made with, or furnished to, the SEC as soon as reasonably practicable after such documents are submitted to the SEC. The informationfound on our website is not part of this or any other report we file with or furnish to the SEC. Inquiries directed to our corporate secretary may be sent to Corporate Secretary, Tenet Healthcare Corporation, P.O. Box 139003, Dallas, Texas75313-9003 or by e-mail at CorporateSecretary@tenethealth.com. FORWARD-LOOKING STATEMENTS The information in this report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 andSection 21E of the Exchange Act, each as amended. All statements, other than statements of historical or present facts, that address activities, events,outcomes, business strategies and other matters that we plan, expect, 16Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents intend, assume, believe, budget, predict, forecast, project, estimate or anticipate (and other similar expressions) will, should or may occur in the future areforward-looking statements. These forward-looking statements represent management’s current belief, based on currently available information, as to theoutcome and timing of future events. They involve known and unknown risks, uncertainties and other factors — many of which we are unable to predict orcontrol — that may cause our actual results, performance or achievements, or health care industry results, to be materially different from those expressed orimplied by forward-looking statements. Such factors include, but are not limited to, the risks described in Item 1A, Risk Factors, of this report and thefollowing: · Our ability to identify and execute on measures designed to save or control costs or streamline operations; · Changes in our business strategies or development plans; · Technological and pharmaceutical improvements that increase the cost of providing, or reduce the demand for, health care services; · Various factors that may increase supply costs; · The soundness of our investments in marketable securities and other instruments; · Adverse fluctuations in interest rates and other risks related to interest rate swaps or any other hedging activities we undertake; · Our ability to integrate new businesses with our existing operations; · National, regional and local economic and business conditions; · Demographic changes; and · Other factors and risk factors referenced in this report and our other public filings. When considering forward-looking statements, a reader should keep in mind the risk factors and other cautionary statements in this report. Shouldone or more of the risks and uncertainties described above, in Item 1A, Risk Factors, below or elsewhere in this report occur, or should underlyingassumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. We specificallydisclaim any obligation to update any information contained in a forward-looking statement or any forward-looking statement in its entirety and, therefore,disclaim any resulting liability for potentially related damages. All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement. ITEM 1A. RISK FACTORS Our business is subject to a number of risks and uncertainties — many of which are beyond our control — that may cause our actual operatingresults or financial performance to be materially different from our expectations. If one or more of the events discussed in the following risks were to occur,actual outcomes could differ materially from those expressed in or implied by any forward-looking statements we make in this report or our other filings withthe SEC, and our business, financial condition, results of operations or liquidity could be materially adversely affected; furthermore, the trading price of ourcommon stock could decline and our shareholders could lose all or part of their investment. If we are unable to enter into and maintain managed care contractual arrangements on acceptable terms, if we experience materialreductions in the contracted rates we receive from managed care payers or if we have difficulty collecting from managed care payers, our resultsof operations could be adversely affected. We currently have thousands of managed care contracts with various health maintenance organizations and preferred provider organizations. Theamount of our managed care net patient revenues during the year ended December 31, 2011 was $5.2 billion, which represented approximately 57% of ourtotal net patient revenues before provision for doubtful accounts. Approximately 62% of our managed care net patient revenues for the year endedDecember 31, 2011 was derived from our top ten managed care payers. In the year ended December 31, 2011, our commercial managed care net inpatientrevenue per admission from our acute care hospitals was approximately 79% higher than our aggregate yield on a per admission basis from governmentpayers, including managed Medicare and Medicaid insurance plans. In addition, at December 31, 2011, approximately 55% of our net accounts receivablewere due from managed care payers. Our future success depends, in part, on our ability to retain and renew our managed care contracts and enter into new managed care contracts onterms favorable to us. Other health care providers may impact our ability to enter into acceptable 17Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents managed care contractual arrangements or negotiate increases in our reimbursement and other favorable terms and conditions. For example, some of ourcompetitors may negotiate exclusivity provisions with managed care plans or otherwise restrict the ability of managed care companies to contract with us.Furthermore, managed care payers are continuing to demand discounted fee structures, and the trend toward consolidation among these payers tends toincrease their bargaining power. In some cases, commercial managed care payers rely on all or portions of Medicare’s severity-adjusted diagnosis-related groupsystem to determine payment rates, which could result in decreased reimbursement from some of these payers if levels of payments to health care providers orpayment methodologies under the Medicare program are changed. Other changes to government health care programs, such as the increased obligations onmanaged care payers imposed by the Affordable Care Act, may negatively impact commercial managed care volumes and payment rates from managed carepayers. Any material reductions in the contracted rates we receive for our services, coupled with any difficulties in collecting receivables from managed carepayers, could have a material adverse effect on our financial condition, results of operations or cash flows. We cannot predict with certainty the effect that the Affordable Care Act may have on our business, financial condition, results ofoperations or cash flows. As enacted, the Affordable Care Act will change how health care services are covered, delivered and reimbursed. The expansion of health insurancecoverage under the law may result in a material increase in the number of patients using our facilities who have either private or public program coverage. Inaddition, a disproportionately large percentage of the new Medicaid coverage is likely to be in states that currently have relatively low income eligibilityrequirements. Two such states are Florida and Texas, where nearly half of our licensed beds are currently located. On the other hand, the Affordable Care Actprovides for significant reductions in the growth of Medicare spending and reductions in Medicare and Medicaid disproportionate share hospital payments. Asignificant portion of both our patient volumes and, as result, our revenues is derived from government health care programs, principally Medicare andMedicaid. Reductions to our reimbursement under the Medicare and Medicaid programs by the Affordable Care Act could adversely affect our business andresults of operations. We are unable to predict with certainty the full impact of the Affordable Care Act on our future revenues and operations at this time due to the law’scomplexity and the limited amount of implementing regulations and interpretive guidance, as well as our inability to foresee how individuals and businesseswill respond to the choices available to them under the law. Furthermore, many of the provisions of the Affordable Care Act that expand insurance coveragewill not become effective until 2014 or later. In addition, the Affordable Care Act will result in increased state legislative and regulatory changes in order forstates to comply with new federal mandates, such as the requirement to establish health insurance exchanges and to participate in grants and other incentiveopportunities, and we are unable to predict the timing and impact of such changes at this time. It is also possible that implementation of the Affordable CareAct could be delayed or even blocked due to court challenges and efforts to repeal or amend the law. In general, there is significant uncertainty with respect to the positive and negative effects the Affordable Care Act may have on reimbursement,utilization and the future designs of provider networks and insurance plans (including pricing, provider participation, coverage, co-pays and deductibles),and the multiple models that attempt to predict those effects may differ materially from our expectations. Further changes in the Medicare and Medicaid programs or other government health care programs could have an adverse effect on ourbusiness. For the year ended December 31, 2011, approximately 23% of our net patient revenues were related to the Medicare program, and approximately 9%of our net patient revenues were related to various state Medicaid programs, in each case excluding Medicare and Medicaid managed care programs. In additionto the changes affected by the Affordable Care Act, the Medicare and Medicaid programs are subject to: other statutory and regulatory changes, administrativerulings, interpretations and determinations concerning patient eligibility requirements, funding levels and the method of calculating payments orreimbursements, among other things; requirements for utilization review; and federal and state funding restrictions, all of which could materially increase ordecrease payments from these government programs in the future, as well as affect the cost of providing services to our patients and the timing of payments toour facilities, which could in turn adversely affect our overall business, financial condition, results of operations or cash flows. Any material adverse effectsresulting from future reductions in payments from government programs could be exacerbated if we are not able to manage our operating costs effectively. Moreover, the recent economic downturn has increased budget pressures on most states, and these budget pressures have resulted, and likely willcontinue to result, in decreased spending for Medicaid programs in many states. Most states began a new fiscal year on July 1, 2011 and, although mostaddressed projected shortfalls in their final budgets, some states are still facing budget gaps. Increased Medicaid enrollment due to the economic downturn,limits on the ability of states to reduce Medicaid eligibility criteria enacted as part of the Affordable Care Act, budget gaps and other factors could result infuture 18Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents reductions to Medicaid payments or additional taxes on hospitals. Some states are considering proposals that would result in such reductions. In general, we are unable to predict the effect of future government health care funding policy changes on our operations. If the rates paid bygovernmental payers are reduced, if the scope of services covered by governmental payers is limited or if we or one or more of our subsidiaries’ hospitals areexcluded from participation in the Medicare or Medicaid program or any other government health care program, there could be a material adverse effect on ourbusiness, financial condition, results of operations or cash flows. Our business continues to be adversely affected by a high volume of uninsured and underinsured patients, as well as declines incommercial managed care patients. Like other organizations in the health care industry, we continue to provide services to a high volume of uninsured patients and more patients than inprior years with increased burdens of co-payments and deductibles due to changes in their health care plans. As a result, we continue to experience a high levelof uncollectible accounts, and, unless our business mix shifts toward a greater number of insured patients as a result of the Affordable Care Act or otherwise,the trend of higher co-payments and deductibles reverses, or the economy improves and unemployment rates decline, we anticipate this high level ofuncollectible accounts to continue or increase. In addition, even after implementation of the Affordable Care Act, we may continue to experience bad debts andhave to provide uninsured discounts and charity care for undocumented aliens who are not permitted to enroll in a health insurance exchange or governmenthealth care program. Over the past several years, we have experienced declines in our commercial managed care volumes, which in the aggregate generate substantiallyhigher yields than Medicare and Medicaid volumes. The declines in our commercial managed care volumes are due, in part, to the related effects of higherunemployment and reductions in commercial managed care enrollment. In addition, we believe our commercial managed care volumes may have beenadversely impacted by the expiration of federal subsidies for those unemployed individuals and their family members who have been receiving subsidizedcontinued health insurance coverage under their former employers’ health plans. We operate in a competitive industry, and competition is one reason increases in patient volumes have been constrained. Overall, our hospitals, outpatient centers and other health care businesses operate in competitive environments, and we believe increases in patientvolumes have been constrained, in part, by competition for market share in high margin services and for quality physicians and personnel. Generally, otherhospitals and outpatient centers in the local communities we serve provide services similar to those we offer, and, in some cases, competing facilities are moreestablished than ours. We also face increased competition from specialty hospitals (some of which are physician-owned) and unaffiliated freestandingoutpatient centers. Furthermore, some of the hospitals that compete with our hospitals are owned by government agencies or not-for-profit organizations. Thesetax-exempt competitors may have certain financial advantages not available to our facilities, such as endowments, charitable contributions, tax-exemptfinancing, and exemptions from sales, property and income taxes. In addition, in certain markets in which we operate, large teaching hospitals provide highlyspecialized facilities, equipment and services that may not be available at our hospitals. If competing health care providers are better able to attract patients,recruit and retain physicians, expand services or obtain favorable managed care contracts at their facilities, our patient volume levels may suffer. If we are unable to recruit and retain an appropriate number of quality physicians on the medical staffs of our hospitals, our businessmay suffer. The success of our business depends in significant part on the number, quality and specialties of the physicians on the medical staffs of ourhospitals, the admitting practices of those physicians and maintaining good relations with those physicians. Although we operate some physician practicesand, where permitted by law, employ some physicians, physicians are often not employees of the hospitals at which they practice and, in many of themarkets we serve, most physicians have admitting privileges at other hospitals in addition to our hospitals. Such physicians may terminate their affiliationwith our hospitals or admit their patients to competing hospitals at any time. In some of our markets, physician recruitment and retention are affected by ashortage of physicians in certain sought-after specialties and the difficulties that physicians experience in obtaining affordable malpractice insurance or findinginsurers willing to provide such insurance. Other issues facing physicians, such as proposed decreases in Medicare payments, are causing them to consideralternatives, including leaving private practice for employed physician arrangements, relocating their practices or retiring sooner than expected. If we are unableto attract and retain sufficient numbers of quality physicians by providing adequate support personnel, technologically advanced equipment and hospitalfacilities that meet the needs of those physicians and their patients, physicians may be discouraged from referring patients to our facilities, admissions maydecrease and our operating performance may decline. 19Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Our labor costs could be adversely affected by competition for staffing, the shortage of experienced nurses and labor union activity. Our operations depend on the efforts, abilities and experience of our management and medical support personnel, including nurses, pharmacists andlab technicians, as well as our employed physicians. We compete with other health care providers in recruiting and retaining physicians and qualifiedmanagement responsible for the daily operations of our hospitals. In addition, like others in the health care industry, we continue to experience a shortage ofexperienced nurses in certain key specialties and geographic areas. As a result, from time to time, we may be required to enhance wages and benefits to recruitand retain experienced nurses or hire more expensive temporary or contract personnel. Furthermore, state-mandated nurse-staffing ratios in California affect notonly our labor costs, but, if we are unable to hire the necessary number of experienced nurses to meet the required ratios, they may also cause us to limitpatient admissions with a corresponding adverse effect on our net operating revenues. In general, our failure to recruit and retain qualified management,experienced nurses and other medical support personnel, or to control labor costs, could have a material adverse effect on our business, financial condition,results of operations or cash flows. Increased labor union activity is another factor that could adversely affect our labor costs. At December 31, 2011, approximately 25% of ouremployees were represented by various labor unions. These employees — primarily registered nurses and service and maintenance workers — were located at22 of our hospitals, the majority of which are in California and Florida. We are in the process of renegotiating the collective bargaining agreements for all of thefacilities whose contracts have expired and negotiating new contracts where employees chose union representation in 2011. At this time, we are unable to predictthe outcome of the negotiations, but increases in salaries, wages and benefits could result from these agreements. Moreover, there is a possibility that strikescould occur during the negotiation process, which could increase our labor costs and have an adverse effect on our patient admissions and net operatingrevenues. In addition, union organizing activities and certain potential changes in federal labor laws and regulations could increase the likelihood of employeeunionization in the future; to the extent a greater portion of our employee base unionizes, it is possible our labor costs could increase materially. Our licensed hospital beds are heavily concentrated in certain market areas in Florida, Texas and California, which makes us sensitive toeconomic, regulatory, environmental and other conditions in those areas. As of December 31, 2011, the largest concentrations of licensed beds in our general hospitals were in Florida (25.9%), Texas (19.5%) andCalifornia (17.4%). These concentrations increase the risk that, should any adverse economic, regulatory, environmental or other condition occur in theseareas, our overall business, financial condition, results of operations or cash flows could be materially adversely affected. Furthermore, a natural disaster or other catastrophic event could affect us more significantly than other companies with less geographicconcentration, and the property insurance we obtain may not be adequate to cover our losses. In the past, hurricanes have had a disruptive effect on theoperations of our hospitals in Florida and Texas and the patient populations in those states. Our California operations could be adversely affected by a majorearthquake or wildfires in that state. Our business and financial results could be harmed by violations of existing regulations or compliance with new or changed regulations. Our business is subject to extensive federal, state and local regulation relating to, among other things, licensure, conduct of operations, privacy ofpatient information, ownership of facilities, physician relationships, addition of facilities and services, and reimbursement rates for services. The laws,rules and regulations governing the health care industry are extremely complex and, in certain areas, the industry has little or no regulatory or judicialinterpretation for guidance. If a determination is made that we were in violation of such laws, rules or regulations, we could be subject to penalties or liabilitiesor required to make significant changes to our operations. Even a public announcement that we are being investigated for possible violations of these lawscould have a material adverse effect on our business, financial condition or results of operations, and our business reputation could suffer. Furthermore,health care, as one of the largest industries in the United States, continues to attract much legislative interest and public attention. We are unable to predict thefuture course of federal, state and local regulation or legislation, including Medicare and Medicaid statutes and regulations. Further changes in the regulatoryframework affecting health care providers could have a material adverse effect on our business, financial condition, results of operations or cash flows. We are also required to comply with various federal and state labor laws, rules and regulations governing a variety of workplace wage and hourissues. From time to time, we have been and expect to continue to be subject to regulatory proceedings and private litigation concerning our application of suchlaws, rules and regulations. 20Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents We could be subject to substantial uninsured liabilities or increased insurance costs as a result of significant legal actions. We are subject to medical malpractice lawsuits, class action lawsuits and other legal actions in the ordinary course of business. Some of these actionsmay involve large demands, as well as substantial defense costs. Even in states that have imposed caps on damages, litigants are seeking recoveries under newtheories of liability that might not be subject to such caps. Our professional and general liability insurance does not cover all claims against us, and it may notcontinue to be available at a reasonable cost for us to maintain at adequate levels, as the health care industry has seen significant increases in the cost of suchinsurance due to increased litigation. We cannot predict the outcome of current or future legal actions against us or the effect that judgments or settlements insuch matters may have on us or on our insurance costs. Additionally, all professional and general liability insurance we purchase is subject to policylimitations. If the aggregate limit of any of our professional and general liability policies is exhausted, in whole or in part, it could deplete or reduce the limitsavailable to pay any other material claims applicable to that policy period. Any losses not covered by or in excess of the amounts maintained under insurancepolicies will be funded from our working capital. Furthermore, one or more of our insurance carriers could become insolvent and unable to fulfill its or theirobligations to defend, pay or reimburse us when those obligations become due. In that case or if payments of claims exceed our estimates or are not covered byour insurance, it could have a material adverse effect on our business, financial condition, results of operations or cash flows. Our expectations for our business and future financial results could be adversely affected if our plans for our Conifer subsidiary are notrealized. We intend to continue expanding our revenue cycle management, health care information management, management services, and patientcommunications services businesses under our Conifer subsidiary by marketing these services to non-Tenet hospitals and other health care-related entities. Webelieve Conifer has the potential over time to generate high margins and improve our results of operations. However, the market for revenue cycle managementsolutions in particular is competitive. Our Conifer subsidiary faces competition from existing participants and new entrants to the revenue cycle managementmarket (including software vendors and other technology-supported revenue cycle management outsourcing companies, traditional consultants andinformation technology outsourcers), as well as from the staffs of hospitals that handle these processes internally. To be successful, Conifer must respondmore quickly and effectively than its competitors to new or changing opportunities, technologies, standards, regulations or customer requirements. Moreover,existing or new competitors may introduce technologies or services that render Conifer’s technologies or services obsolete or less marketable. Even if Conifer’stechnologies and services are more effective than the offerings of its competitors, current or potential customers might prefer competitive technologies orservices to Conifer’s technologies and services. Furthermore, increased competition may result in pricing pressures, which could negatively impact Conifer’smargins, growth rate or market share. If we cannot continue to expand and realize earnings contributions from the businesses under our Conifer subsidiary,our expectations for our overall business and future financial results could be adversely affected. Our business could be negatively impacted by security threats, catastrophic events and other disruptions affecting our informationtechnology and related systems. As a provider of health care services, we rely on our information technology in the day-to-day operation of our business to process, transmit andstore sensitive or confidential data, including electronic health records and other PHI of patients in our facilities, as well as to store our proprietary andconfidential business performance data. Our centralized information technology delivery model supports all of our hospitals, outpatient centers and otherhealth care businesses, including Conifer. We utilize a diversified data and voice network, along with technology systems for billing, supply chain, clinicalinformation systems and labor management. Although we have redundancies and other measures designed to protect the security and availability of the data weprocess, transmit and store, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error ormalfeasance. Furthermore, our network and technology systems may be subject to disruption due to events such as a major earthquake, fire,telecommunications failure, terrorist attack or other catastrophic event. Any such breach or system interruption could result in the unauthorized disclosure,misuse or loss of confidential, sensitive or proprietary information, could negatively impact our ability to conduct normal business operations, and couldresult in potential liability and damage to our reputation, any of which could have a material adverse effect on our business, financial position, results ofoperations or cash flows. The recent economic downturn and other economic factors have impacted, and may continue to impact, our business, financial conditionand results of operations. We continue to be impacted by a number of industry-wide challenges, including constrained growth in patient volumes and high levels of bad debt.We believe factors associated with the recent economic downturn — including higher levels of 21Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents unemployment, reductions in commercial managed care enrollment, and patient decisions to postpone or cancel elective and non-emergency health careprocedures — have impacted our volumes and affected our ability to collect outstanding receivables. If industry trends or general economic conditions worsen,we may not be able to sustain future profitability, and our liquidity and ability to repay our outstanding debt may be harmed. Furthermore, the availability of liquidity and credit to fund the continuation and expansion of many business operations worldwide has been limitedin recent years. Our ability to access the capital markets on acceptable terms may be severely restricted at a time when we would like, or need, to access thosemarkets, which could have a negative impact on our growth plans, our flexibility to react to changing economic and business conditions, and our ability torefinance existing debt. The economic downturn or other economic conditions could also adversely affect the counterparties to our agreements, including thelenders under our senior secured revolving credit facility, causing them to fail to meet their obligations to us. Trends affecting our actual or anticipated results may require us to record charges that would adversely affect our results of operations. As a result of factors that have negatively affected our industry generally and our business specifically, we have been required to record variouscharges in our results of operations. Our impairment tests presume stable, improving or, in some cases, declining results in our hospitals, which are based onprograms and initiatives being implemented that are designed to achieve the hospitals’ most recent projections. If these projections are not met, or if in thefuture negative trends occur that impact our future outlook, further impairments of long-lived assets and goodwill may occur, and we may incur additionalrestructuring charges. Future restructuring of our operating structure that changes our goodwill reporting units could also result in future impairments of ourgoodwill. Any such charges could adversely affect our results of operations. The amount and terms of our current and any future debt could, among other things, adversely affect our ability to raise additionalcapital to fund our operations and limit our ability to react to changes in the economy or our industry. As of December 31, 2011, we had approximately $4.3 billion of total long-term debt, as well as approximately $164 million in standby letters ofcredit outstanding under our senior secured revolving credit facility, which is collateralized by patient accounts receivable of all of our wholly owned acute careand specialty hospitals. From time to time, we expect to engage in additional capital markets, bank credit and other financing activities depending on our needsand financing alternatives available at that time. The terms and conditions in our credit agreement and the indentures governing our outstanding senior notes and senior secured notes, as well as ourpayment obligations under these agreements, could have important consequences to our business and to holders of our securities, including the following: · Our credit agreement and the indentures contain, and any future debt obligations may contain, covenants that, among other things, restrict ourability to pay dividends, incur additional debt and sell assets. Our credit agreement also requires us to maintain a financial ratio relating to ourability to satisfy certain fixed expenses, including interest payments. The indentures contain covenants that, among other things, restrict ourability and the ability of our subsidiaries to incur liens, consummate asset sales, enter into sale and lease-back transactions or consolidate,merge or sell all or substantially all of our or their assets. If we do not comply with these obligations, it may cause an event of default, which, ifnot cured or waived, could require us to repay the indebtedness immediately. · We may be more vulnerable in the event of a deterioration in our business, in the health care industry or in the economy generally, or if federalor state governments set further limitations on reimbursement under the Medicare or Medicaid programs. · We may be required to dedicate a substantial portion of our cash flow to the payment of principal and interest on our indebtedness, which couldreduce the amount of funds available for our operations, capital expenditures or acquisitions. We have the ability to incur additional indebtedness in the future, subject to the restrictions contained in our credit agreement and the indenturesgoverning our outstanding senior notes and senior secured notes. If new indebtedness is added to our current debt levels, the related risks that we now facecould intensify. 22Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents The utilization of our tax losses could be substantially limited if we experience an ownership change as defined in the Internal RevenueCode. Because of net operating losses we have experienced for federal income tax purposes, at December 31, 2011, we had federal net operating loss(“NOL”) carryforwards of approximately $1.8 billion pretax available to offset future taxable income. Our ability to utilize NOL carryforwards to reducefuture taxable income may be limited under Section 382 of the Internal Revenue Code if certain ownership changes in our Company occur during a rollingthree-year period. These ownership changes include the offering of stock by us, the purchase or sale of our stock by 5% shareholders, as defined in theTreasury regulations, or the issuance or exercise of rights to acquire our stock. If such ownership changes by 5% shareholders result in aggregate increasesthat exceed 50 percentage points during the three-year period, then Section 382 imposes an annual limitation on the amount of our taxable income that may beoffset by our NOL carryforwards or tax credit carryforwards at the time of ownership change. The limitation may affect the amount of our deferred income taxasset and, depending on the limitation, a significant portion of our NOL carryforwards or tax credit carryforwards could expire before we are able to use them.In such an event, our business, financial condition, results of operations or cash flows could be adversely affected. We believe that we have not experienced an ownership change under Section 382 of the Internal Revenue Code as of February 17, 2012; however, theamount by which our ownership may change in the future could be affected by purchases and sales of stock by 5% shareholders, the conversion of ouroutstanding mandatory convertible preferred stock and new issuances of stock by us, should we choose to do so. ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 2. PROPERTIES The disclosure required under this Item is included in Item 1, Business, of this report. ITEM 3. LEGAL PROCEEDINGS For information regarding material pending legal proceedings in which we are involved, see Note 15 to our Consolidated Financial Statements, whichis incorporated by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 23Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents PART II. ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIES Common Stock. Our common stock is listed on the New York Stock Exchange under the symbol “THC.” The following table sets forth, for theperiods indicated, the high and low sales prices per share of our common stock on the NYSE: HighLowYear Ended December 31, 2011First Quarter$7.55$6.57Second Quarter7.705.89Third Quarter6.544.02Fourth Quarter5.303.46Year Ended December 31, 2010First Quarter$6.46$4.92Second Quarter6.444.34Third Quarter4.783.92Fourth Quarter6.863.96 On February 17, 2012, the last reported sales price of our common stock on the NYSE composite tape was $5.66 per share. As of that date, therewere 11,835 holders of record of our common stock. Our transfer agent and registrar is Computershare. Shareholders with questions regarding their stockcertificates, including inquiries related to exchanging or replacing certificates or changing an address, should contact the transfer agent at (866) 229-8416. Cash Dividends on Common Stock. We have not paid cash dividends on our common stock since the first quarter of fiscal 1994, and we do notintend to pay cash dividends on our common stock in the foreseeable future. We currently intend to retain earnings, if any, for the future operation anddevelopment of our business. In addition, our senior secured revolving credit agreement contains provisions that limit or prohibit the payment of cashdividends on our common stock. Equity Compensation. Refer to Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, ofthis report for information regarding securities authorized for issuance under our equity compensation plans. Stock Performance Graph. The following graph shows the cumulative, five-year total return for our common stock compared to three indices, eachof which includes us. The Standard & Poor’s 500 Stock Index includes 500 companies representing all major industries. The Standard & Poor’s Health CareComposite Index is a group of 52 companies involved in a variety of healthcare-related businesses. Because the Standard & Poor’s Health Care CompositeIndex is heavily weighted by pharmaceutical and medical device companies, we believe that at times it may be less useful than the Hospital Management PeerGroup Index included below. We compiled this Peer Group Index by selecting publicly traded companies that have as their primary business the managementof acute care hospitals and that have been in business for all five of the years shown. These companies are: Community Health Systems, Inc. (CYH), HealthManagement Associates, Inc. (HMA), Tenet Healthcare Corporation (THC) and Universal Health Services, Inc. (UHS). 24Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Performance data assumes that $100.00 was invested on December 31, 2006 in our common stock and each of the indices. The data assumes thereinvestment of all cash dividends and the cash value of other distributions. Stock price performance shown in the graph is not necessarily indicative of futurestock price performance. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN Dec-06Dec-07Dec-08Dec-09Dec-10Dec-11 Tenet Healthcare Corporation$100.00$72.88$16.50$77.33$95.98$73.60S&P 500$100.00$105.49$66.46$84.05$96.71$98.75S&P Health Care$100.00$107.15$82.71$99.00$101.87$114.85Peer Group$100.00$77.47$33.22$85.26$106.01$77.15 Repurchase of Common Stock. On May 9, 2011, we announced that our board of directors had authorized the repurchase of up to $400 million ofour common stock through a share repurchase program. Under the program, shares could be purchased in the open market or through privately negotiatedtransactions in a manner consistent with applicable securities laws and regulations, including pursuant to a Rule 10b5-1 plan maintained by the Company, attimes and in amounts based on market conditions and other factors. The share repurchase program, which was scheduled to expire on May 9, 2012, wascompleted in January 2012. Pursuant to the program, we repurchased a total of 81,073,864 shares for approximately $400 million (or an average of $4.94 pershare). Purchases during the year ended December 31, 2011 are shown in the table in Note 2 to our Consolidated Financial Statements, which table isincorporated by reference. 25Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents ITEM 6. SELECTED FINANCIAL DATA OPERATING RESULTS The following tables present selected audited consolidated financial data for Tenet Healthcare Corporation and its wholly owned and majority-ownedsubsidiaries for the years ended December 31, 2007 through 2011: Years Ended December 31,20112010200920082007(In Millions, Except Per-Share Amounts)Net operating revenues:Net operating revenues before provision for doubtfulaccounts$9,584$9,205$9,014$8,585$8,083Less provision for doubtful accounts730738696627552Net operating revenues8,8548,4678,3187,9587,531Operating expenses:Salaries, wages and benefits4,0823,9003,8573,7793,617Supplies1,5821,5771,5691,5111,401Other operating expenses, net2,1001,9401,9101,9291,855Electronic health record incentives(55)————Depreciation and amortization413394386371336Impairment of long-lived assets and goodwill, andrestructuring charges, net2710271636Hurricane insurance recoveries, net of costs————(3)Litigation and investigation costs, net of insurancerecoveries5512314113Operating income650634538311276Interest expense(375)(424)(445)(418)(419)Gain (loss) from early extinguishment of debt(117)(57)97——Investment earnings35—2247Net gain on sales of investments——15139—Income (loss) from continuing operations, beforeincome taxes16115820554(96)Income tax benefit (expense)(61)977232561Income (loss) from continuing operations, beforediscontinued operations and cumulative effect ofchange in accounting principle$100$1,135$228$79$(35)Basic earnings (loss) per share attributable to TenetHealthcare Corporation common shareholdersfrom continuing operations$0.13$2.28$0.44$0.15$(0.08)Diluted earnings (loss) per share attributable toTenet Healthcare Corporation commonshareholders from continuing operations$0.13$2.01$0.43$0.15$(0.08) The operating results data presented above is not necessarily indicative of our future results of operations. Reasons for this include, but are notlimited to: overall revenue and cost trends, particularly the timing and magnitude of price changes; fluctuations in contractual allowances and cost report andcommercial contract settlements and valuation allowances; managed care contract negotiations, settlements or terminations and payer consolidations; changesin Medicare and Medicaid regulations; Medicaid funding levels set by the states in which we operate; the timing of approval by CMS of Medicaid provider feerevenue programs; trends in patient accounts receivable collectability and associated provisions for doubtful accounts; fluctuations in interest rates; levels ofmalpractice insurance expense and settlement trends; the timing of when we meet the criteria to recognize electronic health record incentives; impairment oflong-lived assets and goodwill; restructuring charges; losses, costs and insurance recoveries related to natural disasters; litigation and investigation costs;acquisitions and dispositions of facilities and other assets; income tax rates and deferred tax asset valuation allowance activity; changes in estimates ofaccruals for annual incentive compensation; the timing and amounts of stock option and restricted stock unit grants to employees and directors; gains orlosses from early extinguishment of debt; and changes in occupancy levels and patient volumes. Factors that affect patient volumes and, thereby, our resultsof operations at our hospitals and related health care facilities include, but are not limited to: the business environment, economic conditions and demographicsof local communities; the number of uninsured and 26Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents underinsured individuals in local communities treated at our hospitals; seasonal cycles of illness; climate and weather conditions; physician recruitment,retention and attrition; advances in technology and treatments that reduce length of stay; local health care competitors; managed care contract negotiations orterminations; any unfavorable publicity about us, which impacts our relationships with physicians and patients; changes in health care regulation; and thetiming of elective procedures. These considerations apply to year-to-year comparisons as well. BALANCE SHEET DATA December 31,20112010200920082007(In Millions)Working capital (current assets minus currentliabilities)$542$586$689$760$512Total assets8,4628,5007,9538,1748,393Long-term debt, net of current portion4,2943,9974,2724,7784,771Total equity1,4921,81969714788 CASH FLOW DATA Years Ended December 31,20112010200920082007(In Millions)Net cash provided by operating activities$497$472$425$208$326Net cash used in investing activities(503)(420)(125)(274)(520)Net cash provided by (used in) financing activities(286)(337)(117)1(18) ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION TO MANAGEMENT’S DISCUSSION AND ANALYSIS The purpose of this section, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), is to provide anarrative explanation of our financial statements that enables investors to better understand our business, to enhance our overall financial disclosures, toprovide the context within which our financial information may be analyzed, and to provide information about the quality of, and potential variability of, ourfinancial condition, results of operations and cash flows. Unless otherwise indicated, all financial and statistical information included herein relates to ourcontinuing operations, with dollar amounts expressed in millions (except per share, per admission, per patient day, per adjusted patient day and per visitamounts). MD&A, which should be read in conjunction with the accompanying Consolidated Financial Statements, includes the following sections: · Management Overview· Sources of Revenue· Results of Operations· Liquidity and Capital Resources· Off-Balance Sheet Arrangements· Recently Issued Accounting Standards· Critical Accounting Estimates MANAGEMENT OVERVIEW STRATEGY AND TRENDS We are committed to providing the communities our hospitals, outpatient centers and other health care facilities serve with high quality, cost-effectivehealth care while growing our business, increasing our profitability and creating long-term value for our shareholders. We believe that our success in increasingour profitability depends in part on our success in executing the strategies and managing the trends discussed below. 27Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Core Business Strategy—At December 31, 2011, our subsidiaries operated 50 hospitals, including four academic medical centers and a criticalaccess hospital, with a combined total of 13,453 licensed beds, serving primarily urban and suburban communities in 11 states. Our core business isfocused on providing acute care treatment, including inpatient care, intensive care, cardiac care, radiology services and emergency medical treatment, as wellas outpatient services. In supporting our core business, we seek to offer superior quality and patient services, to make capital and other investments in ourfacilities and technology to remain competitive, to recruit and retain physicians, and to negotiate favorable contracts with managed care and other commercialpayers. In addition, we continually review our clinical service lines to determine which services are most highly valued and should be marketed to improve ouroperating results, and we strategically de-emphasize or eliminate unprofitable service lines, if appropriate. Development Strategies—We continue to focus on opportunities to increase our outpatient revenues through organic growth and the acquisition ofselected outpatient businesses. During the year ended December 31, 2011, we derived approximately 31% of our revenues before provision for doubtfulaccounts from outpatient services. Historically, our outpatient business has generated significantly higher margins for us than other business lines. Byexpanding our outpatient business, we expect to increase our profitability over time. We also intend to focus on acquiring hospitals, services providers andother health care assets and companies in markets where we believe our operating strategies can improve performance and create shareholder value. We believethat this growth by strategic acquisitions, when and if opportunities are available, can supplement the growth we believe we can generate organically in ourexisting markets. Expanding Our Conifer Health Solutions Business—We intend to continue expanding our revenue cycle management, health care informationmanagement, management services, and patient communications services businesses under our Conifer Health Solutions (“Conifer”) subsidiary by marketingthese services to non-Tenet hospitals and other health care-related entities. At December 31, 2011, Conifer provided services to more than 300 Tenet and non-Tenet hospitals and other health care organizations. We believe this business has the potential over time to generate high margins and improve our results ofoperations. Commitment to Quality—Through our Commitment to Quality and Medicare Performance Improvement initiatives, we continually work withphysicians to implement the most current evidence-based medicine techniques to improve the way we provide care, while using labor management tools andsupply chain initiatives to reduce variable costs. We believe the use of these practices will promote the most effective and efficient utilization of resources andresult in shorter lengths of stay, as well as reductions in redundant ancillary services and readmissions for hospitalized patients. As a result of our efforts, ourhospitals have substantially improved in quality metrics reported by the government and have been recognized by several managed care companies for theirquality of care. Leveraging off of these initiatives, we expect to benefit over time from provisions in the Patient Protection and Affordable Care Act as amendedby the Health Care and Education Reconciliation Act of 2010 (“Affordable Care Act”) that tie certain payments to quality measures, establish a value-basedpurchasing system, and adjust hospital payment rates based on hospital-acquired conditions and hospital readmissions. In general, we believe that quality ofcare improvements may have the effect of reducing costs, increasing payments from Medicare and certain managed care payers for our services, andincreasing physician and patient satisfaction, which may potentially improve our volumes. Realizing HIT Incentive Payments and Other Benefits—During the year ended December 31, 2011, we achieved compliance with certain of thehealth information technology (“HIT”) requirements under the American Recovery and Reinvestment Act of 2009 (“ARRA”); as a result, we were able torecognize approximately $55 million of electronic health record incentives related to Medicaid ARRA HIT in 2011. These incentives, most of which werereceived by December 31, 2011, will partially offset the operating expenses we have incurred and continue to incur to invest in HIT systems. We alsoanticipate that we will be able to recognize Medicare and additional Medicaid ARRA HIT incentives in the year ending December 31, 2012. Furthermore, webelieve that the operational benefits of HIT, including improved clinical outcomes and increased operating efficiencies, will contribute to our long-term ability togrow our business. General Economic Conditions—We believe that high unemployment rates and other adverse economic conditions are continuing to have a negativeimpact on our bad debt expense levels and patient volumes. However, as the economy recovers, we expect to experience improvements in these metrics relativeto current levels. Improving Operating Leverage—We are experiencing a gradual increase in patient volumes that we believe is primarily attributable to our focus onphysician alignment and satisfaction, targeted capital spending on critical growth opportunities for our hospitals, emphasis on higher demand clinical servicelines (including outpatient lines), the implementation of new payer contracting strategies, and improved quality metrics at our hospitals. Increases in patientvolumes have been constrained by the slow pace of the current economic recovery, increased competition, utilization pressure by managed care organizations,the effects of higher patient co-pays and deductibles, and demographic trends. 28Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Impact of Affordable Care Act—We anticipate that we will benefit over time from the provisions of the Affordable Care Act that will extendinsurance coverage through Medicaid or private insurance to a broader segment of the U.S. population. Although we are unable to predict the precise impact ofthe Affordable Care Act on our future results of operations, and while there will be some reductions in reimbursement rates, which began in 2010, weanticipate, based on the current timetable for implementing the law, that we could begin to receive reimbursement for caring for uninsured and underinsuredpatients as early as 2014. We believe we are well-positioned relative to other health care companies to benefit from extended insurance coverage given theconcentration of our operations in California, Florida and Texas, which states historically have higher percentages of uninsured and underinsured patientscompared to the national average. Our ability to execute on these strategies and manage these trends is subject to a number of risks and uncertainties that may cause actual results to bematerially different from expectations. For information about these risks and uncertainties, see the Forward-Looking Statements and Risk Factors sections inPart I of this report. RESULTS OF OPERATIONS—OVERVIEW Our results of operations have been and continue to be influenced by industry-wide and company-specific challenges, including constrained volumegrowth, decreased demand for inpatient cardiac procedures and high levels of bad debt, that have affected our revenue growth and operating expenses. Webelieve our results of operations for our most recent fiscal quarter best reflect recent trends we are experiencing with respect to volumes, revenues and expenses;therefore, we have provided below information about these metrics for the three months ended December 31, 2011 and 2010 for all of our continuing operationshospitals. Three Months Ended December 31,Admissions, Patient Days and Surgeries20112010Increase(Decrease)Total admissions127,321126,9770.3%Paying admissions (excludes charity and uninsured)118,545118,583—%Charity and uninsured admissions8,7768,3944.6%Admissions through emergency department77,07574,6483.3%Paying admissions as a percentage of total admissions93.1%93.4%(0.3)%(1)Charity and uninsured admissions as a percentage of total admissions6.9%6.6%0.3%(1)Emergency department admissions as a percentage of total admissions60.5%58.8%1.7%(1)Surgeries — inpatient36,28437,448(3.1)%Surgeries — outpatient56,40752,4117.6%Total surgeries92,69189,8593.2%Patient days — total599,859608,890(1.5)%Adjusted patient days(2)917,798923,219(0.6)%Average length of stay (days)4.74.8(0.1)(1)Adjusted patient admissions(2)196,594194,0991.3% (1)The change is the difference between the amounts shown for the three months ended December 31, 2011 as compared to the three monthsended December 31, 2010.(2)Adjusted patient days/admissions represents actual patient days/admissions adjusted to include outpatient services by multiplying actualpatient days/admissions by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues. Total admissions increased by 344, or 0.3%, in the three months ended December 31, 2011 as compared to the same period in 2010. Three of ourfour regions reported admissions increases in the three months ended December 31, 2011 as compared to the three months ended December 31, 2010. Totalsurgeries increased by 3.2% in the three months ended December 31, 2011 as compared to the same period in 2010. While our emergency departmentadmissions increased 3.3% in the three months ended December 31, 2011 compared to the same period in the prior year, we believe the current economicconditions continue to have an adverse impact on the level of elective procedures performed at our hospitals, which constrained the overall change in our totaladmissions. 29Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Three Months Ended December 31,Outpatient Visits20112010Increase(Decrease)Total visits1,002,842999,8270.3%Paying visits (excludes charity and uninsured)901,821900,1820.2%Charity and uninsured visits101,02199,6451.4%Emergency department visits370,381359,1683.1%Surgery visits56,40752,4117.6%Paying visits as a percentage of total visits89.9%90.0%(0.1)%(1)Charity and uninsured visits as a percentage of total visits10.1%10.0%0.1%(1) (1)The change is the difference between the amounts shown for the three months ended December 31, 2011 as compared to the three months endedDecember 31, 2010. We had an increase of 3,015 total outpatient visits, or 0.3%, in the three months ended December 31, 2011 as compared to the three months endedDecember 31, 2010. Two of our four regions reported increased outpatient visits in the three months ended December 31, 2011, with the strongest improvementoccurring in our Southern States region. We had 554 flu-related visits in the three months ended December 31, 2011 compared to 1,618 flu-related visits inthe same period in 2010. Outpatient surgery visits increased by 7.6% in the three months ended December 31, 2011 as compared to the same period in 2010. Charity anduninsured outpatient visits increased by 1.4% in the three months ended December 31, 2011 compared to the three months ended December 31, 2010. Three Months Ended December 31,Revenues20112010Increase(Decrease)Net operating revenues$2,226$2,1115.4%Revenues from the uninsured$160$1543.9%Net inpatient revenues(1)$1,536$1,4774.0%Net outpatient revenues(1)$751$7302.9% (1)Net inpatient revenues and net outpatient revenues are components of net operating revenues. Net inpatient revenues include self-pay revenues of$73 million and $66 million for the three months ended December 31, 2011 and 2010, respectively. Net outpatient revenues include self-pay revenuesof $87 million and $88 million for the three months ended December 31, 2011 and 2010, respectively. Net operating revenues increased by $115 million, or 5.4%, for the three months ended December 31, 2011 as compared to the same period in 2010.Net operating revenues in the three months ended December 31, 2011 included a $14 million increase in Medicaid disproportionate share hospital (“DSH”)revenues and other state-funded subsidy payments in the 2011 period compared to the same period in 2010, primarily due to $28 million of net revenuesrelated to the California supplemental Medi-Cal payments program for the program period January 1, 2011 through June 30, 2011 that was approved by CMSduring the three months ended December 31, 2011. In addition to certain of the factors discussed above, net patient revenues increased by 3.6% in the three months ended December 31, 2011 ascompared to the same period in 2010 primarily as a result of managed care pricing improvement. Three Months Ended December 31,Revenues on a Per Admission, Per Patient Day and Per Visit Basis20112010Increase(Decrease)Net inpatient revenue per admission$12,064$11,6323.7%Net inpatient revenue per patient day$2,561$2,4265.6%Net outpatient revenue per visit$749$7302.6%Net patient revenue per adjusted patient admission(1)$11,633$11,3702.3%Net patient revenue per adjusted patient day(1)$2,492$2,3914.2% (1)Adjusted patient days/admissions represents actual patient days/admissions adjusted to include outpatient services by multiplying actualpatient days/admissions by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues. Inpatient unit revenue improvement was evident across all key metrics, primarily reflecting the improved terms of our managed care contracts in thethree months ended December 31, 2011 compared to the same period in 2010. The increase in net outpatient revenue per visit was primarily due to improvedterms of our managed care contracts, the 7.6% increase in outpatient surgery visits in the three months ended December 31, 2011 as compared to the sameperiod in 2010 and favorable cost report 30Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents adjustments in the 2011 period, partially offset by the impact of increased imaging visits, which typically have a lower associated per-visit revenue. Three Months Ended December 31,Provision for Doubtful Accounts20112010Increase(Decrease)Provision for doubtful accounts$185$190(2.6)%Provision for doubtful accounts as a percentage of net operating revenues before provisionfor doubtful accounts7.7%8.3%(0.6)%(1)Collection rate on self-pay accounts(2)27.8%28.3%(0.5)%(1)Collection rate on commercial managed care accounts98.2%98.4%(0.2)%(1) (1)The change is the difference between the amounts shown for the three months ended December 31, 2011 as compared to the three months endedDecember 31, 2010.(2)Self-pay accounts receivable are comprised of both uninsured and balance-after insurance receivables. Provision for doubtful accounts decreased by $5 million, or 2.6%, in the three months ended December 31, 2011 as compared to the same period in2010. The decrease in provision for doubtful accounts primarily related to the favorable impact from our quarterly collection rate update in the 2011 periodand the deterioration in the age of our managed care receivables in the three months ended December 31, 2010 that did not occur in the same period in 2011,partially offset by the impact of a 50 basis point decline in our collection rate on self-pay accounts. Our self-pay collection rate, which is the blended collectionrate for uninsured and balance-after insurance accounts receivable, declined to approximately 27.8% as of December 31, 2011 from 28.3% as ofDecember 31, 2010. Three Months Ended December 31,Selected Operating Expenses20112010Increase(Decrease)Salaries, wages and benefits$1,029$9676.4%Supplies391394(0.8)%Other operating expenses51746910.2%Total$1,937$1,8305.8%Rent/lease expense(1)$39$3511.4%Salaries, wages and benefits per adjusted patient day(2)$1,121$1,0477.1%Supplies per adjusted patient day(2)426427(0.2)%Other operating expenses per adjusted patient day(2)56350810.8%Total per adjusted patient day$2,110$1,9826.5% (1)Included in other operating expenses.(2)Adjusted patient days represent actual patient days adjusted to include outpatient services by multiplying actual patient days by the sum of grossinpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues. Total selected operating expenses, which is defined as salaries, wages and benefits, supplies and other operating expenses, increased by 6.5% on aper adjusted patient day basis in the three months ended December 31, 2011 compared to the three months ended December 31, 2010. Salaries, wages and benefits per adjusted patient day increased by 7.1% in the three months ended December 31, 2011 as compared to the sameperiod in 2010. This increase is primarily due to annual merit increases for our employees, an increase in the number of physicians we employ and higherhealth benefits costs. Supplies expense per adjusted patient day decreased by 0.2% in the three months ended December 31, 2011 compared to the three months endedDecember 31, 2010. Supplies expense was favorably impacted by a decline in orthopedic and cardiology-related costs due to renegotiated prices and lowervolume levels, partially offset by increased costs of surgical supplies. In general, supplies expense changes are primarily attributable to changes in our patientvolume levels and the mix of procedures performed. Other operating expenses per adjusted patient day increased by 10.8% in the three months ended December 31, 2011 as compared to the same periodin 2010. This change is primarily due to increased physician and medical fees, higher malpractice expense, increased costs of contracted services, andincreased physician relocation and income guarantee costs. Malpractice expense in the 2011 period includes approximately $1 million of expense due to aneight basis point decrease in the interest rate used to estimate the discounted present value of projected future malpractice liabilities compared to a $10 millionfavorable adjustment as a result of an 80 basis point increase in the interest rate in the 2010 period. 31Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Our estimated direct and allocated costs (based on selected operating expenses, which include salaries, wages and benefits, supplies and otheroperating expenses) of caring for uninsured patients were $108 million and $92 million in the three months ended December 31, 2011 and 2010, respectively. The table below shows the pre-tax and after-tax impact on continuing operations for the three months and years ended December 31, 2011 and 2010of the following items: Three Months EndedDecember 31Years EndedDecember 31,2011201020112010(Expense) IncomeImpairment of long-lived assets and goodwill, and restructuring charges$(9)$(9)$(27)$(10)Litigation and investigation costs(31)(6)(55)(12)Loss from early extinguishment of debt(117)(2)(117)(57)Pre-tax impact$(157)$(17)$(199)$(79)Deferred tax asset valuation allowance and other tax adjustments$(8)$23$8$1,043Total after-tax impact$(108)$9$(118)$993Diluted per-share impact of above items$(0.25)$0.02$(0.24)$1.78Diluted earnings per share, including above items$(0.15)$0.10$0.13$2.01 LIQUIDITY AND CAPITAL RESOURCES OVERVIEW Cash and cash equivalents were $113 million at December 31, 2011, a decrease of $72 million from $185 million at September 30, 2011. Significant cash flow items in the three months ended December 31, 2011 included: ·$24 million of collections related to state Medicaid electronic health record incentives under the HIT provisions of ARRA; ·Capital expenditures of $177 million; ·Preferred stock dividend payments of $6 million; ·Income tax payments of $19 million; ·Payments on reserves for restructuring charges and litigation costs of $17 million; ·Interest payments of $92 million; ·$28 million of payments to acquire various outpatient and physician practice businesses; ·$23 million of proceeds from the sale of seven medical office buildings in Texas; and ·$178 million of payments to repurchase common stock. Net cash provided by operating activities was $497 million in the year ended December 31, 2011 compared to $472 million in the year endedDecember 31, 2010. Key negative and positive factors contributing to the change between the 2011 and 2010 periods include the following: ·Increased income from continuing operations before income taxes of $95 million, excluding investment earnings, loss from earlyextinguishment of debt, interest expense, litigation and investigation costs, impairment and restructuring charges, and depreciation andamortization, in the year ended December 31, 2011 compared to the year ended December 31, 2010; ·Lower interest payments of $55 million; 32Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents ·$30 million of proceeds from the interest rate swap agreement we terminated in August 2011, which generated approximately $8 million of cashinterest savings and $22 million in proceeds from the termination of the agreement; ·Reduced cash flows associated with various changes in working capital and changes in long-term liabilities, including the following: ·a $13 million receivable as of December 31, 2011 that is expected to be collected in 2012 related to state Medicaid electronic health recordincentives under the HIT provisions of ARRA; ·a $16 million receivable recorded as of December 31, 2011 related to the California supplemental Medi-Cal payment program that wasapproved by CMS in the three months ended December 31, 2011, which resulted in the recognition of $28 million of net revenues in theperiod; ·a $6 million receivable recorded in the year ended December 31, 2011 related to the estimated recovery of the employer portion of certainpayroll taxes paid by us prior to April 2005 on behalf of medical residents that we expect will be refunded to us in 2012; and ·$77 million of reduced net cash flows in the 2011 period compared to the 2010 period related to accounts receivable primarily due topayment delays by certain government payers and a temporary delay in the adjudication of accounts receivable due to processing changeswe implemented to capture long-term operating efficiencies, partially offset by our management of liabilities; ·Income tax payments of $10 million in the year ended December 31, 2011 compared to income tax refunds of $34 million in the year endedDecember 31, 2010; ·Lower aggregate annual 401(k) matching contributions and annual incentive compensation payments of $20 million ($85 million in the yearended December 31, 2011 compared to $105 million in the year ended December 31, 2010); ·Lower payments on reserves for restructuring charges and litigation costs of $39 million; and ·$47 million of additional cash used in operating activities from discontinued operations (including approximately $13 million in paymentsrelating to the settlement of two class action lawsuits resulting from Hurricane Katrina). SOURCES OF REVENUE We receive revenues for patient services from a variety of sources, primarily managed care payers and the federal Medicare program, as well as stateMedicaid programs, indemnity-based health insurance companies and self-pay patients (that is, patients who do not have health insurance and are not coveredby some other form of third-party arrangement). The table below shows the sources of net patient revenues before provision for doubtful accounts for our general hospitals, expressed as percentagesof net patient revenues before provision for doubtful accounts from all sources: Years Ended December 31,Net Patient Revenues from:201120102009Medicare23.2%23.9%25.0%Medicaid9.0%8.7%8.1%Managed care57.0%56.5%56.1%Indemnity, self-pay and other10.8%10.9%10.8% 33Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Our payer mix on an admissions basis for our general hospitals, expressed as a percentage of total admissions from all sources, is shown below: Years Ended December 31,Admissions from:201120102009Medicare29.6%29.9%30.0%Medicaid12.9%13.0%12.3%Managed care47.7%47.6%48.5%Indemnity, self-pay and other9.8%9.5%9.2% GOVERNMENT PROGRAMS The Medicare program, the nation’s largest health insurance program, is administered by the Centers for Medicare and Medicaid Services (“CMS”)of the U.S. Department of Health and Human Services (“HHS”). Medicare is a health insurance program primarily for individuals 65 years of age and older,certain younger people with disabilities, and people with end-stage renal disease, and is provided without regard to income or assets. Medicaid is a programthat pays for medical assistance for certain individuals and families with low incomes and resources, and is jointly funded by the federal government andstate governments. Medicaid is the largest source of funding for medical and health-related services for the nation’s poor and most vulnerable individuals. As enacted, the Affordable Care Act will change how health care services under Medicare, Medicaid and other government programs are covered,delivered and reimbursed. Among other things, the Affordable Care Act expands eligibility under existing Medicaid programs to non-pregnant adults withincomes up to 138% of the federal poverty level beginning in 2014. Further, the law permits states to create federally funded, non-Medicaid plans for low-income residents not eligible for Medicaid. However, the Affordable Care Act also contains a number of provisions designed to significantly reduce Medicareand Medicaid program spending, including: (1) negative adjustments to the annual market basket updates for Medicare inpatient, outpatient, long-term acuteand inpatient rehabilitation prospective payment systems, which began in 2010, as well as additional “productivity adjustments” that began in 2011; and(2) reductions to Medicare and Medicaid disproportionate share hospital payments beginning in 2013 as the number of uninsured individuals declines. We areunable to predict with certainty the full impact of the Affordable Care Act on our future revenues and operations at this time due to the law’s complexity, thelimited amount of implementing regulations and interpretive guidance, gradual or potentially delayed implementation, the pending U.S. Supreme Court reviewand possible amendment. However, we expect that several provisions of the Affordable Care Act will have a material effect on our business. In addition to the changes affected by the Affordable Care Act, the Medicare and Medicaid programs are subject to statutory and regulatory changes,administrative and judicial rulings, interpretations and determinations, requirements for utilization review, and federal and state funding restrictions, all ofwhich could materially increase or decrease payments from these government programs in the future, as well as affect the cost of providing services to ourpatients and the timing of payments to our facilities. We are unable to predict the effect of future government health care funding policy changes on ouroperations. If the rates paid by governmental payers are reduced, if the scope of services covered by governmental payers is limited, or if we or one or more ofour subsidiaries’ hospitals are excluded from participation in the Medicare or Medicaid program or any other government health care program, there could be amaterial adverse effect on our business, financial condition, results of operations or cash flows. 34Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Medicare Medicare offers its beneficiaries different ways to obtain their medical benefits. One option, the Original Medicare Plan, is a fee-for-service paymentsystem. The other option, called Medicare Advantage (sometimes called “Part C” or “MA Plans”), includes health maintenance organizations (“HMOs”),preferred provider organizations (“PPOs”), private fee-for-service Medicare special needs plans and Medicare medical savings account plans. The majorcomponents of our net patient revenues for hospital services provided to patients enrolled in the Original Medicare Plan for the years ended December 31, 2011,2010 and 2009 are set forth in the table below: Years Ended December 31,Revenue Descriptions201120102009Medicare severity-adjusted diagnosis-related group — operating$1,147$1,171$1,191Medicare severity-adjusted diagnosis-related group — capital103106109Outliers465168Outpatient474453421Disproportionate share219215219Direct Graduate and Indirect Medical Education(1)110110111Other(2)725376Adjustments for prior-year cost reports and related valuation allowances(1)(15)10Total Medicare net patient revenues$2,170$2,144$2,205 (1)Includes Indirect Medical Education revenue earned by our children’s hospital under the Children’s Hospitals Graduate Medical Education PaymentProgram administered by the Health Resources and Services Administration of HHS.(2)The other revenue category includes one skilled nursing facility (which we sold in the three months ended June 30, 2009), inpatient psychiatric units,one inpatient rehabilitation hospital (which we closed in the three months ended March 31, 2009), inpatient rehabilitation units, one long-term acute carehospital, other revenue adjustments, and adjustments related to the estimates for current-year cost reports and related valuation allowances. A general description of the types of payments we receive for services provided to patients enrolled in the Original Medicare Plan is provided below.Recent regulatory and legislative updates to the terms of these payment systems and their estimated effect on our revenues can be found below under“Regulatory and Legislative Changes.” Acute Care Hospital Inpatient Prospective Payment System Medicare Severity-Adjusted Diagnosis-Related Group Payments—Sections 1886(d) and 1886(g) of the Social Security Act (the “Act”) set forth asystem of payments for the operating and capital costs of inpatient acute care hospital admissions based on a prospective payment system (“PPS”). Under theinpatient prospective payment system (“IPPS”), Medicare payments for hospital inpatient operating services are made at predetermined rates for each hospitaldischarge. Discharges are classified according to a system of Medicare severity-adjusted diagnosis-related groups (“MS-DRGs”), which categorize patientswith similar clinical characteristics that are expected to require similar amounts of hospital resources. CMS assigns to each MS-DRG a relative weight thatrepresents the average resources required to treat cases in that particular MS-DRG, relative to the average resources used to treat cases in all MS-DRGs. The base payment amount for the operating component of the MS-DRG payment is comprised of an average standardized amount that is divided intoa labor-related share and a nonlabor-related share. Both the labor-related share of operating base payments and the base payment amount for capital costs areadjusted for geographic variations in labor and capital costs, respectively. Using diagnosis and procedure information submitted by the hospital, CMSassigns to each discharge an MS-DRG, and the base payments are multiplied by the relative weight of the MS-DRG assigned. The MS-DRG operating andcapital base rates, relative weights and geographic adjustment factors are updated annually, with consideration given to: the increased cost of goods andservices purchased by hospitals; the relative costs associated with each MS-DRG; and changes in labor data by geographic area. Although these payments areadjusted for area labor and capital cost differentials, the adjustments do not take into consideration an individual hospital’s operating and capital costs. Outlier Payments— Outlier payments are additional payments made to hospitals on individual claims for treating Medicare patients whose medicalconditions are costlier to treat than those of the average patient in the same MS-DRG. To qualify for a cost outlier payment, a hospital’s billed charges,adjusted to cost, must exceed the payment rate for the MS-DRG by a fixed threshold established annually by CMS. A Medicare administrative contractor(“MAC”) calculates the cost of a claim by multiplying the billed charges by a cost-to-charge ratio that is typically based on the hospital’s most recently filedcost report. Generally, if the computed cost exceeds the sum of the MS-DRG payment plus the fixed threshold, the hospital receives 80% of the difference as anoutlier payment. 35Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Under the Act, CMS must project aggregate annual outlier payments to all PPS hospitals to be not less than 5% or more than 6% of total MS-DRGpayments (“Outlier Percentage”). The Outlier Percentage is determined by dividing total outlier payments by the sum of MS-DRG and outlier payments. CMSannually adjusts the fixed threshold to bring projected outlier payments within the mandated limit. A change to the fixed threshold affects total outlier paymentsby changing: (1) the number of cases that qualify for outlier payments; and (2) the dollar amount hospitals receive for those cases that still qualify for outlierpayments. Disproportionate Share Hospital Payments—In addition to making payments for services provided directly to beneficiaries, Medicare makesadditional payments to hospitals that treat a disproportionately high share of low-income patients. DSH payments are determined annually based on certainstatistical information defined by CMS and are calculated as a percentage add-on to the MS-DRG payments. During 2011, 42 of our hospitals in continuingoperations qualified for DSH payments. The primary method for a hospital to qualify for DSH payments is based on a complex statutory formula that resultsin a DSH percentage that is applied to payments based on MS-DRGs. The hospital-specific DSH percentage is equal to the sum of the percentage of Medicareinpatient days attributable to patients eligible for both the Traditional Medicare Plan (“Part A”) and Supplemental Security Income (“SSI”) percentage, and thepercentage of total inpatient days attributable to patients eligible for Medicaid but not Medicare Part A. Hospitals receive interim DSH payments that arereconciled in the annual cost report. CMS develops and distributes the hospital-specific SSI percentages, typically one year after the close of the federal fiscalyear (“FFY”); however, the release of the SSI percentages has been delayed in recent years as CMS continues to examine and refine the data. Historically, theSSI percentage included only patient days paid under Part A. However, the FFY 2007 SSI percentages CMS released in June 2009 reflect a policy change toinclude the Part C days in the ratio. The 2007 SSI percentages will be used to settle our 2007 cost reports. As a result, during the three months endedJune 30, 2009, we recorded an unfavorable adjustment of $23 million as our initial estimate of the impact of using the FFY 2007 SSI ratios. During the threemonths ended September 30, 2009, we learned that CMS had instructed the MACs to suspend the settlement of all cost reports (including ours) in which the2007 SSI percentages would be used. However, the MACs are authorized to use the 2007 SSI percentages for current DSH interim payments and tentativesettlements for post-2007 cost reporting periods pending the release of revised 2007 SSI percentages and the 2008 and subsequent SSI percentages. The costreport settlement suspension is still in effect, and we cannot predict with certainty when the suspension will be removed. CMS has not yet released the FFYs2008, 2009 and 2010 SSI ratios. According to the CMS website, revised FFYs 2007 and 2008 SSI ratios that will include the Part C data were to be posted onthe website in 2011; however, the website has not yet been updated. A 2011 U.S. Court of Appeals decision invalidated the inclusion of the Part C days in theSSI ratios for certain earlier periods; however, the proper treatment of the Part C days for periods after October 2004 remains unresolved. CMS has notindicated it intends to change its policy in this regard. As a result, in the three months ended June 30, 2010, we revised our estimate of the impact of using theFFY 2007 SSI ratios for the calculation of Medicare DSH payments for our non-teaching hospitals for 2007 and subsequent periods to reflect the inclusion ofthe estimated Part C days in the FFY 2007 SSI ratios, and we recorded an unfavorable adjustment to Medicare net revenue of $20 million ($14 million relatedto prior years and $6 million related to the year ended December 31, 2010). We intend to continue to pursue a reversal of CMS’ policy in this regard throughthe administrative and judicial appeal process; however, we cannot predict the outcome or timing of the appeals. The Medicare DSH statutes and regulations have been the subject of various administrative appeals and lawsuits, and our hospitals have beenincluded in these appeals for several years. These types of appeals generally take several years to resolve, in particular for multi-hospital organizations,because of CMS’ administrative appeal rules. The appeals have been further delayed due to CMS’ general moratorium on the release of information critical tocertain elements of these appeals. We cannot predict the timing or outcome of the DSH appeals for our hospitals, but a favorable outcome could have a materialimpact on our future revenues and cash flows. Direct Graduate and Indirect Medical Education Payments—The Medicare program provides additional reimbursement to approved teachinghospitals for additional expenses incurred by such institutions. This additional reimbursement, which is subject to certain limits, including intern andresident full-time equivalent (“FTE”) limits, is made in the form of Direct Graduate Medical Education (“DGME”) and Indirect Medical Education (“IME”)payments. During 2011, 13 of our hospitals in continuing operations were affiliated with academic institutions and were eligible to receive such payments.Medicare rules permit teaching hospitals to enter into Medicare Graduate Medical Education Affiliation Agreements for the purpose of applying the FTE limitson an aggregate basis, and some of our teaching hospitals have entered into such agreements. Hospital Outpatient Prospective Payment System Under the outpatient prospective payment system, hospital outpatient services, except for certain services that are reimbursed on a separate feeschedule, are classified into groups called ambulatory payment classifications (“APCs”). Services in each APC are similar clinically and in terms of theresources they require, and a payment rate is established for each APC. 36Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Depending on the services provided, hospitals may be paid for more than one APC for an encounter. CMS periodically updates the APCs and annually adjuststhe rates paid for each APC. Inpatient Psychiatric Facility Prospective Payment System The inpatient psychiatric facility prospective payment system (“IPF-PPS”) applies to psychiatric hospitals and psychiatric units located within acutecare hospitals that have been designated as exempt from the hospital inpatient prospective payment system. The IPF-PPS is based on prospectively determinedper-diem rates and includes an outlier policy that authorizes additional payments for extraordinarily costly cases. Inpatient Rehabilitation Prospective Payment System Rehabilitation hospitals and rehabilitation units in acute care hospitals meeting certain criteria established by CMS are eligible to be paid as aninpatient rehabilitation facility (“IRF”) under the IRF prospective payment system (“IRF-PPS”). Payments under the IRF-PPS are made on a per-dischargebasis. A patient classification system is used to assign patients in IRFs into case-mix groups. The IRF-PPS uses federal prospective payment rates acrossdistinct case-mix groups. To be paid under the IRF-PPS, each hospital or unit must demonstrate on an annual basis that at least 60% of its total population had either aprincipal or secondary diagnosis that fell within one or more of the qualifying conditions designated in the Medicare regulations governing IRFs. As ofDecember 31, 2011, all of our rehabilitation units were in compliance with the required 60% threshold. Physician Services Payment System Medicare pays for physician and other professional services based on a list of services and their payment rates, called the Medicare Physician FeeSchedule (“MPFS”). In determining payment rates for each service on the fee schedule, CMS considers the amount of work required to provide a service,expenses related to maintaining a practice, and liability insurance costs. The values given to these three types of resources are adjusted by variations in theinput prices in different markets, and then a total is multiplied by a standard dollar amount, called the fee schedule’s conversion factor, to arrive at thepayment amount. Medicare’s payment rates may be adjusted based on provider characteristics, additional geographic designations and other factors. Theconversion factor updates payments for physician services every year according to a formula called the sustainable growth rate (“SGR”) system. This formulais intended to keep spending growth (a function of service volume growth) consistent with growth in the national economy. However, in the last several years,Congress has specified an update outside of the SGR formula. Cost Reports The final determination of certain Medicare payments to our hospitals, such as DSH, DGME, IME and bad debt expense, are retrospectivelydetermined based on our hospitals’ cost reports. The final determination of these payments often takes many years to resolve because of audits by the programrepresentatives, providers’ rights of appeal, and the application of numerous technical reimbursement provisions. For filed cost reports, we adjust the accrual for estimated cost report settlements based on those cost reports and subsequent activity, and record avaluation allowance against those cost reports based on historical settlement trends. The accrual for estimated cost report settlements for periods for which acost report is yet to be filed is recorded based on estimates of what we expect to report on the filed cost reports and a corresponding valuation allowance isrecorded as previously described. Cost reports must generally be filed within five months after the end of the annual cost report reporting period. After the costreport is filed, the accrual and corresponding valuation allowance may need to be adjusted. Typically, the MACs settle cost reports within two years after theend of the cost reporting period; however, due to the aforementioned CMS suspension of issuing cost report settlements nationwide, our Medicare cost reportsfor periods ended on and after December 31, 2007 have not yet been settled. We cannot predict when CMS will remove the settlement suspension. 37Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Medicaid Medicaid programs and the corresponding reimbursement methodologies are administered by the states and vary from state to state and from year toyear. Estimated revenues under various state Medicaid programs, excluding state-funded managed care Medicaid programs, constituted approximately 9.0%,8.7% and 8.1% of net patient revenues at our continuing general hospitals for the years ended December 31, 2011, 2010 and 2009, respectively. We alsoreceive DSH payments under various state Medicaid programs. For the years ended December 31, 2011, 2010 and 2009, our revenues attributable to DSHpayments and other state-funded subsidy payments were approximately $260 million, $181 million and $171 million, respectively. Several states in which we operate have recently faced budgetary challenges that resulted in reduced Medicaid funding levels to hospitals and otherproviders. Because most states must operate with balanced budgets, and the Medicaid program is generally a significant portion of a state’s budget, states canbe expected to adopt or consider adopting future legislation designed to reduce their Medicaid expenditures. The economic downturn has increased budgetpressures on most states, and these budget pressures have resulted, and likely will continue to result, in decreased spending for Medicaid programs in manystates. Most states began a new fiscal year on July 1, 2011 and, although most addressed projected shortfalls in their final budgets, some states are still facingbudget gaps. Increased Medicaid enrollment due to the economic downturn, limits on the ability of states to reduce Medicaid eligibility criteria enacted as partof the Affordable Care Act, budget gaps and other factors could result in future reductions to Medicaid payments or additional taxes on hospitals. Some statesare considering proposals that would result in such reductions. As an alternative means of funding provider payments, several states in which we operate have adopted or are considering adopting broad-basedprovider taxes to fund the non-federal share of Medicaid programs. Some states, such as California and Pennsylvania, as described below, have introducedprovider fee arrangements, which are intended to enhance funding or partially mitigate reduced Medicaid funding levels to hospitals and other providers. Because we cannot predict what actions the federal government or the states may take under existing legislation and future legislation to addressbudget gaps or deficits, we are unable to assess the effect that any such legislation might have on our business, but the impact on our future financial position,results of operations or cash flows could be material. Medicaid-related patient revenues recognized by our continuing general hospitals from Medicaid-related programs in the states in which they arelocated, as well as from Medicaid programs in neighboring states, for the years ended December 31, 2011, 2010 and 2009 are set forth in the table below: Years Ended December 31,201120102009MedicaidManagedMedicaidMedicaidManagedMedicaidMedicaidManagedMedicaidCalifornia$221$127$137$111$125$99Florida184601945518256Pennsylvania911955316153157Georgia884087407341Texas641146610967107Missouri525816756South Carolina402261205217Alabama30—26—14—North Carolina23—26—27—Nebraska227246236Tennessee1030927930$825$600$764$535$700$519 In October 2009, the Governor of California signed legislation supported by the hospital industry to impose a provider fee on general acute carehospitals that, combined with federal matching funds, would be used to provide supplemental Medi-Cal payments to hospitals, as well as provide the statewith $320 million annually for children’s health care coverage, for the 21-month period retroactive to April 2009 and expiring on December 31, 2010 (the “21-Month Program”). On January 18, 2011, CMS issued the final required federal approval of the program, which allowed us to recognize $63 million ofadditional revenues, net of provider fees and other expenses, during the three months ended March 31, 2011. We made $5 million of our required paymentsand received approximately $59 million in additional supplemental proceeds during 2011 related to the 21-Month Program, and we received $9 million ofreceipts in excess of payments related to this program in 2010. 38Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents On April 13, 2011, the Governor of California signed legislation that created a fee program to provide supplemental Medi-Cal payments to hospitalsretroactive to January 1, 2011 and expiring on June 30, 2011 (the “Six-Month Program”). On December 30, 2011, CMS issued the final required federalapproval of the program, which allowed us to recognize $28 million of additional revenues, net of provider fees and other expenses, during the three monthsended December 31, 2011. We made $44 million of our required payments and received approximately $56 million in additional supplemental proceedsduring 2011 related to the Six-Month Program. On September 16, 2011, the Governor of California signed legislation, similar to the 21-Month and Six-Month Programs described above, thatcreated a fee program to provide supplemental Medi-Cal payments to hospitals retroactive to July 1, 2011 and expiring on December 31, 2013 (the “30-MonthProgram”). To date, CMS has not issued any approvals in connection with the 30-Month Program. Based on the most recent California Hospital Associationestimates, the 30-Month Program could result in approximately $210 million of net revenues for our California hospitals. We expect to record the additional netrevenues, net of provider fees and other expenses, ratably over 30 months (which will be calculated based on the program being retroactive to July 2011)beginning in the period CMS issues the required approvals of the 30-Month Program. We cannot provide any assurances regarding the final approval of the 30-Month Program by CMS or the timing or amount of the payments we may ultimately receive or be required to make. During the three months ended March 31, 2011, CMS issued final approval of Pennsylvania’s Medical Assistance payment system, whichincludes, among other things, a three-year provider fee program for the period July 1, 2010 through June 30, 2013. Net operating revenues in the year endedDecember 31, 2011 included approximately $39 million related to the program, of which the portion related to the year ended December 31, 2010 wasapproximately $13 million. Based on estimates prepared by the Hospital Association of Pennsylvania, this program is expected to result in approximately $24million of additional net revenues for our Pennsylvania hospitals in the state fiscal year 2012 (July 1, 2011-June 30, 2012). In March 2011, the State of Georgia adopted an amended budget for the state fiscal year ended June 30, 2011 that included additional funding forpayments to private hospitals from the Indigent Care Trust Fund (“ICTF”), the state’s disproportionate share program. During the six months ended June 30,2011, we received payments to our hospitals from the ICTF of approximately $13 million, of which $10 million was recognized in the three months endedMarch 31, 2011, and the portion related to 2010 was approximately $7 million. The Governor of Georgia has proposed an amended budget for the state fiscalyear ending June 30, 2012 that includes a provision to again fund the private hospital ICTF; however, the proposal must be approved by the state legislature.We cannot provide any assurances regarding the amount, if any, of ICTF payments we might receive for the current state fiscal year. Based on a recent audit of Missouri’s 2005-2007 Medicaid plan years, it was determined that excess DSH payments were made to hospitals and thatexcess payments were likely in 2011. Effective June 1, 2011, the State of Missouri Department of Social Services Medicaid Division implemented anemergency rule that allows it to recoup state fiscal year 2011 (July 2010 - June 2011) DSH payments from hospitals with DSH “longfalls” (i.e., payments inexcess of costs) and redistribute the funds to hospitals with DSH “shortfalls” (i.e., payments lower than costs). The state implemented this rule on anemergency basis as it allows the state to redistribute DSH payments to hospitals in accordance with CMS audit requirements. In September 2011, the stateissued notices of the estimated overpayments to the affected hospitals. Based on these notices, the estimated amount that we have to repay as a result of thisemergency rule is approximately $12 million. We are currently challenging the recoupment and redistribution; however, we cannot predict the outcome of suchaction. Accordingly, as of September 30, 2011, we recorded a liability of approximately $12 million for this matter. We were recently advised that collection ofthe liability has been placed in abeyance pending the outcome of our appeal. Regulatory and Legislative Changes Recent regulatory and legislative updates to the Medicare and Medicaid payment systems are provided below. Payment and Policy Changes to the Medicare Inpatient Prospective Payment System Under Medicare law, CMS is required annually to update certain rules governing the inpatient prospective payment system. The updates generallybecome effective October 1, the beginning of the federal fiscal year. On August 1, 2011, CMS issued the Changes to the Hospital Inpatient ProspectivePayment Systems for Acute Care Hospitals and Fiscal Year 2012 Rates (“Final Rule”). The Final Rule includes the following payment and policy changes: · A market basket increase of 3.0% for MS-DRG operating payments for hospitals reporting specified quality measure data (hospitals that do notreport specified quality measure data will receive an increase of 1.0%); CMS 39Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents also made certain adjustments to the estimated 3.0% market basket increase that will result in a net market basket update of 1.0%, including thefollowing adjustments to the market basket index: · Market basket index and productivity reductions required by the Affordable Care Act of 0.10% and 1.0%, respectively; · A reduction of 2.0% to permanently remove approximately one half of the estimated 3.9% documentation and coding adjustment resultingfrom the conversion to MS-DRGs; CMS did not indicate when it will remove the remaining 1.9%, however, CMS did indicate that it isfeasible that all or most of the adjustment could be made in FFY 2013; and · An increase of 1.1% to prospectively correct an error in the standardized rate related to the rural floor budget neutrality adjustment thatoccurred in prior years; · A 0.34% net increase in the capital federal MS-DRG rate; and · A decrease in the cost outlier threshold from $23,075 to $22,385. The Final Rule also adopts for FFY 2014 a measure relating to Medicare spending per beneficiary for both the Hospital Inpatient Quality ReportingProgram and the new Hospital Inpatient Value-Based Purchasing program required by the Affordable Care Act. The new measure will assess Part A and Part Bbeneficiary spending during a period of time that spans from three days prior to a hospital admission through 30 days after the patient is discharged. The goalis to encourage hospitals to provide high-quality care to Medicare beneficiaries at a lower cost and to promote greater efficiencies, including measures to reduceunnecessary hospital readmissions across patient care settings throughout the entire U.S. health care system. CMS projects that the combined impact of the payment and policy changes will yield an average 1.2% increase in payments for hospitals in largeurban areas (populations over one million). Using the impact percentages in the Final Rule as applied to our IPPS payments for the 12 months endedSeptember 30, 2011, the estimated annual impact for all changes in the Final Rule on our hospitals is an increase in our Medicare inpatient revenues ofapproximately $16 million. Because of the uncertainty associated with various factors that may influence our future IPPS payments by individual hospital,including admission volumes, length of stay and case mix, we cannot provide any assurances regarding this estimate. Payment Changes to the Medicare Inpatient Rehabilitation Facility Prospective Payment System On July 29, 2011, CMS issued a final rule that implements certain provisions of the Affordable Care Act and updates the prospective payment ratesfor the Medicare inpatient rehabilitation facility prospective payment system for FFY 2012 (“IRF-PPS Final Rule”). The IRF-PPS Final Rule, as subsequentlycorrected on September 26, 2011, includes the following payment changes: · A net payment increase for IRFs of 1.8%, which reflects a market basket index increase of 2.9%, reduced by a productivity adjustment of1.0% and an additional 0.1%, both as required by the Affordable Care Act, as well as other adjustments, including a budget neutralityreduction; and · A decrease in the outlier threshold for high cost outlier cases from $11,410 to $10,713. The IRF-PPS Final Rule also implements Section 3004 of the Affordable Care Act, which establishes a new quality reporting program that providesfor a 2% reduction in the annual IRF-PPS increase factor beginning in 2014 for IRFs that fail to report quality data. At December 31, 2011, eight of our general hospitals operated inpatient rehabilitation units. CMS projects that the payment changes in the IRF-PPSFinal Rule will result in an estimated total increase in aggregate IRF payments of 2.2%. This estimated increase includes an average 2.3% increase forrehabilitation units in hospitals located in urban areas for FFY 2012. Using the urban rehabilitation unit impact percentage as applied to our Medicare IRFpayments for the 12 months ended September 30, 2011, the annual impact of the payment changes in the IRF-PPS Final Rule may result in an estimatedincrease in our Medicare revenues of less than $1 million. Because of the uncertainty associated with various factors that may influence our future IRFpayments, including legislative action, admission volumes, length of stay and case mix, and the impact of compliance with IRF admission criteria, we cannotprovide any assurances regarding our estimate of the impact of these changes. 40Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Payment Changes to the Medicare Inpatient Psychiatric Facility Prospective Payment System On April 28, 2011, CMS issued a final rule updating the prospective payment rates for the Medicare inpatient psychiatric facility (“IPF”) PPS forthe rate year beginning July 1, 2011 (“IPF-PPS Final Rule”). The IPF-PPS Final Rule includes the following payment and policy changes: · A change to the IPF-PPS rate update period to a rate year that coincides with the FFY effective October 1, 2011 that will apply to dischargesbeginning July 1, 2011 through September 30, 2012; and · An update to IPF-PPS payments equal to the market basket of 3.2% for the 15-month rate year period minus a 0.25% reduction required by theAffordable Care Act and a 0.21% reduction due to an update of the fixed dollar loss threshold. At December 31, 2011, 11 of our general hospitals operated inpatient psychiatric units reimbursed under the IPF-PPS. CMS projects that thecombined impact of the payment and policy changes included in the IPF-PPS Final Rule will yield an average 2.74% increase in payments for all IPFs(including psychiatric units in acute care hospitals) and an average 2.43% increase in payments for psychiatric units of acute care hospitals located in urbanareas for the 15-month rate period beginning July 1, 2011. Using the urban psychiatric unit impact percentage as applied to our IPF-PPS payments for the 12months ended June 30, 2011, the annual impact of all payment and policy changes in the IPF-PPS Final Rule on our IPF-PPS psychiatric units may result inan estimated increase in our Medicare revenues of approximately $1 million. Because of the uncertainty associated with various factors that may influence ourfuture IPF-PPS payments, including legislative action, admission volumes, length of stay and case mix, we cannot provide any assurances regarding ourestimate of the impact of the aforementioned changes. Payment and Policy Changes to the Medicare Outpatient Prospective Payment System On November 1, 2011, CMS released the Final Changes to the Hospital Outpatient Prospective Payment System (“OPPS”) and Calendar Year(“CY”) 2012 Payment Rates (“Final OPPS Rule”). The Final OPPS Rule includes the following payment and policy changes: · A net update to OPPS payments equal to the estimated market basket of 1.9%, which takes into account a projected hospital OPPS marketbasket percentage increase of 3.0%, minus an estimated productivity adjustment of 1.0% and a 0.1% adjustment, both of which are necessary tocomply with certain provisions of the Affordable Care Act; · A budget neutrality reduction of 0.2% in payments for non-cancer OPPS hospitals to fund an increase in OPPS payments to cancer hospitalsmandated under the Affordable Care Act; and · The addition of three quality measures to the current list of 23 outpatient measures that hospitals would have to report for determining CY 2014payments. CMS projects that the combined impact of the payment and policy changes in the Final OPPS Rule will yield an average 1.9% increase in paymentsfor all hospitals and an average 2.0% increase in payments for hospitals in large urban areas (populations over one million). According to CMS’ estimates, theprojected annual impact of the payment and policy changes in the final OPPS Rule on our hospitals is an $8 million increase in our Medicare outpatientrevenues. Because of the uncertainty associated with various factors that may influence our future OPPS payments by individual hospital, including patientvolumes and case mix, we cannot provide any assurances regarding this estimate. Changes to the Medicare Physician Fee Schedule On November 1, 2011, CMS issued the CY 2012 Medicare Physician Fee Schedule final rule (“MPFS Final Rule”) detailing Medicare physicianpayment policies for 2012. The rule confirmed that, unless Congress intervened, Medicare’s physician payments were scheduled to decrease in January 2012by 27.4%. On January 4, 2012, the President signed the Temporary Payroll Tax Cut Continuation Act into law, which prevented the scheduled 27.4% cut inMedicare physician payments from being implemented on January 1, 2012 and extended the CY 2011 rates through February 29, 2012. In February 2012,the President signed the Middle Class Tax Relief and Job Creation Act of 2012 (the “Job Creation Act”) into law, which further extended the CY 2011 ratesthrough December 31, 2012. Because the legislation does not change the underlying formula for calculating rates, it is projected that physician rates will bereduced by more than 30% on January 1, 2013 unless additional legislation is enacted. 41Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Affordable Care Act As enacted, the Affordable Care Act will change how health care services are covered, delivered and reimbursed through expanded coverage ofuninsured individuals, reduced growth and other reductions in Medicare program spending, and the establishment of programs where reimbursement is tied toquality and integration. In addition, the law reforms certain aspects of health insurance, expands existing efforts to tie Medicare and Medicaid payments toperformance and quality, and contains provisions intended to strengthen fraud and abuse enforcement. The expansion of health insurance coverage under theAffordable Care Act may result in a material increase in the number of patients using our facilities who have either private or public program coverage. Inaddition, a disproportionately large percentage of the new Medicaid coverage is likely to be in states that currently have relatively low income eligibilityrequirements. Two such states are Florida and Texas, where nearly half of our licensed beds are currently located. On the other hand, the Affordable Care Actprovides for significant reductions in Medicare market basket updates and reductions in Medicare and Medicaid DSH payments. Given that approximately32.2% of our net patient revenues in 2011 were from Medicare and Medicaid, reductions to these programs may significantly impact us and could offset anypositive effects of the Affordable Care Act. We are unable to predict the full impact of the Affordable Care Act on our future revenues and operations at this time due to the law’s complexity andthe limited amount of implementing regulations and interpretive guidance, as well as our inability to foresee how individuals and businesses will respond to thechoices available to them under the law. Furthermore, many of the provisions of the Affordable Care Act that expand insurance coverage will not becomeeffective until 2014 or later. In addition, the Affordable Care Act will result in increased state legislative and regulatory changes in order for states to complywith new federal mandates, such as the requirement to establish health insurance exchanges and to participate in grants and other incentive opportunities, andwe are unable to predict the timing and impact of such changes at this time. It is also possible that implementation of the Affordable Care Act could be delayedor even blocked due to court challenges and efforts to repeal or amend the law. Because of the many variables involved, we are unable to predict with certainty the net effect on us of (1) the expected increases in volumes andrevenues and decrease in bad debt expense from providing care to previously uninsured and underinsured individuals, (2) the reductions in Medicarespending, (3) the reductions in Medicare and Medicaid DSH funding, and (4) numerous other provisions in the Affordable Care Act legislation that may affectus. The American Recovery and Reinvestment Act of 2009 The American Recovery and Reinvestment Act of 2009 was enacted to stimulate the U.S. economy. The law created federal tax incentives, expandedunemployment benefits and other social welfare provisions, and increased domestic spending on education, infrastructure and health care, including $31billion in new spending on health information technology, most of which is for incentive Medicare and Medicaid payments to physicians and hospitals. ARRArequires that hospitals and physicians become “meaningful users” of electronic health records (“EHRs”) and submit quality data as a condition of receivingthe incentive payments, which began in 2011. On July 13, 2010, CMS issued two final rules related to the adoption and dissemination of EHRs. One of therules defines the “meaningful use” requirements that hospitals and other providers must meet to qualify for federal incentive payments for adopting EHRsunder ARRA, and the other final rule describes the technical capabilities required for certified EHR technology. The Medicaid Electronic Health Record Incentive Program provides incentive payments to eligible hospitals, physicians and certain otherprofessionals (“Providers”) as they adopt, implement, upgrade or demonstrate meaningful use of certified EHR technology in their first year of participationand demonstrate meaningful use for up to five remaining participation years. Medicaid EHR incentive payments to Providers are 100% federally funded;however, the Medicaid EHR incentive program is voluntarily offered by individual states. As of December 31, 2011, all but one state (Nebraska) in which weoperate had received the required CMS approval of their Medicaid EHR plans. If we are able to achieve full compliance at all of our hospitals by 2013, we could receive approximately $345 million in total estimated combinedMedicare and Medicaid hospital EHR incentive payments. However, based on the timeframe we anticipate it will take for us to achieve full compliance with theHIT requirements, it is unlikely that we will be able to realize the maximum amount of incentive payments of $345 million. We will be required to makeinvestments in HIT through 2014 in excess of $600 million ($255 million of which had already been invested as of December 31, 2011) compared toapproximately $320 million of Medicare and Medicaid EHR incentive payments, some of which we were able to recognize in 2011, as described below. TheMedicare incentive payments to individual hospitals are made over a four-year, front-weighted transition period. The Medicaid incentive payments, which areadministered by the states, are subject to more flexible payment and compliance standards than Medicare incentive payments; hospitals that achievecompliance between 2014 and 2015 will receive reduced incentive payments during the transition period. We anticipate that, in addition to the expenditures weincur to qualify 42Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents for these incentive payments, our operating expenses have increased and will increase in the future as a result of these information system investments. Muchor all of these expenditures may have been made by us as a part of our clinical systems enhancements, but would not have been incurred in the timeline tocomply with the incentive payment requirements of ARRA. However, we anticipate there will be other operational benefits that we can realize as a result of theseHIT enhancements that are not included in the above amounts. Hospitals that fail to become meaningful users of EHRs or fail to submit quality data by 2015will be subject to penalties in the form of a reduction to Medicare payments. This reduction, which will be based on the market basket update, will be phasedin over three years and will continue until a hospital achieves compliance. Using an estimated market basket of 2.9% and our annual Medicare inpatient netrevenues for the year ended December 31, 2011, should all of our hospitals fail to become meaningful users of EHRs and fail to submit quality data, thepenalties would result in reductions to our annual Medicare traditional inpatient net revenues of approximately $11 million, $21 million and $32 million in2015, 2016, and 2017 and subsequent years, respectively. During the year ended December 31, 2011, we acquired certified EHR technology for all of our acute care hospitals and certain of our employedphysicians. As a result, we recognized approximately $55 million of EHR incentives related to the Medicaid EHR incentive program, a significant portion ofwhich was received during the three months ended December 31, 2011 pursuant to the ARRA HIT programs in the various states in which we operate thatreceived CMS approval as of December 31, 2011. These incentives offset approximately $85 million of operating expenses we incurred in 2011 related to ouroverall HIT implementation program. All states in which we operate that have CMS approval have become fully operational for providers to register for Year 1Medicaid EHR incentive payments. The final Medicaid incentive payment amount to which a Provider is entitled is determined by several variables that aresubject to validation by the state prior to such payment being issued, as well as post-payment audits. The complexity of the changes required to our hospitals’ systems and the time required to complete the changes will likely result in some or all of ourhospitals not being fully compliant in time to be eligible for the maximum HIT funding permitted under ARRA. Because of the uncertainties regarding theimplementation of HIT, including CMS’ future EHR implementation regulations, the ability of our hospitals to achieve compliance and the associated costs,we cannot provide any assurances regarding the aforementioned estimates. FFY 2013 Budget Proposal The President released his FFY 2013 budget proposal on February 13, 2012. The key provisions of the budget proposal affecting Medicare andMedicaid include: · A reduction in reimbursement from 70% of bad debts resulting from non-payment of deductibles and co-payments by Medicare beneficiaries to25% over three years starting in 2013;· A 10% reduction in IME payments beginning in 2014;· A change to the Federal Matching Assistance Percentage formula in a manner that would result in a net reduction of federal money to the states;· A phase-down of the cap on state provider taxes, which could require some states to develop alternative sources of Medicaid funding or reduceprovider payments; and· A reduction in DSH allotments to states as the number of uninsured individuals declines following implementation of the Affordable Care Act. We cannot predict what action Congress or the President might take with respect to the budget proposal or the impact the resulting legislation mighthave on our business, financial condition, results of operations or cash flows. Middle Class Tax Relief and Job Creation Act of 2012 In addition to extending the CY 2011 rates under the Medicare Physician Fee Schedule, the Job Creation Act, among other things, will reduceMedicare bad debt reimbursement from 70% to 65% for cost reporting periods beginning in FFY 2013 and thereafter. We estimate this change will reduce ourannual Medicare bad debt reimbursement by approximately $2 million beginning in 2013. Legislation to implement the remaining proposals must be enactedby Congress for them to become effective. We cannot predict what action Congress or the President might take with respect to such legislation or the impact thelegislation might have on our business, financial condition, results of operations or cash flows. 43Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Medicare and Medicaid Recovery Audit Contractor Initiatives Section 302 of the Tax Relief and Health Care Act of 2006 authorized a permanent program involving the use of third-party recovery audit contractors(“RACs”) to identify Medicare overpayments and underpayments made to providers. RACs are compensated based on the amount of both overpayments andunderpayments they identify by reviewing claims submitted to Medicare for correct coding and medical necessity. CMS must approve new issues prior towidespread review by the RACs. Historically, RACs have conducted claims reviews on a post-payment basis. In February 2012, CMS announced that it ismoving forward with a RAC prepayment demonstration in 11 states. We have established protocols to respond to RAC requests and payment denials.Payment recoveries resulting from RAC reviews are appealable through administrative and judicial processes, and we intend to pursue the reversal of adversedeterminations where appropriate. In addition to overpayments that are not reversed on appeal, we will incur additional costs to respond to requests for recordsand pursue the reversal of payment denials. We expect that the RACs will continue to seek CMS approval to review additional issues. The Affordable Care Act expanded the RAC program’s scope by requiring all states to enter into contracts with RACs by December 31, 2010 to auditpayments to Medicaid providers. CMS issued a letter to state Medicaid directors on October 1, 2010 that (1) provided preliminary guidance to states on theimplementation of Medicaid RAC programs, (2) created a deadline of December 31, 2010 for states to establish RAC programs, and (3) established a deadlineof April 1, 2011 for states to fully implement their RAC programs. In September 2011, CMS issued a final rule requiring all states to implement a MedicaidRAC program effective January 1, 2012. We cannot predict with certainty the impact of the Medicare and Medicaid RAC program on our future results ofoperations or cash flows. MedPAC Recommendations The Medicare Payment Advisory Commission (“MedPAC”) is an independent Congressional agency established by the Balanced Budget Act of1997 to advise Congress on issues affecting the Medicare program. The MedPAC’s statutory mandate is quite broad; in addition to advising Congress onpayments to private health plans participating in Medicare Advantage and providers in the Original Medicare Plan, MedPAC is also tasked with analyzingaccess to care, quality of care and other issues affecting Medicare. On January 12, 2012, the MedPAC commissioners voted on final recommendations for their 2012 Report to Congress. Among other things,MedPAC voted in favor of recommending: · A 1% market basket payment update for Medicare hospital inpatient and outpatient services in 2013; and · A reduction in payments, phased-in over three years, for Medicare non-emergency hospital outpatient evaluation and management examinations,to equalize them to payments for similar services provided in physician offices. MedPAC will submit its recommendations formally in a report to Congress, which is due no later than March 1, 2012. Medicare Value-Based Purchasing Section 3001 of the Affordable Care Act requires the Secretary of HHS to establish a value-based purchasing (“VBP”) program for hospital paymentsbeginning in FFY 2013 based on hospital performance measures that are part of the hospital inpatient quality reporting program. The VBP program is intendedto be budget-neutral, with 1% of IPPS payments allocated to the program in FFY 2013 and increasing over time to 2% in FFY 2017 and beyond. On April 29,2011, CMS issued the final rule establishing the hospital VBP program under the Medicare IPPS. Under the hospital VBP program, CMS will evaluatehospitals’ performance during the period July 1, 2011 through March 31, 2012 for the FFY 2013 hospital VBP payment determination. Hospitals will receivepoints on each measure based on the higher of their level of (1) achievement relative to an established standard based on all other hospitals’ baseline periodperformance, or (2) improvement in performance from their performance during a prior baseline period. The combined scores on all the measures will betranslated into value-based incentive payments for discharges occurring on or after October 1, 2012. CMS will notify each hospital of the estimated amount ofits value-based incentive payment for FFY 2013 at least 60 days prior to October 1, 2012 and will notify each hospital of the exact amount of its value-basedincentive payment on November 1, 2012. Although we believe that our Commitment to Quality initiatives will position our hospitals to benefit under the VBPprogram, we cannot predict with certainty the impact of the VBP program on our results of operations or cash flows. 44Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Children’s Hospital Graduate Medical Education Payments We receive approximately $8 million in payments annually from the Children’s Hospital Graduate Medical Education (“CHGME”) program forresident training expenses at St. Christopher’s Hospital for Children. Legislative authority for payments to freestanding children’s hospitals for direct andindirect expenses attributable to medical residency programs under the federal Public Health Service Act expired on September 30, 2011. In December 2011,Congress passed a final omnibus appropriations bill that included funding in FFY 2012 for CHGME at levels similar to 2011; however, that funding will notbe available for distribution to hospitals until Congress enacts legislation reauthorizing the CHGME program. We cannot provide any assurances that suchlegislation will be enacted in 2012. The Budget Control Act On August 2, 2011, the President signed the Budget Control Act of 2011 (“BCA”) into law. The intent of the BCA is to reduce federal spending by atleast $1.2 trillion over FFYs 2013 through 2021. The savings will be achieved by: · Spending caps on certain discretionary spending, excluding payments to providers under Medicare and Medicaid; · The creation of a bipartisan and bicameral Joint Select Committee of Congress charged with developing a legislative proposal to reduce thefederal deficit by at least an additional $1.5 trillion by FFY 2021; and · An automatic $1.2 trillion reduction (or enough to make up any shortfall between actual cuts enacted and $1.2 trillion), allocated 50% todefense and 50% to non-defense discretionary spending, divided equally amongst FFYs 2013 through 2021 and enforced by sequestration thatwould begin during the first quarter of CY 2013 if legislation cutting $1.5 trillion was not enacted by January 15, 2012. The deadline for the Joint Select Committee (“Committee”) to issue a proposal was November 23, 2011. On November 21, 2011, the Committeeannounced that it could not agree on any spending reductions, thus triggering the aforementioned automatic sequestration. Under current law, Medicarepayments to all providers will be reduced by 2% beginning in the first quarter of CY 2013. Federal Medicaid payments to states are excluded fromsequestration, but budget pressures caused by cuts to other federal payments could result in some states imposing additional Medicaid reductions to balancetheir budgets. We cannot predict what other action Congress or the states might take to address federal spending or the impact those actions could have on ouroperations or cash flows. PRIVATE INSURANCE Managed Care We currently have thousands of managed care contracts with various HMOs and PPOs. HMOs generally maintain a full-service health care deliverynetwork comprised of physician, hospital, pharmacy and ancillary service providers that HMO members must access through an assigned “primary care”physician. The member’s care is then managed by his or her primary care physician and other network providers in accordance with the HMO’s qualityassurance and utilization review guidelines so that appropriate health care can be efficiently delivered in the most cost-effective manner. HMOs typicallyprovide reduced benefits or reimbursement (or none at all) to their members who use non-contracted health care providers for non-emergency care. PPOs generally offer limited benefits to members who use non-contracted health care providers. PPO members who use contracted health careproviders receive a preferred benefit, typically in the form of lower co-payments, co-insurance or deductibles. As employers and employees have demandedmore choice, managed care plans have developed hybrid products that combine elements of both HMO and PPO plans, including high-deductible health careplans that may have limited benefits, but cost the employee less in premiums. The amount of our managed care net patient revenues during the years ended December 31, 2011, 2010 and 2009 was $5.2 billion, $5.0 billion and$4.9 billion, respectively. Approximately 62% of our managed care net patient revenues for the year ended December 31, 2011 was derived from our top tenmanaged care payers. National payers generate approximately 44% of our total net managed care revenues. The remainder comes from regional or local payers.At December 31, 2011 and 2010 approximately 55% and 57%, respectively, of our net accounts receivable related to continuing operations were due frommanaged care payers. 45Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Revenues under managed care plans are based primarily on payment terms involving predetermined rates per diagnosis, per-diem rates, discountedfee-for-service rates and other similar contractual arrangements. These revenues are also subject to review and possible audit by the payers. The payers arebilled for patient services on an individual patient basis. An individual patient’s bill is subject to adjustment on a patient-by-patient basis in the ordinarycourse of business by the payers following their review and adjudication of each particular bill. We estimate the discounts for contractual allowances at theindividual hospital level utilizing billing data on an individual patient basis. At the end of each month, on an individual hospital basis, we estimate ourexpected reimbursement for patients of managed care plans based on the applicable contract terms. We believe it is reasonably likely for there to be anapproximately 3% increase or decrease in the estimated contractual allowances related to managed care plans. Based on reserves as of December 31, 2011, a 3%increase or decrease in the estimated contractual allowance would impact the estimated reserves by approximately $9 million. Some of the factors that cancontribute to changes in the contractual allowance estimates include: (1) changes in reimbursement levels for procedures, supplies and drugs when thresholdlevels are triggered; (2) changes in reimbursement levels when stop-loss or outlier limits are reached; (3) changes in the admission status of a patient due tophysician orders subsequent to initial diagnosis or testing; (4) final coding of in-house and discharged-not-final-billed patients that change reimbursementlevels; (5) secondary benefits determined after primary insurance payments; and (6) reclassification of patients among insurance plans with different coveragelevels. Contractual allowance estimates are periodically reviewed for accuracy by taking into consideration known contract terms, as well as payment history.Although we do not separately accumulate and disclose the aggregate amount of adjustments to the estimated reimbursement for every patient bill, we believeour estimation and review process enables us to identify instances on a timely basis where such estimates need to be revised. We do not believe there were anyadjustments to estimates of individual patient bills that were material to our revenues. In addition, on a corporate-wide basis, we do not record any generalprovision for adjustments to estimated contractual allowances for managed care plans. We expect managed care governmental admissions to continue to increase as a percentage of total managed care admissions over the near term.However, the managed Medicare and Medicaid insurance plans typically generate lower yields than commercial managed care plans, which have beenexperiencing an improved pricing trend. Although we have had 26 consecutive quarters of improved year-over-year managed care pricing, we expect somemoderation in the pricing percentage increases in future years. It is not clear what impact, if any, the increased obligations on managed care and other payersimposed by the Affordable Care Act will have on our commercial managed care volumes and payment rates. In the year ended December 31, 2011, ourcommercial managed care net inpatient revenue per admission from our acute care hospitals was approximately 79% higher than our aggregate yield on a peradmission basis from government payers, including managed Medicare and Medicaid insurance plans. Indemnity An indemnity-based agreement generally requires the insurer to reimburse an insured patient for health care expenses after those expenses have beenincurred by the patient, subject to policy conditions and exclusions. Unlike an HMO member, a patient with indemnity insurance is free to control his or herutilization of health care and selection of health care providers. SELF-PAY PATIENTS Self-pay patients are patients who do not qualify for government programs payments, such as Medicare and Medicaid, do not have some form ofprivate insurance and, therefore, are responsible for their own medical bills. A significant portion of our self-pay patients is admitted through our hospitals’emergency departments and often requires high-acuity treatment that is more costly to provide and, therefore, results in higher billings, which are the leastcollectible of all accounts. We believe that our level of self-pay patients has been higher in the last several years than previous periods due to a combination ofbroad economic factors, including increased unemployment rates, reductions in state Medicaid budgets, increasing numbers of individuals and employerswho choose not to purchase insurance, and an increased burden of co-payments and deductibles to be made by patients instead of insurers. Self-pay accounts pose significant collectability problems. At both December 31, 2011 and 2010, approximately 7% of our net accounts receivablerelated to continuing operations were due from self-pay patients. Further, a significant portion of our provision for doubtful accounts relates to self-paypatients, as well as co-payments and deductibles owed to us by patients with insurance. We provide revenue cycle management and patient communicationsservices through our Conifer subsidiary, which has performed systematic analyses to focus our attention on the drivers of bad debt for each hospital. Whileemergency department use is the primary contributor to our provision for doubtful accounts in the aggregate, this is not the case at all hospitals. As a result, weare increasing our focus on targeted initiatives that concentrate on non-emergency department patients as well. These initiatives are intended to promote processefficiencies in working self-pay accounts, as well as co-payment and deductible amounts owed to us by patients with insurance, that we deem highlycollectible. We are dedicated to modifying and 46Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents refining our processes as needed, enhancing our technology and improving staff training throughout the revenue cycle in an effort to increase collections andreduce accounts receivable. Over the longer term, several other initiatives we have previously announced should also help address this challenge. For example, our Compact withUninsured Patients (“Compact”) is designed to offer managed care-style discounts to certain uninsured patients, which enables us to offer lower rates to thosepatients who historically have been charged standard gross charges. A significant portion of those charges had previously been written down in our provisionfor doubtful accounts. Under the Compact, the discount offered to uninsured patients is recognized as a contractual allowance, which reduces net operatingrevenues at the time the self-pay accounts are recorded. The uninsured patient accounts, net of contractual allowances recorded, are further reduced to their netrealizable value through provision for doubtful accounts based on historical collection trends for self-pay accounts and other factors that affect the estimationprocess. In July 2010, the President signed the Restoring American Financial Stability Act of 2010 (the “Dodd-Frank Act”) into law. Under the Dodd-FrankAct, a new Consumer Financial Protection Bureau (“CFPB”) was formed within the U.S. Federal Reserve to promulgate regulations to promote transparency,simplicity, fairness, accountability and equal access in the market for consumer financial products or services, including debt collection services. Thelegislation gives significant discretion to the CFPB in establishing regulatory requirements and enforcement priorities. At this time, we cannot predict the extentto which the operations of our Conifer subsidiary could be affected by these developments. Our estimated costs (based on selected operating expenses, which include salaries, wages and benefits, supplies and other operating expenses) ofcaring for our self-pay patients for the years ended December 31, 2011, 2010 and 2009 were approximately $406 million, $377 million and $365 million,respectively. We also provide charity care to patients who are financially unable to pay for the health care services they receive. Most patients who qualify forcharity care are charged a per-diem amount for services received, subject to a cap. Except for the per-diem amounts, our policy is not to pursue collection ofamounts determined to qualify as charity care; therefore, we do not report these amounts in net operating revenues. Most states include an estimate of the costof charity care in the determination of a hospital’s eligibility for Medicaid DSH payments. Revenues attributable to DSH payments and other state-fundedsubsidy payments for the years ended December 31, 2011, 2010 and 2009 were approximately $260 million, $181 million and $171 million, respectively.These payments are intended to mitigate our cost of uncompensated care, as well as reduced Medicaid funding levels. Our estimated costs (based on theselected operating expenses described above) of caring for charity care patients for the years ended December 31, 2011, 2010 and 2009 were $125 million,$120 million and $118 million, respectively. Our method of measuring the estimated costs uses adjusted self-pay/charity patient days multiplied by selectedoperating expenses per adjusted patient day. The adjusted self-pay/charity patient days represents actual self-pay/charity patient days adjusted to include self-pay/charity outpatient services by multiplying actual self-pay/charity patient days by the sum of gross self-pay/charity inpatient revenues and gross self-pay/charity outpatient revenues and dividing the results by gross self-pay/charity inpatient revenues. The expansion of health insurance coverage under the Affordable Care Act may result in a material increase in the number of patients using ourfacilities who have either private or public program coverage. However, because of the many variables involved, we are unable to predict with certainty the neteffect on us of the expected increase in revenues and expected decrease in bad debt expense from providing care to previously uninsured and underinsuredindividuals, and numerous other provisions in the law that may affect us. In addition, even after implementation of the Affordable Care Act, we may continueto experience a high level of bad debt expense and have to provide uninsured discounts and charity care for undocumented aliens who are not permitted toenroll in a health insurance exchange or government health care program. 47Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2011 COMPARED TO THE YEAR ENDED DECEMBER 31, 2010 The following two tables summarize our net operating revenues, operating expenses and operating income from continuing operations, both in dollaramounts and as percentages of net operating revenues, for the years ended December 31, 2011 and 2010: Years Ended December 31,20112010Increase(Decrease)Net operating revenues:General hospitals$9,273$8,966$307Other operations31123972Net operating revenues before provision for doubtful accounts9,5849,205379Less provision for doubtful accounts730738(8)Net operating revenues8,8548,467387Operating expenses:Salaries, wages and benefits4,0823,900182Supplies1,5821,5775Other operating expenses, net2,1001,940160Electronic health record incentives(55)—(55)Depreciation and amortization41339419Impairment of long-lived assets and goodwill, and restructuring charges271017Litigation and investigation costs551243Operating income$650$634$16 Years Ended December 31,20112010Increase(Decrease)Net operating revenues100.0%100.0%—%Operating expenses:Salaries, wages and benefits46.1%46.1%—%Supplies17.9%18.6%(0.7)%Other operating expenses, net23.7%22.9%0.8%Electronic health record incentives(0.6)%—%(0.6)%Depreciation and amortization4.7%4.7%—%Impairment of long-lived assets and goodwill, and restructuring charges0.3%0.1%0.2%Litigation and investigation costs0.6%0.1%0.5%Operating income7.3%7.5%(0.2)% Net operating revenues of our continuing general hospitals include inpatient and outpatient revenues, as well as nonpatient revenues (rental income,management fee revenue and income from services such as cafeterias, gift shops and parking) and other miscellaneous revenue. Net operating revenues ofother operations primarily consist of revenues from (1) physician practices, (2) a long-term acute care hospital and (3) revenue cycle services provided by ourConifer subsidiary. Revenues from our general hospitals represented approximately 97% of our total net operating revenues before provision for doubtfulaccounts in both 2011 and 2010. None of our individual hospitals represented more than 5% of our net operating revenues for the year ended December 31,2011, and only one of our individual hospitals represented more than 5% (approximately 5.8%) of our total assets, excluding goodwill and intercompanyreceivables, at December 31, 2011. Net operating revenues from our other operations were $311 million and $239 million in the years ended December 31, 2011 and 2010, respectively.The increase in net operating revenues from other operations during 2011 primarily relates to our additional owned physician practices and revenue cycleservices provided by our Conifer subsidiary. Equity earnings for unconsolidated affiliates, included in our net operating revenues from other operations, were$8 million and $5 million for the years ended December 31, 2011 and 2010, respectively. 48Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents The tables below show certain selected historical operating statistics of our continuing hospitals: Years Ended December 31,Admissions, Patient Days and Surgeries20112010Increase(Decrease)Total admissions515,693512,9720.5%Paying admissions (excludes charity and uninsured)480,909478,7390.5%Charity and uninsured admissions34,78434,2331.6%Admissions through emergency department310,286300,6523.2%Paying admissions as a percentage of total admissions93.3%93.3%—%(1)Charity and uninsured admissions as a percentage of total admissions6.7%6.7%—%(1)Emergency department admissions as a percentage of total admissions60.2%58.6%1.6%(1)Surgeries — inpatient147,725150,562(1.9)%Surgeries — outpatient219,913209,6444.9%Total surgeries367,638360,2062.1%Patient days — total2,452,1562,473,017(0.8)%Adjusted patient days(2)3,732,3303,723,7020.2%Average length of stay (days)4.84.8—(1)Adjusted patient admissions(2)791,919778,5051.7%Number of hospitals (at end of period) (3)5050—(1)Licensed beds (at end of period)13,45313,4280.2%Average licensed beds13,44913,4300.1%Utilization of licensed beds(4)50.0%50.4%(0.4)%(1) (1) The change is the difference between the 2011 and 2010 amounts shown.(2) Adjusted patient days/admissions represents actual patient days/admissions adjusted to include outpatient services by multiplying actual patientdays/admissions by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues.(3) Number of hospitals includes 49 general hospitals and one critical access facility.(4) Utilization of licensed beds represents patient days divided by number of days in the period divided by average licensed beds. Years Ended December 31,Outpatient Visits20112010Increase(Decrease)Total visits4,039,4563,917,7583.1%Paying visits (excludes charity and uninsured)3,625,7653,512,3623.2%Charity and uninsured visits413,691405,3962.0%Emergency department visits1,486,7231,431,2563.9%Surgery visits219,913209,6444.9%Paying visits as a percentage of total visits89.8%89.7%0.1%(1)Charity and uninsured visits as a percentage of total visits10.2%10.3%(0.1)%(1) (1) The change is the difference between the 2011 and 2010 amounts shown. Years Ended December 31,Revenues20112010Increase(Decrease)Net operating revenues$8,854$8,4674.6%Revenues from the uninsured$620$641(3.3)%Net inpatient revenues(1)$6,163$5,9293.9%Net outpatient revenues(1)$2,984$2,9032.8% (1) Net inpatient revenues and net outpatient revenues are components of net operating revenues. Net inpatient revenues include self-pay revenues of $276million and $261 million for the years ended December 31, 2011 and 2010, respectively. Net outpatient revenues include self-pay revenues of $344million and $380 million for years ended December 31, 2011 and 2010, respectively. 49Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Years Ended December 31,Revenues on a Per Admission, Per Patient Day and Per Visit Basis20112010Increase(Decrease)Net inpatient revenue per admission$11,951$11,5583.4%Net inpatient revenue per patient day$2,513$2,3974.8%Net outpatient revenue per visit$739$741(0.3)%Net patient revenue per adjusted patient admission(1)$11,550$11,3451.8%Net patient revenue per adjusted patient day(1)$2,451$2,3723.3% (1) Adjusted patient days/admissions represents actual patient days/admissions adjusted to include outpatient services by multiplying actual patientdays/admissions by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues. Years Ended December 31,Provision for Doubtful Accounts20112010Increase(Decrease)Provision for doubtful accounts$730$738(1.1)%Provision for doubtful accounts as a percentage of net operating revenues before provisionfor doubtful accounts7.6%8.0%(0.4)%(1)Collection rate on self-pay accounts(2)27.8%28.3%(0.5)%(2)Collection rate on commercial managed care accounts98.2%98.4%(0.2)%(1) (1) The change is the difference between the 2011 and 2010 amounts shown.(2) Self-pay accounts receivable are comprised of both uninsured and balance-after insurance receivables. Years Ended December 31,Selected Operating Expenses20112010Increase(Decrease)Salaries, wages and benefits$4,082$3,9004.7%Supplies1,5821,5770.3%Other operating expenses2,1001,9408.2%Total$7,764$7,4174.7%Rent/lease expense(1)$146$1367.4%Salaries, wages and benefits per adjusted patient day(2)$1,094$1,0474.5%Supplies per adjusted patient day(2)424424—%Other operating expenses per adjusted patient day(2)5625217.9%Total per adjusted patient day$2,080$1,9924.4% (1) Included in other operating expenses.(2) Adjusted patient days represent actual patient days adjusted to include outpatient services by multiplying actual patient days by the sum of grossinpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues. REVENUES During the year ended December 31, 2011, net operating revenues before provision for doubtful accounts from continuing operations increased 4.1%,which included a 3.6% increase in net patient revenues, compared to the year ended December 31, 2010. Increases in pricing were the largest contributingfactors, resulting in a 3.4% increase in net patient revenues, while increases in our inpatient admissions and outpatient visits resulted in a 0.2% increase in netpatient revenues. Our net inpatient revenues for the year ended December 31, 2011 increased by 3.9% compared to the year ended December 31, 2010. Several factorsimpacted our net inpatient revenues in the year ended December 31, 2011 compared to the year ended December 31, 2010, including: · Medicaid DSH payments and other state-funded subsidy revenues of $260 million in the year ended December 31, 2011 compared to $181million in the year ended December 31, 2010 (significant changes in DSH revenues include: (i) $91 million of additional revenues, net ofprovider fees and other expenses, related to the California supplemental Medi-Cal payments programs, which were recorded in the year endedDecember 31, 2011 because CMS issued the final required federal approval of the programs in 2011; (ii) a $33 million increase in the yearended December 31, 2011 related to our Pennsylvania hospitals, primarily due to the Pennsylvania provider fee program that was approved byCMS in 2011; and (iii) a $22 million reduction in the year ended December 31, 2011 primarily due to a new regulation issued by the State ofMissouri); 50Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents · Improved managed care pricing as a result of renegotiated contracts; · Increased Medicaid-related admissions, the reimbursement for which is lower than other payers; · A $4 million unfavorable patient revenue adjustment in the year ended December 31, 2011 related to the portion of our bad debts that will not bereimbursed by Medicare compared to $11 million in unfavorable adjustments for the year ended December 31, 2010; · An unfavorable patient revenue adjustment of approximately $20 million ($14 million related to 2009 and prior years and $6 million related tothe year ended December 31, 2010) recorded in the year ended December 31, 2010 for the estimated impact on our DSH payments as a result ofestimated lower SSI percentages at certain of our hospitals; and · The recognition by our Philadelphia hospitals of $8 million of revenues that were approved for distribution to us in the year ended December31, 2011 by a Philadelphia HMO in which we hold a minority interest. Patient days decreased by 0.8%, while total admissions increased by 0.5%, during the year ended December 31, 2011 compared to the year endedDecember 31, 2010. We believe the following factors contributed to the changes in our inpatient volume levels: (1) the current weak economic conditions,which we believe have adversely impacted the level of elective procedures performed at our hospitals; (2) loss of patients to competing health care providers; (3)industry trends reflecting the shift of certain clinical procedures being performed in an outpatient setting rather than in an inpatient setting; and (4) strategicreduction of services related to our Targeted Growth Initiative, which seeks to de-emphasize or eliminate less profitable service lines. Net outpatient revenues and total outpatient visits increased 2.8% and 3.1%, respectively, during the year ended December 31, 2011 compared to theyear ended December 31, 2010. The growth in our outpatient revenues and volumes was substantially related to the acquisition of various outpatient centersduring 2010 and 2011. Outpatient revenue per visit declined 0.3% primarily due to the provision of lower acuity services by outpatient centers we acquired in2010 and 2011, as well as an unfavorable shift in our total outpatient payer mix, including a decline in managed care outpatient visits as a percentage of totaloutpatient visits in the year ended December 31, 2011 as compared to the same period in 2010. Net operating revenues in the year ended December 31, 2011 included $59 million related to the revenue cycle services provided by our Conifersubsidiary compared to $31 million in the year ended December 31, 2010. PROVISION FOR DOUBTFUL ACCOUNTS The provision for doubtful accounts as a percentage of net operating revenues before provision for doubtful accounts was 7.6% for the year endedDecember 31, 2011 compared to 8.0% for the year ended December 31, 2010. Key factors contributing to the change in the provision for doubtful accounts forthe year ended December 31, 2011 compared to the same period in 2010 include (i) a $21 million decrease in revenues from the uninsured in the 2011 periodcompared to the same period in 2010, (ii) a $12 million favorable adjustment in the 2011 period for Medicare bad debts to be claimed on our cost reportscompared to $37 million in the 2010 period, and (iii) a lower collection rate on self-pay accounts in the 2011 period compared to the 2010 period. Our self-paycollection rate, which is the blended collection rate for uninsured and balance-after insurance accounts receivable, declined to approximately 27.8% as ofDecember 31, 2011 from 28.3% as of December 31, 2010. 51Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents The table below shows the net accounts receivable and allowance for doubtful accounts by payer at December 31, 2011 and 2010: December 31, 2011December 31, 2010AccountsReceivableBeforeAllowancefor DoubtfulAccountsAllowancefor DoubtfulAccountsNetAccountsReceivableBeforeAllowancefor DoubtfulAccountsAllowancefor DoubtfulAccountsNet Medicare$170$—$170$159$—$159Medicaid123—123118—118Net cost report settlements payable andvaluation allowances(38)—(38)(26)—(26)Managed care7776970871460654Self-pay uninsured2191932619417222Self-pay balance after insurance13678581196653Estimated future recoveries from accountsassigned to collection agency subsidiary64—6433—33Other payers2205116916839129Total continuing operations1,6713911,2801,4793371,142Total discontinued operations46(2)16151$1,675$397$1,278$1,495$352$1,143 We provide revenue cycle management and patient communications services through our Conifer subsidiary, which has performed systematicanalyses to focus attention on the drivers of bad debt for each of our hospitals. While emergency department use is the primary contributor to our provision fordoubtful accounts in the aggregate, this is not the case at all hospitals. As a result, we have increased our focus on targeted initiatives that concentrate on non-emergency department patients as well. These initiatives are intended to promote process efficiencies in working self-pay accounts, as well as co-payment anddeductible amounts owed to us by patients with insurance, that we deem highly collectible. We are dedicated to modifying and refining our processes asneeded, enhancing our technology and improving staff training throughout the revenue cycle in an effort to increase collections and reduce accounts receivable. A significant portion of our provision for doubtful accounts relates to self-pay patients, as well as co-payments and deductibles owed to us bypatients with insurance. Collection of accounts receivable has been a key area of focus, particularly over the past several years, as we have experienced adversechanges in our business mix. At December 31, 2011, our collection rate on self-pay accounts was approximately 27.8%, including collections from point-of-service through collections by our Conifer collection agency subsidiary. We have experienced a downward trend in our self-pay collection rate as follows:29.9% at March 31, 2010; 29.5% at June 30, 2010; 29.1% at September 30, 2010; 28.3% at December 31, 2010; 27.9% at March 31, 2011; 27.9% at June30, 2011; and 27.7% at September 30, 2011. These self-pay collection rates include payments made by patients, including co-payments and deductibles paidby patients with insurance, prior to an account being classified and assigned to our Conifer collection agency subsidiary. Based on our accounts receivablefrom self-pay patients and co-payments and deductibles owed to us by patients with insurance at December 31, 2011, a 10% decrease or increase in our self-pay collection rate, or approximately 3%, which we believe could be a reasonable likely change, would result in an unfavorable or favorable adjustment toprovision for doubtful accounts of approximately $6 million. Payment pressure from managed care payers also affects our provision for doubtful accounts. We typically experience ongoing managed carepayment delays and disputes; however, we continue to work with these payers to obtain adequate and timely reimbursement for our services. Our estimatedcollection rate from managed care payers was approximately 98.2% and 98.4% at December 31, 2011 and 2010, respectively, which includes collections frompoint-of-service through collections by our Conifer collection agency subsidiary. We experienced a temporary slowdown in collections related to commercial andgovernmental managed care accounts receivable in the year ended December 31, 2011 as a result of a revenue cycle operational realignment we initiated thatresulted in the closure of two of our service centers, which we anticipate will create long-term operating efficiencies. We continue to focus on revenue cycle initiatives to improve cash flow. In 2011, we completed the transition of the patient access staff and operationsof the majority of our hospitals to Conifer. This initiative is focused on standardizing and improving patient access processes, including pre-registration,registration, verification of eligibility and benefits, liability identification and collection, and financial counseling, while more clearly aligning responsibilityfor revenue cycle activities 52Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents with Conifer. The goals of the effort are focused on reducing denials, improving service levels to patients and increasing the quality of accounts that end up inaccounts receivable. Although we continue to focus on improving our methodology for evaluating the collectability of our accounts receivable, we may incurfuture charges if there are unfavorable changes in the trends affecting the net realizable value of our accounts receivable. We manage our provision for doubtful accounts using hospital-specific goals and benchmarks such as (1) total cash collections, (2) point-of-servicecash collections, (3) accounts receivable days outstanding (“AR Days”), and (4) accounts receivable by aging category. The following tables present theapproximate aging by payer of our net accounts receivable from continuing operations of $1.318 billion and $1.168 billion at December 31, 2011 andDecember 31, 2010, respectively, excluding cost report settlements payable and valuation allowances of $38 million and $26 million at December 31, 2011and December 31, 2010, respectively: December 31, 2011MedicareMedicaidManagedCareIndemnity,Self-Payand OtherTotal0-60 days93%64%75%31%68%61-120 days3%17%12%17%12%121-180 days2%9%5%10%6%Over 180 days2%10%8%42%14%Total100%100%100%100%100% December 31, 2010MedicareMedicaidManagedCareIndemnity,Self-Payand OtherTotal0-60 days96%70%79%40%74%61-120 days3%22%12%20%13%121-180 days1%8%4%10%5%Over 180 days—%—%5%30%8%Total100%100%100%100%100% Our AR Days from continuing operations were 53 days at December 31, 2011 and 50 days at December 31, 2010, which were within our target, asadjusted to reflect the impact of the adoption of Accounting Standards Update (“ASU”) 2011-07, “Health Care Entities (Topic 954): Presentation andDisclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities,” of less than 55days. AR Days are calculated as our accounts receivable from continuing operations on the last date in the quarter divided by our net operating revenues fromcontinuing operations for the quarter ended on that date divided by the number of days in the quarter. As of December 31, 2011, we had a cumulative total of patient account assignments dating back at least three years or older of approximately$3.7 billion related to our continuing operations being pursued by our Conifer collection agency subsidiary. These accounts have already been written off andare not included in our receivables or in the allowance for doubtful accounts; however, an estimate of future recoveries from all the accounts assigned to ourConifer collection agency subsidiary is determined based on our historical experience and recorded in accounts receivable. Patient advocates from our Medical Eligibility Program (“MEP”) screen patients in the hospital to determine whether those patients meet eligibilityrequirements for financial assistance programs. They also expedite the process of applying for these government programs. Receivables from patients who arepotentially eligible for Medicaid are classified as Medicaid pending, under our MEP, with appropriate contractual allowances recorded. Based on recent trends,approximately 92% of all accounts in our MEP are ultimately approved for benefits under a government program such as Medicaid. 53Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents The following table shows the approximate amount of accounts receivable in our MEP, still awaiting determination of eligibility under a governmentprogram at December 31, 2011 and 2010, by aging category: December 31,201120100-60 days$81$10061-120 days1821121-180 days78Over 180 days1713Total$123$142 SALARIES, WAGES AND BENEFITS Salaries, wages and benefits expense as a percentage of net operating revenues was flat for the year ended December 31, 2011 compared to the yearended December 31, 2010. Salaries, wages and benefits per adjusted patient day increased 4.5% in the year ended December 31, 2011 as compared to the sameperiod in 2010. This increase is primarily due to annual merit increases for our employees, as well as an increase in the number of physicians we employ,increased overtime costs, increased health benefits costs, increased 401(k) plan expense and increased employee-related costs associated with our HITimplementation program, partially offset by reductions in workers’ compensation expense and annual incentive compensation expense, in the year endedDecember 31, 2011 as compared to the year ended December 31, 2010. Included in salaries, wages and benefits expense in 2011 is $4 million of expense due toa 136 basis point decrease in the interest rate used to estimate the discounted present value of projected future workers’ compensation liabilities. Salaries,wages and benefits expense for the years ended December 31, 2011 and 2010 also included stock-based compensation expense of $24 million and $22 million,respectively. As of December 31, 2011, approximately 25% of our employees were represented by various labor unions. These employees — primarily registerednurses and service and maintenance workers — were located at 22 of our hospitals, the majority of which are in California and Florida. We are in the processof renegotiating the collective bargaining agreements for all of the facilities whose contracts have expired and negotiating new contracts where employees havechosen union representation in 2011. At this time, we are unable to predict the outcome of the negotiations, but increases in salaries, wages and benefits couldresult from these agreements. Furthermore, there is a possibility that strikes could occur during the negotiation process, which could increase our labor costsand have an adverse effect on our patient admissions and net operating revenues. SUPPLIES Supplies expense as a percentage of net operating revenues was 17.9% for the year ended December 31, 2011 compared to 18.6% for the year endedDecember 31, 2010. Supplies expense per adjusted patient day was flat in the year ended December 31, 2011 compared to the same period in 2010. Suppliesexpense was unfavorably impacted by the higher cost of pharmaceuticals and increased costs of surgical supplies, partially offset by decreases in cardiology-related costs due to renegotiated prices and lower volume levels. In general, supplies expense changes are primarily attributable to changes in our patient volumelevels and the mix of procedures performed. We strive to control supplies expense through product standardization, contract compliance, improved utilization, bulk purchases and operationalimprovements. The items of current cost reduction focus continue to be cardiac stents and pacemakers, orthopedics and implants, and high-costpharmaceuticals. We also utilize the group-purchasing strategies and supplies-management services of MedAssets, Inc., a company that offers group-purchasing procurement strategy, outsourcing and e-commerce services to the health care industry. OTHER OPERATING EXPENSES, NET Other operating expenses as a percentage of net operating revenues was 23.7% in the year ended December 31, 2011 compared to 22.9% in the yearended December 31, 2010. Other operating expenses per adjusted patient day increased by 7.9% in the year ended December 31, 2011 as compared to the sameperiod in 2010. This change is due in part to a $53 million increase in malpractice expense in the year ended December 31, 2011 compared to the year endedDecember 31, 2010. The increase in malpractice expense is primarily attributable to several large unfavorable case reserve adjustments in the 2011 period ascompared to the prior-year period, as well as a $17 million unfavorable impact of a 136 basis point decrease in the interest rate used to estimate the discountedpresent value of projected future malpractice liabilities in the year ended 54Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents December 31, 2011. The amount of malpractice expense in the year ended December 31, 2011 may not necessarily be indicative of malpractice expenseamounts in future years due to changes in loss experience and interest rates used to estimate the discounted present value of projected future malpracticeliabilities. There were also increases in other operating expenses due to: · increased physician and medical fees ($29 million);· increased costs of contracted services ($25 million);· increased systems implementation costs and information technology service contract expenses primarily related to our HIT implementationprogram ($16 million);· increased rent and lease expense ($10 million);· increased physician relocation and income guarantee costs ($9 million);· a favorable adjustment of $6 million in the 2011 period compared to $10 million in the 2010 period related to the estimated recovery of theemployer portion of certain payroll taxes paid prior to April 2005 on behalf of medical residents;· increased hospital provider fees assessed by certain states in which we operate ($4 million, which were substantially offset by additional DSHpayments recognized in net patient revenues);· increased repairs and maintenance expense ($14 million); and· a reduction in information systems and business office costs allocable to discontinued operations ($3 million). These increases were partially offset by $7 million of lower consulting costs and gains of $8 million from the sales of the building at the former campus ofone of our hospitals and a medical office building. IMPAIRMENT OF LONG-LIVED ASSETS AND GOODWILL, AND RESTRUCTURING CHARGES During the year ended December 31, 2011, we recorded net impairment and restructuring charges of $27 million. This amount included a $6million impairment charge for the write-down of buildings and equipment of one of our previously impaired hospitals to their estimated fair values, primarilydue to a decline in the fair value of real estate in the market in which the hospital operates and a decline in the estimated fair value of equipment. Materialadverse trends in our most recent estimates of future undiscounted cash flows of the hospital, consistent with our previous estimates in prior years whenimpairment charges were recorded at this hospital, indicated the carrying value of the hospital’s long-lived assets was not recoverable from the estimated futurecash flows. We believe the most significant factors contributing to the continuing adverse financial trends include reductions in volumes of insured patients,shifts in payer mix from commercial to governmental payers combined with reductions in reimbursement rates from governmental payers, and high levels ofuninsured patients. As a result, we updated the estimate of the fair value of the hospital’s long-lived assets and compared the fair value estimate to the carryingvalue of the hospital’s long-lived assets. Because the fair value estimate was lower than the carrying value of the hospital’s long-lived assets, an impairmentcharge was recorded for the difference in the amounts. Unless the anticipated future financial trends of this hospital improve to the extent that the estimatedfuture undiscounted cash flows exceed the carrying value of the long-lived assets, this hospital is at risk of future impairments, particularly if we spendsignificant amounts of capital at the hospital without generating a corresponding increase in the hospital’s fair value or if the fair value of the hospital’s realestate or equipment continues to decline. The aggregate carrying value of assets held and used of the hospital for which an impairment charge was recordedwas $20 million as of December 31, 2011 after recording the impairment charge. In addition, we recorded a $6 million charge in 2011for the write-off ofgoodwill associated with our diagnostic imaging center business in Louisiana. Material adverse trends in our most recent estimates of future operating resultsof the centers, primarily due to our limited market presence, indicated that the carrying value of the goodwill exceeded its fair value. As a result, we reduced thecarrying value of the goodwill to its fair value determined based on an appraisal. In 2011, we also recorded impairment charges of $1 million in connectionwith the sale of seven medical office buildings in Texas, $1 million related to a cost basis investment, $7 million in employee severance costs, $3 million inlease termination costs, $1 million of acceleration of stock-based compensation costs and $2 million of other related costs. During the year ended December 31, 2010, we recorded net impairment and restructuring charges of $10 million. This amount included a $5 millionnet impairment charge for the write-down of buildings, equipment and other long-lived assets, primarily capitalized software costs classified in other intangibleassets, of one of our previously impaired hospitals to their estimated fair values, primarily due to a decline in the fair value of real estate in the market inwhich the hospital operates and a decline in the estimated fair value of equipment. Material adverse trends in our estimates of future undiscounted cash flowsof the hospital at that time, consistent with our previous estimates in prior years when impairment charges were recorded at this hospital, indicated thecarrying value of the hospital’s long-lived assets was not recoverable from the estimated future cash flows. We believed the most significant factorscontributing to the continuing adverse financial trends at that time included reductions in volumes of insured patients, shifts in payer mix from commercial togovernmental payers combined with reductions in reimbursement rates from governmental payers, and high levels of uninsured patients. As a result, weupdated the 55Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents estimate of the fair value of the hospital’s long-lived assets and compared the fair value estimate to the carrying value of the hospital’s long-lived assets.Because the fair value estimate was lower than the carrying value of the hospital’s long-lived assets, an impairment charge was recorded for the difference inthe amounts. We disclosed in our Form 10-K for the year ended December 31, 2010 that, unless the anticipated future financial trends of this hospitalimproved to the extent that the estimated future undiscounted cash flows exceeded the carrying value of the long-lived assets, this hospital was at risk of futureimpairments, which impairments occurred in 2011 as described above, particularly if we spent significant amounts of capital at the hospital withoutgenerating a corresponding increase in the hospital’s fair value or if the fair value of the hospital’s real estate or equipment continued to decline. The aggregatecarrying value of assets held and used of the hospital for which an impairment charge was recorded was $25 million as of December 31, 2010 after recordingthe impairment charge. In addition, we recorded a $5 million net impairment charge in connection with the sale of nine medical office buildings in Florida and$2 million in employee severance and other related costs. These charges were partially offset by a $2 million credit related to the collection of a note receivabledue from a buyer of one of our previously divested hospitals, which had been fully reserved in a prior year. Our impairment tests presume stable, improving or, in some cases, declining results in our hospitals, which are based on programs and initiativesbeing implemented that are designed to achieve the hospital’s most recent projections. If these projections are not met, or if in the future negative trends occurthat impact our future outlook, further impairments of long-lived assets and goodwill may occur, and we may incur additional restructuring charges. LITIGATION AND INVESTIGATION COSTS Litigation and investigation costs in continuing operations for the year ended December 31, 2011 were $55 million compared to $12 million for theyear ended December 31, 2010. The 2011 amount is comprised of costs associated with our evaluation of an unsolicited acquisition proposal received inNovember 2010 (which was subsequently withdrawn), changes in reserve estimates established in connection with certain governmental reviews described inNote 15 to the Consolidated Financial Statements, accruals for a physician privileges case and certain hospital-related tort claims, the settlement of a unionarbitration claim, and costs to defend the Company in various matters. The 2010 costs primarily relate to changes in reserve estimates established inconnection with certain governmental reviews described in Note 15 to the Consolidated Financial Statements and costs to defend the Company in variousmatters. INTEREST EXPENSE Interest expense for the year ended December 31, 2011 was $375 million compared to $424 million for the year ended December 31, 2010. Thedecrease in interest expense primarily relates to our repurchases of outstanding senior notes during 2010 and the $30 million favorable impact from the interestrate swap agreement we terminated in August 2011. During the year ended December 31, 2011, the interest rate swap agreement generated approximately $8million of cash interest savings and a $22 million gain on the settlement of the agreement. See Note 6 to the Consolidated Financial Statements for additionalinformation about this agreement. LOSS FROM EARLY EXTINGUISHMENT OF DEBT During the year ended December 31, 2011, we recorded a loss from early extinguishment of debt of approximately $117 million, primarily related tothe difference between the purchase prices and the par values of the $713 million aggregate principal amount of 9% senior secured notes due 2015 that wepurchased during the period, as well as the write-off of unamortized note discounts and issuance costs. During the year ended December 31, 2010, we recorded a loss from early extinguishment of debt of approximately $57 million primarily related tothe difference between the purchase prices and the par values of the $782 million aggregate principal amount of 7/% senior notes due 2013 that we purchasedduring the period, as well as the write-off of unamortized note discounts, issuance costs and unrecognized interest rate hedge settlements associated with thenotes. In addition, we repurchased $40 million aggregate principal amount of our 9/% senior notes due 2014 and $7 million aggregate principal amount ofour 9/% senior notes due 2015 for total cash of $49 million. INCOME TAX EXPENSE (BENEFIT) During the year ended December 31, 2011, we recorded income tax expense of $61 million compared to a $977 million benefit during the year endedDecember 31, 2010. The increase in income tax expense in the 2011 period is primarily due to the elimination of substantially all of our valuation allowance fordeferred tax assets during the three months ended September 30, 2010. We now recognize income tax expense that includes little or no change in the deferred taxvaluation allowance, whereas in the 2010 period the tax impact associated with our earnings was substantially offset by the change in the deferred tax valuationallowance. See Note 16 to the Consolidated Financial Statements for additional detail about these amounts. 56387814Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents ADDITIONAL SUPPLEMENTAL NON-GAAP DISCLOSURES The financial information provided throughout this report, including our Consolidated Financial Statements and the notes thereto, has been preparedin conformity with accounting principles generally accepted in the United States of America (“GAAP”). However, we use certain non-GAAP financialmeasures defined below in communications with investors, analysts, rating agencies, banks and others to assist such parties in understanding the impact ofvarious items on our financial statements, some of which are recurring or involve cash payments. In addition, from time to time we use these measures todefine certain performance targets under our compensation programs. “Adjusted EBITDA” is a non-GAAP measure that we use in our analysis of the performance of our business, which we define as net income (loss)attributable to our common shareholders before: (1) the cumulative effect of changes in accounting principle, net of tax; (2) net income attributable tononcontrolling 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) litigationand investigation benefit (costs), net of insurance recoveries; (11) hurricane insurance recoveries, net of costs; (12) impairment of long-lived assets andgoodwill, and restructuring charges, net of insurance recoveries; and (13) depreciation and amortization. As is the case with all non-GAAP measures, investorsshould consider the limitations associated with this metric, including the potential lack of comparability of this measure from one company to another, andshould recognize that Adjusted EBITDA does not provide a complete measure of our operating performance because it excludes many items that are included inour financial statements. Accordingly, investors are encouraged to use GAAP measures when evaluating our financial performance. The table below shows the reconciliation of Adjusted EBITDA to net income attributable to our common shareholders (the most comparable GAAPterm) for the years ended December 31, 2011 and 2010: Years Ended December 31,20112010Net income attributable to Tenet Healthcare Corporation common shareholders$58$1,119Less: Net income attributable to noncontrolling interests(12)(9)Preferred stock dividends(24)(24)Income (loss) from discontinued operations, net of tax(6)17Income from continuing operations1001,135Income tax benefit (expense)(61)977Investment earnings35Loss from early extinguishment of debt(117)(57)Interest expense(375)(424)Operating income650634Litigation and investigation costs(55)(12)Impairment of long-lived assets and goodwill, and restructuring charges(27)(10)Depreciation and amortization(413)(394)Adjusted EBITDA$1,145$1,050 Net operating revenues$8,854$8,467 Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin)12.9%12.4% 57Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2010 COMPARED TO THE YEAR ENDED DECEMBER 31, 2009 The following two tables summarize our net operating revenues, operating expenses and operating income from continuing operations, both in dollaramounts and as percentages of net operating revenues, for the years ended December 31, 2010 and 2009: Years Ended December 31,20102009Increase(Decrease)Net operating revenues:General hospitals$8,966$8,808$158Other operations23920633Net operating revenues before provision for doubtful accounts9,2059,014191Less provision for doubtful accounts73869642Net operating revenues8,4678,318149Operating expenses:Salaries, wages and benefits3,9003,85743Supplies1,5771,5698Other operating expenses, net1,9401,91030Depreciation and amortization3943868Impairment of long-lived assets and goodwill, and restructuring charges1027(17)Litigation and investigation costs1231(19)Operating income$634$538$96 Years Ended December 31,20102009Increase(Decrease)Net operating revenues100.0%100.0%—%Operating expenses:Salaries, wages and benefits46.1%46.4%(0.3)%Supplies18.6%18.9%(0.3)%Other operating expenses, net22.9%22.9%—%Depreciation and amortization4.7%4.6%0.1%Impairment of long-lived assets and goodwill, and restructuring charges0.1%0.3%(0.2)%Litigation and investigation costs0.1%0.4%(0.3)%Operating income7.5%6.5%1.0% Revenues from our general hospitals represented approximately 97% of our total net operating revenues before provision for doubtful accounts in both 2010and 2009. None of our individual hospitals represented more than 5% of our net operating revenues for the year ended December 31, 2010, and only one of ourindividual hospitals represented more than 5% (approximately 5.4%) our total assets, excluding goodwill and intercompany receivables, atDecember 31, 2010. Net operating revenues from our other operations were $239 million and $206 million in the years ended December 31, 2010 and 2009, respectively.The increase in net operating revenues from other operations during 2010 primarily relates to our additional owned physician practices and revenue cycleservices provided by our Conifer subsidiary. Equity earnings for unconsolidated affiliates, included in our net operating revenues from other operations, were$5 million and $6 million for the years ended December 31, 2010 and 2009, respectively. The tables below show certain selected historical operating statistics of our continuing hospitals: Years Ended December 31,Admissions, Patient Days and Surgeries20102009Increase(Decrease)Total admissions512,972525,532(2.4)%Paying admissions (excludes charity and uninsured)478,739491,244(2.5)%Charity and uninsured admissions34,23334,288(0.2)%Admissions through emergency department300,652301,593(0.3)%Paying admissions as a percentage of total admissions93.3%93.5%(0.2)%(1) 58Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Years Ended December 31,Admissions, Patient Days and Surgeries20102009Increase(Decrease)Charity and uninsured admissions as a percentage of total admissions6.7%6.5%0.2%(1)Emergency department admissions as a percentage of total admissions58.6%57.4%1.2%(1)Surgeries — inpatient150,562154,670(2.7)%Surgeries — outpatient209,644210,043(0.2)%Total surgeries360,206364,713(1.2)%Patient days — total2,473,0172,553,215(3.1)%Adjusted patient days(2)3,723,7023,785,230(1.6)%Average length of stay (days)4.84.9(0.1)(1)Adjusted patient admissions(2)778,505784,502(0.8)%Number of hospitals (at end of period) (3)5050—(1)Licensed beds (at end of period)13,42813,436(0.1)%Average licensed beds13,43013,4190.1%Utilization of licensed beds(4)50.4%52.1%(1.7)%(1) (1) The change is the difference between the 2010 and 2009 amounts shown.(2) Adjusted patient days/admissions represents actual patient days/admissions adjusted to include outpatient services by multiplying actual patientdays/admissions by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues.(3) Number of hospitals includes 49 general hospitals and one critical access facility.(4) Utilization of licensed beds represents patient days divided by number of days in the period divided by average licensed beds. Years Ended December 31,Outpatient Visits20102009Increase(Decrease)Total visits3,917,7583,934,496(0.4)%Paying visits (excludes charity and uninsured)3,512,3623,525,810(0.4)%Charity and uninsured visits405,396408,686(0.8)%Emergency department visits1,431,2561,448,784(1.2)%Surgery visits209,644210,043(0.2)%Paying visits as a percentage of total visits89.7%89.6%0.1%(1)Charity and uninsured visits as a percentage of total visits10.3%10.4%(0.1)%(1) (1) The change is the difference between the 2010 and 2009 amounts shown. Years Ended December 31,Revenues20102009Increase(Decrease)Net operating revenues$8,467$8,3181.8%Revenues from the uninsured$641$6223.1%Net inpatient revenues(1)$5,929$5,9020.5%Net outpatient revenues(1)$2,903$2,7704.8% (1) Net inpatient revenues and net outpatient revenues are components of net operating revenues. Net inpatient revenues include self-pay revenues of$261 million and $256 million for the years ended December 31, 2010 and 2009, respectively. Net outpatient revenues include self-pay revenues of$380 million and $366 million for years ended December 31, 2010 and 2009, respectively. Years Ended December 31,Revenues on a Per Admission, Per Patient Day and Per Visit Basis20102009Increase(Decrease)Net inpatient revenue per admission$11,558$11,2312.9%Net inpatient revenue per patient day$2,397$2,3123.7%Net outpatient revenue per visit$741$7045.3%Net patient revenue per adjusted patient admission(1)$11,345$11,0542.6%Net patient revenue per adjusted patient day(1)$2,372$2,2913.5% (1) Adjusted patient days/admissions represents actual patient days/admissions adjusted to include outpatient services by multiplying actual patientdays/admissions by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues. 59Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Years Ended December 31,Provision for Doubtful Accounts20102009Increase(Decrease)Provision for doubtful accounts$738$6966.0%Provision for doubtful accounts as a percentage of net operating revenuesbefore provision for doubtful accounts8.0%7.7%0.3%(1)Collection rate on self-pay accounts(2)28.3%30.1%(1.8)%(1)Collection rate on commercial managed care accounts98.4%98.0%0.4%(1) (1) The change is the difference between the 2010 and 2009 amounts shown.(2) Self-pay accounts receivable are comprised of both uninsured and balance-after insurance receivables. Years Ended December 31,Selected Operating Expenses20102009Increase(Decrease)Salaries, wages and benefits$3,900$3,8571.1%Supplies1,5771,5690.5%Other operating expenses1,9401,9101.6%Total$7,417$7,3361.1%Rent/lease expense(1)$136$143(4.9)%Salaries, wages and benefits per adjusted patient day(2)$1,047$1,0192.7%Supplies per adjusted patient day(2)4244152.2%Other operating expenses per adjusted patient day(2)5215043.4%Total per adjusted patient day$1,992$1,9382.8% (1) Included in other operating expenses.(2) Adjusted patient days represent actual patient days adjusted to include outpatient services by multiplying actual patient days by the sum of gross inpatientrevenues and outpatient revenues and dividing the results by gross inpatient revenues. REVENUES During the year ended December 31, 2010, net operating revenues before provision for doubtful accounts from continuing operations increased 2.1%,which included a 1.8% increase in net patient revenues, compared to the year ended December 31, 2009. Increases in pricing, including the provision of higheracuity services and a favorable shift in managed care payer mix, were the largest contributing factors, resulting in a 3.6% increase in net patient revenues,while declines in our inpatient admissions and outpatient visits resulted in a 1.8% decrease in net patient revenues. Our net inpatient revenues for the year ended December 31, 2010 increased by 0.5% compared to the year ended December 31, 2009. There werevarious positive and negative factors impacting our net inpatient revenues. Key positive factors include: · Improved managed care pricing as a result of renegotiated contracts; and · The provision of higher acuity services, including a 2.5% increase in acuity for commercial managed care inpatients. Key negative factors include: · An unfavorable shift in our total payer mix, including a decline in commercial managed care admissions; · An $11 million unfavorable patient revenue adjustment in the year ended December 31, 2010 related to the portion of our bad debts that will notbe reimbursed by Medicare; and · An unfavorable patient revenue adjustment of approximately $20 million ($14 million related to prior years and $6 million related to the yearended December 31, 2010) recorded in the three months ended June 30, 2010 for the estimated impact on our DSH payments as a result ofestimated lower SSI percentages at certain of our hospitals compared to $23 million in the year ended December 31, 2009. 60Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Patient days and total admissions decreased during the year ended December 31, 2010 compared to the year ended December 31, 2009 by 3.1% and2.4%, respectively. Our patient volumes in the year ended December 31, 2010 were partially adversely impacted by a decline in flu-related volumes, as well asweather-related disruptions. We believe the following factors also contributed to the overall decline in our inpatient volume levels: (1) loss of patients tocompeting health care providers; (2) strategic reduction of services related to our Targeted Growth Initiative, which seeks to de-emphasize or eliminate lessprofitable service lines; and (3) weak economic conditions, which we believe adversely impacted the level of elective procedures performed at our hospitals. Net outpatient revenues during the year ended December 31, 2010 increased 4.8% compared to the year ended December 31, 2009, despite a 0.4%decline in total outpatient visits. The primary reasons for the increase in outpatient revenues were improved terms of our managed care contracts and theprovision of higher acuity services. Outpatient revenues were also favorably impacted by the acquisitions of various outpatient centers during 2010. Thegrowth in outpatient revenue per visit of 5.3% was constrained by an unfavorable shift in our total outpatient payer mix, including a decline in managed careoutpatient visits as a percentage of total outpatient visits in the year ended December 31, 2010 as compared to the same period in 2009. PROVISION FOR DOUBTFUL ACCOUNTS The provision for doubtful accounts as a percentage of net operating revenues before provision for doubtful accounts was 8.0% for the year endedDecember 31, 2010 compared to 7.7% for the year ended December 31, 2009. The increase in the provision for doubtful accounts is primarily due to a 180basis point decline in our collection rate on self-pay accounts, a $19 million increase in uninsured revenues and higher pricing. These items were partiallyoffset by $37 million of favorable adjustments for Medicare bad debts that we claimed on our Medicare cost reports and improved managed care accountsreceivable balances by aging category. Our self-pay collection rate, which is the blended collection rate for uninsured and balance-after insurance accountsreceivable, declined to approximately 28.3% as of December 31, 2010 from 30.1% as of December 31, 2009. The table below shows the net accounts receivable and allowance for doubtful accounts by payer at December 31, 2010 and 2009: December 31, 2010December 31, 2009AccountsReceivableBeforeAllowancefor DoubtfulAccountsAllowancefor DoubtfulAccountsNetAccountsReceivableBeforeAllowancefor DoubtfulAccountsAllowancefor DoubtfulAccountsNet Medicare$159$—$159$162$—$162Medicaid118—118106—106Net cost report settlements payable andvaluation allowances(26)—(26)(24)—(24)Managed care7146065471262650Self-pay uninsured1941722220417529Self-pay balance after insurance11966531186256Estimated future recoveries fromaccounts assigned to our collectionagency subsidiary33—3335—35Other payers1683912916442122Total continuing operations1,4793371,1421,4773411,136Total discontinued operations16151502822$1,495$352$1,143$1,527$369$1,158 At December 31, 2010, our collection rate on self-pay accounts was approximately 28.3%, including collections from point-of-service throughcollections by our Conifer collection agency subsidiary. During 2009 and 2010, we experienced a downward trend in our self-pay collection rate as follows:31.4% at March 31, 2009; 30.8% at June 30, 2009; 30.3% at September 30, 2009; 30.1% at December 31, 2009; 29.9% at March 31, 2010; 29.5% atJune 30, 2010; and 29.1% at September 30, 2010. These self-pay collection rates include payments made by patients, including co-payments and deductiblespaid by patients with insurance, prior to an account being classified and assigned to our Conifer collection agency subsidiary. Based on our accountsreceivable from self-pay patients and co-payments and deductibles owed to us by patients with insurance at December 31, 2010, a 10% decrease or increase inour self-pay collection rate, or approximately 3%, which we believe could 61Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents be a reasonable likely change, would result in an unfavorable or favorable adjustment to provision for doubtful accounts of approximately $5 million. Our estimated collection rate from managed care payers was approximately 98.4% at December 31, 2010 and 98.0% at December 31, 2009, whichincludes collections from point-of-service through collections by our Conifer collection agency subsidiary. The following tables present the approximate aging by payer of our net accounts receivable from continuing operations of $1.168 billion and$1.160 billion at December 31, 2010 and 2009, respectively, excluding cost report settlements payable and valuation allowances of $26 million and$24 million at December 31, 2010 and 2009, respectively: December 31, 2010MedicareMedicaidManagedCareIndemnity,Self-Payand OtherTotal0-60 days96%70%79%40%74%61-120 days3%22%12%20%13%121-180 days1%8%4%10%5%Over 180 days—%—%5%30%8%Total100%100%100%100%100% December 31, 2009MedicareMedicaidManagedCareIndemnity,Self-Payand OtherTotal0-60 days94%63%78%38%72%61-120 days3%24%12%19%13%121-180 days3%11%5%10%6%Over 180 days—%2%5%33%9%Total100%100%100%100%100% Our AR Days from continuing operations were 50 days at both December 31, 2010 and 2009, which were within our target, as adjusted to reflect theimpact of the adoption of ASU 2011-07, of less than 55 days. AR Days are calculated as our accounts receivable from continuing operations on the last datein the quarter divided by our revenues from continuing operations for the quarter ended on that date divided by the number of days in the quarter. As of December 31, 2010, we had a cumulative total of patient account assignments dating back at least three years or older of approximately$4.3 billion related to our continuing operations being pursued by our Conifer collection agency subsidiary. These accounts have already been written off andare not included in our receivables or in the allowance for doubtful accounts; however, an estimate of future recoveries from all the accounts assigned to ourConifer collection agency subsidiary is determined based on our historical experience and recorded in accounts receivable. The following table shows the approximate amount of accounts receivable in our MEP, still awaiting determination of eligibility under a governmentprogram at December 31, 2010 and 2009, by aging category: December 31,201020090-60 days$100$6661-120 days2118121-180 days85Over 180 days1310Total$142$99 SALARIES, WAGES AND BENEFITS Salaries, wages and benefits expense as a percentage of net operating revenues decreased 0.3% for the year ended December 31, 2010 compared to theyear ended December 31, 2009. Salaries, wages and benefits per adjusted patient day 62Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents increased approximately 2.7% in the year ended December 31, 2010 as compared to the same period in 2009. This increase is primarily due to merit increasesfor our employees, the effect of lower volumes on operating leverage, increased health benefits costs, an increase in the number of employed physicians,increased severance costs and higher state unemployment taxes, partially offset by decreased accruals for annual incentive compensation, reduced contractlabor expense and discretionary contribution expense of $16 million in the 2009 period for contributions to the 401(k) plan accounts of employees who werenot eligible for annual incentive compensation, in the year ended December 31, 2010 as compared to the year ended December 31, 2009. Contract laborexpense, which is included in salaries, wages and benefits, was $69 million in the year ended December 31, 2010, a decrease of $12 million, or 15%, ascompared to the same period in 2009. Salaries, wages and benefits expense for the year ended December 31, 2010 and 2009 included $22 million and$23 million, respectively, of stock-based compensation expense. SUPPLIES Supplies expense as a percentage of net operating revenues was 18.6% for the year ended December 31, 2010 compared to 18.9% for the year endedDecember 31, 2009; supplies expense per adjusted patient day increased by 2.2% in the year ended December 31, 2010 compared to the same period in 2009.Supplies expense was unfavorably impacted by the increased utilization of high-cost implants and pharmaceuticals, partially offset by decreases in the cost ofpacemakers due to renegotiated prices and lower volume levels. A portion of the increase in supplies expense per adjusted patient day was offset by revenuegrowth related to payments we receive from certain payers. OTHER OPERATING EXPENSES, NET Other operating expenses as a percentage of net operating revenues was 22.9% in both years ended December 31, 2010 and 2009. Other operatingexpenses per adjusted patient day increased by approximately 3.4% in the year ended December 31, 2010 as compared to the same period in 2009. There wereincreases in other operating expenses primarily due to: · the effect of lower volumes on operating leverage;· increases in the costs of repairs, maintenance and technology service contracts ($17 million);· a reduction in information systems and business office costs allocable to discontinued operations ($15 million);· increased costs of contracted services ($11 million);· increased physician relocation costs ($10 million);· increased systems implementation costs ($3 million); and· increased hospital provider fees assessed by the states in which we operate ($17 million), which were substantially offset by additionalMedicaid supplemental payments recognized in revenues. Also partially offsetting these increases was a $32 million, or 36%, decline in malpractice expense to $57 million in the year ended December 31, 2010compared to $89 million in the year ended December 31, 2009. The decline in malpractice expense is principally due to a 6% decrease in the average cost perclaim and a 3% decrease in the number of expected claims. There was minimal impact to expense from a two basis point increase in the interest rate used toestimate the discounted present value of projected future malpractice liabilities, compared to $9 million of similar expense in the year endedDecember 31, 2009. The amount of malpractice expense in the year ended December 31, 2010 may not necessarily be indicative of malpractice expenseamounts in future years due to changes in loss experience and interest rates used to estimate the discounted present value of projected future malpracticeliabilities. Declines in rent expense ($7 million) and a favorable adjustment of $10 million related to the estimated recovery of the employer portion of certainpayroll taxes paid prior to April 2005 on behalf of medical residents, which was recorded in the three months ended December 31, 2010, also had a favorableimpact on other operating expenses. IMPAIRMENT OF LONG-LIVED ASSETS AND GOODWILL, AND RESTRUCTURING CHARGES During the year ended December 31, 2010, we recorded net impairment and restructuring charges of $10 million. This amount included a $5 millionnet impairment charge for the write-down of buildings, equipment and other long-lived assets, primarily capitalized software costs classified in other intangibleassets, of one of our previously impaired hospitals to their estimated fair values, primarily due to a decline in the fair value of real estate in the market inwhich the hospital operates and a decline in the estimated fair value of equipment. Material adverse trends in our estimates of future undiscounted cash flowsof the hospital at that time, consistent with our previous estimates in prior years when impairment charges were recorded at this hospital, indicated thecarrying value of the hospital’s long-lived assets was not recoverable from the estimated future cash flows. We believed the most significant factorscontributing to the continuing adverse financial trends at that time included reductions in volumes of insured patients, shifts in payer mix from commercial togovernmental payers combined with reductions in reimbursement rates from governmental payers, and high levels of uninsured patients. As a result, weupdated the estimate of the fair value of the hospital’s long-lived assets and compared the fair value estimate to the carrying value of the 63Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents hospital’s long-lived assets. Because the fair value estimate was lower than the carrying value of the hospital’s long-lived assets, an impairment charge wasrecorded for the difference in the amounts. We disclosed in our Form 10-K for the year ended December 31, 2010 that unless the anticipated future financialtrends of this hospital improved to the extent that the estimated future undiscounted cash flows exceeded the carrying value of the long-lived assets, thishospital was at risk of future impairments, which impairments occurred in 2011 as described above, particularly if we spent significant amounts of capital atthe hospital without generating a corresponding increase in the hospital’s fair value or if the fair value of the hospital’s real estate or equipment continued todecline. The aggregate carrying value of assets held and used of the hospital for which an impairment charge was recorded was $25 million as ofDecember 31, 2010 after recording the impairment charge. In addition, we recorded a $5 million net impairment charge in connection with the sale of ninemedical office buildings in Florida and $2 million in employee severance and other related costs. These charges were partially offset by a $2 million creditrelated to the collection of a note receivable due from a buyer of one of our previously divested hospitals, which had been fully reserved in a prior year. During the year ended December 31, 2009, we recorded net impairment and restructuring charges of $27 million. This amount included a $7 millionnet impairment charge for the write-down of buildings, equipment and other long-lived assets, primarily capitalized software costs classified in other intangibleassets, of one of our previously impaired hospitals to their estimated fair values, primarily due to a decline in the fair value of real estate in the market inwhich the hospital operates. Material adverse trends in our estimates of future undiscounted cash flows of the hospital at that time, consistent with ourprevious estimates during 2008 when impairment charges were recorded at this hospital, indicated the carrying value of the hospital’s long-lived assets was notrecoverable from the estimated future cash flows. We believed the most significant factors contributing to the continuing adverse financial trends at that timeincluded reductions in volumes of insured patients due to competition, shifts in payer mix from commercial to governmental payers combined with reductionsin reimbursement rates from governmental payers, and high levels of uninsured patients. As a result, we updated the estimate of the fair values of thehospital’s long-lived assets and compared the fair value estimate to the carrying values of the hospital’s long-lived assets. Because the fair value estimate waslower than the carrying values of the hospital’s long-lived assets, an impairment charge was recorded for the difference in the amounts. We also recorded a $10million net impairment charge for the write-down of land and buildings at the campus of one hospital that moved to a new, replacement campus during 2010.Our estimates of the future undiscounted cash flows from the use of the former campus for several months during 2010 and from estimated dispositionproceeds were less than the carrying values of the land and buildings of the campus. We compared the estimated fair values to the carrying values and,because the fair value estimate was lower than the carrying values of the assets, an impairment charge was recorded for the difference in the amounts. Theremaining net impairment and restructuring charges for the year ended December 31, 2009 include $4 million of employee severance and other related costs, a$3 million impairment charge for the write-down of a note receivable due from a buyer of one of our previously divested hospitals as a result of the buyer filingfor bankruptcy, and a $3 million impairment charge for the write-down of other assets primarily related to an option to purchase certain real property near oneof our hospitals that no longer had value due to the financial condition of the owner of the real property. LITIGATION AND INVESTIGATION COSTS Litigation and investigation costs in continuing operations for the year ended December 31, 2010 were $12 million compared to $31 million for theyear ended December 31, 2009. The 2010 costs primarily relate to costs to defend the Company in various matters and changes in reserve estimatesestablished in connection with certain governmental reviews further described in Note 15 to the accompanying Consolidated Financial Statements, as well ascosts associated with the unsolicited acquisition proposal we received in November 2010. The 2009 costs primarily relate to reserves established in connectionwith certain governmental reviews further described in Note 15 to the accompanying Consolidated Financial Statements. The 2009 costs also include amountspaid to indemnify a former officer of the Company in a matter to which the Company was not a party and costs to defend the Company in various matters. INTEREST EXPENSE During the year ended December 31, 2010, we recorded interest expense of $424 million compared to $445 million for the year ended December 31,2009. The decrease in interest expense primarily relates to our repurchases of outstanding senior notes during 2009 and 2010. GAIN (LOSS) FROM EARLY EXTINGUISHMENT OF DEBT During the year ended December 31, 2010, we recorded a loss from early extinguishment of debt of approximately $57 million, primarily related tothe difference between the purchase prices and the par values of the $782 million aggregate principal amount of 7/% senior notes due 2013 that we purchasedduring the period, as well as the write-off of unamortized note discounts, issuance costs and unrecognized interest rate hedge settlements associated with thenotes. In addition, we 6438Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents repurchased $40 million aggregate principal amount of our 9/% senior notes due 2014 and $7 million aggregate principal amount of our 9/% senior notesdue 2015 for total cash of $49 million. During the year ended December 31, 2009, we recorded a gain from early extinguishment of debt of approximately $97 million, primarily related tothe estimated fair values of new notes issued in note exchanges at less than their par values, net of the write-off of unamortized note discounts, issuance costsand unrecognized interest rate hedge settlements associated with the notes tendered, as well as other notes repurchased. See Note 6 to the accompanyingConsolidated Financial Statements for additional details about our debt transactions. INVESTMENT EARNINGS During the year ended December 31, 2010, we recorded investment earnings of $5 million compared to no investment earnings for the year endedDecember 31, 2009. In 2009, investment earnings were offset by a $7 million loss related to an agreement reached during June 2009 for the early redemption ofour $56 million investment in hospital authority bonds related to previously divested hospitals in the Dallas, Texas area for $49 million of cash that wereceived in June 2009. NET GAIN ON SALES OF INVESTMENTS During the year ended December 31, 2009, we recorded a gain on sale of investments of approximately $15 million in continuing operations relatedto the sale of our 50% membership interest in Peoples Health Network, the company that administered the operations of Tenet Choices, Inc., our wholly ownedMedicare Advantage HMO insurance subsidiary in Louisiana. INCOME TAX BENEFIT During the year ended December 31, 2010, we recorded an income tax benefit of $977 million compared to $23 million during the year endedDecember 31, 2009. The benefit recorded in the 2010 period is primarily due to a decrease in the valuation allowance for our deferred tax assets. The netdecrease in the valuation allowance during the year ended December 31, 2010 is primarily attributable to the estimated realization of deferred tax assetsresulting from the utilization of net operating loss carryforwards against projected future years’ taxable income. During the year ended December 31, 2010,after considering all available evidence, both positive and negative, we concluded that the valuation allowance against our deferred tax assets could be reducedby approximately $1.1 billion. See Note 16 to the accompanying Consolidated Financial Statements for additional detail about the 2010 tax benefit. 657814Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents LIQUIDITY AND CAPITAL RESOURCES CASH REQUIREMENTS Our obligations to make future cash payments under contracts, such as debt and lease agreements, and under contingent commitments, such asstandby letters of credit and minimum revenue guarantees, are summarized in the table below, all as of December 31, 2011: Years Ending December 31,LaterTotal20122013201420152016Years(In Millions)Long-term debt(1)$7,108$409$561$397$784$287$4,670Borrowings under credit facility(1)90222282—Capital lease obligations(1)25896——2Long-term non-cancelable operatingleases4161099959403079Standby letters of credit1641622————Guarantees(2)1558332171310—Asset retirement obligations147—————147Academic affiliation agreements(3)2173122221919104Tax liabilities338————25Supplemental executive retirementplan obligations5302020202020430Information technology contractservices1,700197193173166168803Purchase orders231231—————Total(4)$10,816$1,260$940$696$1,044$616$6,260 (1) Includes interest through maturity date/lease termination.(2) Includes minimum revenue guarantees, primarily related to physicians under relocation agreements and physician groups that provide services at ourhospitals, and operating lease guarantees.(3) These agreements contain various rights and termination provisions.(4) Professional liability and workers’ compensation reserves have been excluded from the table. At December 31, 2011, the current and long-termprofessional and general liability reserves included in our Consolidated Balance Sheet were approximately $75 million and $337 million, respectively,and the current and long-term workers’ compensation reserves included in our Consolidated Balance Sheet were approximately $41 million and$106 million, respectively. Standby letters of credit are required principally by our insurers and various states to collateralize our workers’ compensation programs pursuant tostatutory requirements and as security to collateralize the deductible and self-insured retentions under certain of our professional and general liability insuranceprograms. The amount of collateral required is primarily dependent upon the level of claims activity and our creditworthiness. The insurers require thecollateral in case we are unable to meet our obligations to claimants within the deductible or self-insured retention layers. The standby letters of credit are issuedunder our revolving credit facility, as amended November 29, 2011. We consummated the following transactions affecting our long-term commitments in the year ended December 31, 2011: · We entered into a five-year extension of our existing outsourcing contract for information technology services through 2021, as well ascommitments for future professional services under the same contract to be provided to us related to our initiative to achieve full compliance withthe ARRA HIT requirements. Our increased cash obligations under this contract approximate $1 billion. · We entered into three contractual agreements for an aggregate commitment of $41 million for future professional services to be provided to us andlicensed software fees related to our ARRA HIT initiative. During the year ended December 31, 2011, we paid approximately $13 million of thisaggregate committment. · We entered into non-cancellable capital leases of approximately $23 million, primarily for equipment. · In November 2011, we purchased approximately $713 million aggregate principal amount of our 9% senior secured notes due 2015 for total cashof approximately $776 million. We purchased the senior secured notes with the net proceeds from our sale of $900 million aggregate principalamount of 6/% senior secured notes due 2018. As part of our long-term objective to manage our capital structure, we may from time to time seek to retire, purchase, redeem or refinance some of ouroutstanding debt or equity securities subject to prevailing market conditions, our liquidity 6614Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents requirements, contractual restrictions and other factors. These actions are part of our strategy to manage our leverage and capital structure over time, which isdependent on our total amount of debt, our cash and our operating results. At December 31, 2011, using the last 12 months of Adjusted EBITDA, our ratio oftotal long-term debt, net of cash and cash equivalent balances, to Adjusted EBITDA was 3.7x. We anticipate this ratio will fluctuate from quarter to quarterbased on earnings performance and other factors. We intend to manage this ratio by following our business plan, managing our cost structure and throughother changes in our capital structure, including, if appropriate, the issuance of equity or convertible securities. Our ability to achieve our leverage and capitalstructure objectives is subject to numerous risks and uncertainties, many of which are described in the Forward-Looking Statements and Risk Factorssections in Part I of this report. Our capital expenditures primarily relate to the expansion and renovation of existing facilities (including amounts to comply with applicable laws andregulations), equipment and information systems additions and replacements (including those required to achieve compliance with the HIT requirements underARRA), introduction of new medical technologies, design and construction of new buildings, and various other capital improvements. Capital expenditureswere $475 million, $476 million and $456 million in the years ended December 31, 2011, 2010 and 2009, respectively, which included $13 million and$1 million in the years ended December 31, 2010 and 2009, respectively, related to discontinued operations. We anticipate that our capital expenditures forcontinuing operations for the year ending December 31, 2012 will total approximately $500 million to $550 million, including $109 million that was accruedas a liability at December 31, 2011. Our budgeted 2012 capital expenditures include approximately $27 million to improve disability access at certain of ourfacilities pursuant to the terms of a negotiated consent decree. We expect to spend approximately $61 million more on such improvements over the next fouryears. During the year ended December 31, 2011, we acquired 15 outpatient centers — four diagnostic imaging centers, a majority interest in one otherdiagnostic imaging center, three oncology centers, an urgent care center, a majority interest in five ambulatory surgery centers, and a majority interest in oneother ambulatory surgery center in which we previously held a minority interest. In 2011, we also acquired 26 physician practice entities. All of theseacquisitions were in furtherance of our efforts to expand our outpatient services and increase our outpatient revenues. The aggregate purchase price of theacquisitions was $84 million, which we funded with cash on hand. Interest payments, net of capitalized interest, were $347 million, $402 million and $439 million in the years ended December 31, 2011, 2010 and2009, respectively. Interest payments were higher in the 2009 period as compared to the 2010 and 2011 periods primarily due to $23 million of interestpayments that were accelerated and paid in the year ended December 31, 2009 as a result of our exchange of approximately $1.4 billion aggregate principalamount of our 6/% senior notes due 2011 and our 6/% senior notes due 2012 for new senior secured notes, as well as other subsequent debt repurchasesthat reduced our outstanding debt and debt refinancings at lower interest rates. From time to time, we use interest rate swap agreements to manage our exposure to future changes in interest rates. We were party to an interest rateswap agreement for an aggregate notional amount of $600 million from February 14, 2011 through August 2, 2011. The interest rate swap agreement wasdesignated as a fair value hedge and was being used to manage our exposure to future changes in interest rates. It had the effect of converting our 10% seniorsecured notes due 2018 from a fixed interest rate paid semi-annually to a variable interest rate paid semi-annually based on the six-month London InterbankOffered Rate (“LIBOR”) plus a floating rate spread of 6.60%. During the term of the interest rate swap agreement, changes in the fair value of the interest rateswap agreement and changes in the fair value of the 10% senior secured notes, which we expected to substantially offset each other, were recorded in interestexpense. During the year ended December 31, 2011, our interest rate swap agreement generated approximately $8 million of cash interest savings and a $22million gain on the settlement of the agreement. In the year ended December 31, 2009, we entered into an interest rate swap agreement for an aggregate notional amount of $1 billion. That interest rateswap agreement was designated as a fair value hedge and was used to manage our exposure to future changes in interest rates. It had the effect of converting our7/% senior notes due 2013 from a fixed interest rate paid semi-annually to a variable interest rate paid monthly based on the one-month LIBOR plus afloating rate spread of approximately 5.46%. During the term of the interest rate swap agreement, changes in the fair value of the interest rate swap agreementand changes in the fair value of the 7/% senior notes, which substantially offset each other, were recorded in interest expense. To mitigate risks related topotential significant increases in the one-month LIBOR, we also entered into a separate agreement that limited the maximum one-month LIBOR to 8% under theinterest rate swap agreement. We realized approximately $8 million in net savings in interest payments during the term of the interest rate swap agreement,which we entered into in May 2009 and terminated in November 2009. Income tax payments, net of tax refunds, were approximately $10 million in the year ended December 31, 2011 compared to income tax refunds, netof tax payments, of approximately $34 million in the year ended December 31, 2010. At December 31, 2011, our carryforwards available to offset futuretaxable income consisted of (1) federal net operating loss 6738123838Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents (“NOL”) carryforwards of approximately $1.8 billion pretax expiring in 2024 to 2030, (2) approximately $20 million in alternative minimum tax credits withno expiration, (3) general business credit carryforwards of approximately $14 million expiring in 2023 to 2031, and (4) state NOL carryforwards of $3.3billion expiring in 2012 to 2031 for which the associated deferred tax benefit, net of valuation allowance and federal tax impact, is $32 million. Our ability toutilize NOL carryforwards to reduce future taxable income may be limited under Section 382 of the Internal Revenue Code if certain ownership changes in ourcompany occur during a rolling three-year period. These ownership changes include the offering of stock by us, the purchase or sale of our stock by 5%shareholders, as defined in the Treasury regulations, or the issuance or exercise of rights to acquire our stock. If such ownership changes by 5% shareholdersresult in aggregate increases that exceed 50 percentage points during the three-year period, then Section 382 imposes an annual limitation on the amount of ourtaxable income that may be offset by the NOL carryforwards or tax credit carryforwards at the time of ownership change. The White House and the U.S.Department of the Treasury recently released a report entitled “The President's Framework for Business Tax Reform” in which President Obama recommendedvarious changes to the Internal Revenue Code impacting businesses. Among the recommended changes is a proposal to reduce the corporate income tax ratefrom 35% to 28%. If the tax rate change is enacted, we would be required to revalue our deferred tax assets and liabilities using the lower tax rate, which wouldresult in a non-cash charge to deferred tax expense of approximately $145 million. In addition, there are other proposed changes that could affect ourdepreciation and interest expense deductions, but we are unable to estimate the potential impact at this time. No legislation has been introduced in Congress toeffectuate the proposed changes, and we cannot predict whether or when any such legislation might be enacted by Congress. Periodic examinations of our tax returns by the Internal Revenue Service (“IRS”) or other taxing authorities could result in the payment of additionaltaxes. The IRS has completed audits of our tax returns for all tax years ended on or before December 31, 2007. All disputed issues with respect to these auditshave been resolved, and all related tax assessments (including interest) have been paid. Tax returns for years ended after December 31, 2007 are not currentlyunder examination by the IRS. SOURCES AND USES OF CASH Our liquidity for the year ended December 31, 2011 was primarily derived from cash on hand and borrowings under our revolving credit facility. Wehad approximately $113 million of cash and cash equivalents on hand at December 31, 2011 to fund our operations and capital expenditures, and ourborrowing availability under our credit facility was $527 million based on our borrowing base calculation as of December 31, 2011. Our primary source of operating cash is the collection of accounts receivable. As such, our operating cash flow is negatively impacted by lower levelsof cash collections and higher levels of bad debt due to unfavorable shifts in payer mix, growth in admissions of uninsured and underinsured patients, andother factors. Net cash provided by operating activities was $497 million in the year ended December 31, 2011 compared to $472 million in the year endedDecember 31, 2010. Key negative and positive factors contributing to the change between the 2011 and 2010 periods include the following: · Increased income from continuing operations before income taxes of $95 million, excluding investment earnings, loss from earlyextinguishment of debt, interest expense, litigation and investigation costs, impairment and restructuring charges, and depreciation andamortization, in the year ended December 31, 2011 compared to the year ended December 31, 2010; · Lower interest payments of $55 million; · $30 million of proceeds from the interest rate swap agreement we terminated in August 2011, which generated approximately $8 million of cashinterest savings and $22 million in proceeds from the termination of the agreement; · Reduced cash flows associated with various changes in working capital and changes in long-term liabilities, including the following: · a $13 million receivable as of December 31, 2011 that is expected to be collected in 2012 related to state Medicaid EHR incentives under theHIT provisions of ARRA; · a $16 million receivable recorded as of December 31, 2011 related to the California supplemental Medi-Cal payment program that wasapproved by CMS in the three months ended December 31, 2011, which resulted in the recognition of $28 million of net revenues in theperiod; · a $6 million receivable recorded in the year ended December 31, 2011 related to the estimated recovery of the employer portion of certainpayroll taxes paid by us prior to April 2005 on behalf of medical residents that we expect will be refunded to us in 2012; and · $77 million of reduced net cash flows in the 2011 period compared to the 2010 period related to accounts receivable primarily due topayment delays by certain government payers and a temporary delay in the adjudication of accounts receivable due to processing changeswe implemented to capture long-term operating efficiencies, partially offset by our management of liabilities; 68Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents · Income tax payments of $10 million in the year ended December 31, 2011 compared to income tax refunds of $34 million in the year endedDecember 31, 2010; · Lower aggregate annual 401(k) matching contributions and annual incentive compensation payments of $20 million ($85 million in the yearended December 31, 2011 compared to $105 million in the year ended December 31, 2010); · Lower payments on reserves for restructuring charges and litigation costs of $39 million; and · $47 million of additional cash used in operating activities from discontinued operations (including approximately $13 million in paymentsrelating to the settlement of two class action lawsuits resulting from Hurricane Katrina). We continue to seek further initiatives to increase the efficiency of our balance sheet by generating incremental cash. These initiatives include the saleof excess land, buildings or other underutilized or inefficient assets. In December 2011, we sold seven medical office buildings in Texas for aggregate cashproceeds of $23 million. Capital expenditures were $475 million and $476 million in the years ended December 31, 2011 and 2010, respectively, including approximately$13 million in the year ended December 31, 2010 for construction of a replacement hospital for our East Cooper Regional Medical Center in Mount Pleasant,South Carolina. On May 9, 2011, we announced that our board of directors had authorized the repurchase of up to $400 million of our common stock through ashare repurchase program. Under the program, shares could be purchased in the open market or through privately negotiated transactions in a mannerconsistent with applicable securities laws and regulations, including pursuant to a Rule 10b5-1 plan maintained by the Company, at times and in amountsbased on market conditions and other factors. The share repurchase program, which was scheduled to expire on May 9, 2012, was completed inJanuary 2012. Pursuant to the share repurchase program, we paid approximately $400 million to repurchase a total of 81,073,864 shares (or an average of$4.94 per share). We record our investments that are available-for-sale at fair market value. As shown in Note 18 to the accompanying Consolidated FinancialStatements, the majority of our investments are valued based on quoted market prices or other observable inputs. We have no investments that we expect willbe negatively affected by the recent economic downturn that will materially impact our financial condition, results of operations or cash flows. DEBT INSTRUMENTS, GUARANTEES AND RELATED COVENANTS We have a senior secured revolving credit facility, as amended November 29, 2011 (“Credit Agreement”), that provides, subject to borrowingavailability, for revolving loans in an aggregate principal amount of up to $800 million, with a $300 million subfacility for standby letters of credit. TheCredit Agreement has a scheduled maturity date of November 29, 2016, subject to our repayment or refinancing on or before December 3, 2014 ofapproximately $238 million of the aggregate outstanding principal amount of our 9/% senior notes due 2015 (approximately $474 million of which wasoutstanding at December 31, 2011). If such repayment or refinancing does not occur, borrowings under the Credit Agreement will be due December 3, 2014.We are in compliance with all covenants and conditions in our Credit Agreement. Our borrowing availability under the Credit Agreement was $527 millionbased on our borrowing base calculation as of December 31, 2011. There were $80 million of cash borrowings outstanding under the revolving credit facilityat December 31, 2011, and we had approximately $164 million of standby letters of credit outstanding. In November 2011, we sold $900 million aggregate principal amount of 6/% senior secured notes due 2018. The notes will mature on November 1,2018. We will pay interest on the 6/% senior secured notes semi-annually in arrears on May 1 and November 1 of each year, with payments commencing onMay 1, 2012. The notes rank equally with our 8% senior secured notes due 2019, our 9% senior secured notes due 2015 and our 10% senior secured notesdue 2018, which we issued in the year ended December 31, 2009. Also in November 2011, we purchased approximately $713 million aggregate principal amount of our 9% senior secured notes due 2015 for totalcash of approximately $776 million, including approximately $4 million in accrued and unpaid interest through the dates of purchase. We purchased thesenior secured notes with a portion of the proceeds from our sale of new 6/% senior secured notes due 2018, as described above. In connection with thepurchase, we recorded a loss from early extinguishment of debt of approximately $117 million related to the difference between the purchase prices and the parvalues of the purchased notes, as well as the write-off of unamortized note discounts and issuance costs associated with the notes. 691414147814Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents We were party to an interest rate swap agreement for an aggregate notional amount of $600 million from February 14, 2011 through August 2, 2011.The interest rate swap agreement was designated as a fair value hedge and was being used to manage our exposure to future changes in interest rates. It had theeffect of converting our 10% senior secured notes due 2018 from a fixed interest rate paid semi-annually to a variable interest rate paid semi-annually based onthe six-month LIBOR plus a floating rate spread of 6.60%. During the term of the interest rate swap agreement, changes in the fair value of the interest rateswap agreement and changes in the fair value of the 10% senior secured notes, which we expected to substantially offset each other, were recorded in interestexpense. During the year ended December 31, 2011, our interest rate swap agreement generated approximately $8 million of cash interest savings and a $22million gain on the settlement of the agreement. For additional information regarding our long-term debt, see Note 6 to the accompanying Consolidated Financial Statements. LIQUIDITY From time to time, we expect to engage in additional capital markets, bank credit and other financing activities depending on our needs and financingalternatives available at that time. We believe our existing debt agreements provide significant flexibility for future secured or unsecured borrowings. Our cash on hand fluctuates day-to-day throughout the year based on the timing and levels of routine cash receipts and disbursements, including ourbook overdrafts, and required cash disbursements, such as interest and income tax payments. These fluctuations result in material intra-quarter net operatingand investing uses of cash that has caused, and in the future could cause, us to use our senior secured revolving credit facility as a source of liquidity. Wemay be required to pay the Medicare program approximately $50 million (which we reserved for in prior years) as a result of the SSI matter described under“Disproportionate Share Hospital Payments” under the caption “Sources of Revenue” above unless CMS changes its policy regarding the inclusion ofMedicare Advantage days in the calculation of the SSI ratio prior to its removal of the moratorium on cost report settlements. We would be required to make thepayments at the time of the cost report settlements pending the final outcome of our appeals related to this matter, which settlements could start occurring in2012. We believe that existing cash and cash equivalents on hand, availability under our revolving credit facility, anticipated future cash provided byoperating activities, and our investments in marketable securities of our captive insurance companies classified as noncurrent investments on our balancesheet should be adequate to meet our current cash needs. These sources of liquidity should also be adequate to finance planned capital expenditures, paymentson the current portion of our long-term debt and other presently known operating needs. Long-term liquidity for debt service will be dependent on improved cash provided by operating activities and, given favorable market conditions,future borrowings or refinancings. However, our cash requirements could be materially affected by the use of cash in acquisitions of businesses andrepurchases of securities, and also by a deterioration in our results of operations, as well as the various uncertainties discussed in this and other sections ofthis report, which could require us to pursue any number of financing options, including, but not limited to, additional borrowings, debt refinancings, assetsales or other financing alternatives. The level, if any, of these financing sources cannot be assured. We do not rely on commercial paper or other short-term financing arrangements nor do we enter into repurchase agreements or other short-termfinancing arrangements not otherwise reported in our period-end balance sheets. We do not have any significant European sovereign debt exposure. We continue to aggressively identify and implement further actions to control costs and enhance our operating performance, including cash flow.Among the areas being addressed are volume growth, including the acquisition of outpatient businesses, physician recruitment and alignment strategies,expansion of our revenue cycle management services, managed care payer contracting, procurement efficiencies, cost standardization, bad debt expensereduction initiatives, underperforming hospitals, and certain hospital and overhead costs not related to patient care. Although these initiatives may result inimproved performance, that performance may remain somewhat below our hospital management peers because of geographic and other differences in hospitalportfolios. OFF-BALANCE SHEET ARRANGEMENTS Our consolidated operating results for the years ended December 31, 2011, 2010 and 2009 include $908 million, $874 million and $856 million,respectively, of net operating revenues and $115 million, $94 million and $99 million, respectively, of operating income generated from four general hospitalsoperated by us under lease arrangements. In accordance with GAAP, the applicable buildings and the future lease obligations under these arrangements are notrecorded on our consolidated balance sheet as they are considered operating leases. The current terms of these leases expire between 2014 and 2027, notincluding lease extensions that we have options to exercise. If these leases expire, we would no longer generate revenue or expenses from these hospitals. 70Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents We have no other off-balance sheet arrangements that may have a current or future material effect on our financial condition, revenues or expenses,results of operations, liquidity, capital expenditures or capital resources, except for $319 million of standby letters of credit outstanding and guarantees as ofDecember 31, 2011. RECENTLY ISSUED ACCOUNTING STANDARDS See Note 21 to our Consolidated Financial Statements included in this report for a discussion of recently issued accounting standards. CRITICAL ACCOUNTING ESTIMATES In preparing our Consolidated Financial Statements in conformity with GAAP, we must use estimates and assumptions that affect the amountsreported in our Consolidated Financial Statements and accompanying notes. We regularly evaluate the accounting policies and estimates we use. In general, webase the estimates on historical experience and on assumptions that we believe to be reasonable, given the particular circumstances in which we operate. Actualresults may vary from those estimates. We consider our critical accounting estimates to be those that (1) involve significant judgments and uncertainties, (2) require estimates that are moredifficult for management to determine, and (3) may produce materially different outcomes under different conditions or when using different assumptions. Our critical accounting estimates cover the following areas: · Recognition of net operating revenues before provision for doubtful accounts, including contractual allowances;· Provisions for doubtful accounts;· Electronic health record incentives;· Accruals for general and professional liability risks;· Accruals for supplemental executive retirement plans;· Accruals for litigation losses;· Impairment of long-lived assets and goodwill;· Accounting for income taxes; and· Accounting for stock-based compensation. REVENUE RECOGNITION We recognize net operating revenues before provision for doubtful accounts in the period in which our services are performed. Net operating revenuesbefore provision for doubtful accounts primarily consist of net patient service revenues that are recorded based on established billing rates (i.e., gross charges),less estimated discounts for contractual and other allowances, principally for patients covered by Medicare, Medicaid, and managed care and other healthplans, as well as certain uninsured patients under the Compact. Revenues under the traditional fee-for-service Medicare and Medicaid programs are based primarily on prospective payment systems. Retrospectivelydetermined cost-based revenues under these programs, which were more prevalent in earlier periods, and certain other payments, such as DSH, DGME, IMEand bad debt expense, which are based on our hospitals’ cost reports, are estimated using historical trends and current factors. Cost report settlements underthese programs are subject to audit by Medicare and Medicaid auditors and administrative and judicial review, and it can take several years until finalsettlement of such matters is determined and completely resolved. Because the laws, regulations, instructions and rule interpretations governing Medicare andMedicaid reimbursement are complex and change frequently, the estimates recorded by us could change by material amounts. We have a system and estimation process for recording Medicare net patient revenue and estimated cost report settlements. This results in usrecording accruals to reflect the expected final settlements on our cost reports. For filed cost reports, we record the accrual based on those cost reports andsubsequent activity, and record a valuation allowance against those cost reports based on historical settlement trends. The accrual for periods for which a costreport is yet to be filed is recorded based on estimates of what we expect to report on the filed cost reports, and a corresponding valuation allowance is recordedas previously described. Cost reports must generally be filed within five months after the end of the annual cost report reporting period. After the cost report isfiled, the accrual and corresponding valuation allowance may need to be adjusted. 71Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Revenues under managed care plans are based primarily on payment terms involving predetermined rates per diagnosis, per-diem rates, discountedfee-for-service rates and other similar contractual arrangements. These revenues are also subject to review and possible audit by the payers. The payers arebilled for patient services on an individual patient basis. An individual patient’s bill is subject to adjustment on a patient-by-patient basis in the ordinarycourse of business by the payers following their review and adjudication of each particular bill. We estimate the discounts for contractual allowances at theindividual hospital level utilizing billing data on an individual patient basis. At the end of each month, on an individual hospital basis, we estimate ourexpected reimbursement for patients of managed care plans based on the applicable contract terms. We believe it is reasonably likely for there to be anapproximately 3% increase or decrease in the estimated contractual allowances related to managed care plans. Based on reserves as of December 31, 2011, a 3%increase or decrease in the estimated contractual allowance would change the estimated reserves by approximately $9 million. Some of the factors that cancontribute to changes in the contractual allowance estimates include: (1) changes in reimbursement levels for procedures, supplies and drugs when thresholdlevels are triggered; (2) changes in reimbursement levels when stop-loss or outlier limits are reached; (3) changes in the admission status of a patient due tophysician orders subsequent to initial diagnosis or testing; (4) final coding of in-house and discharged-not-final-billed patients that change reimbursementlevels; (5) secondary benefits determined after primary insurance payments; and (6) reclassification of patients among insurance plans with different coveragelevels. Contractual allowance estimates are periodically reviewed for accuracy by taking into consideration known contract terms, as well as payment history.Although we do not separately accumulate and disclose the aggregate amount of adjustments to the estimated reimbursement for every patient bill, we believeour estimation and review process enables us to identify instances on a timely basis where such estimates need to be revised. We do not believe there were anyadjustments to estimates of individual patient bills that were material to our revenues. In addition, on a corporate-wide basis, we do not record any generalprovision for adjustments to estimated contractual allowances for managed care plans. Revenues related to self-pay patients may qualify for a discount under the Compact, whereby the gross charges based on established billing rateswould be reduced by an estimated discount for contractual allowance. We believe that adequate provision has been made for any adjustments that may result from final determination of amounts earned under all theabove arrangements. We know of no material claims, disputes or unsettled matters with any payers that would affect our revenues for which we have notadequately provided for in our Consolidated Financial Statements. PROVISIONS FOR DOUBTFUL ACCOUNTS Although outcomes vary, our policy is to attempt to collect amounts due from patients, including co-payments and deductibles due from patientswith insurance, at the time of service while complying with all federal and state laws and regulations, including, but not limited to, the Emergency MedicalTreatment and Active Labor Act (“EMTALA”). Generally, as required by EMTALA, patients may not be denied emergency treatment due to inability to pay.Therefore, services, including the legally required medical screening examination and stabilization of the patient, are performed without delaying to obtaininsurance information. In non-emergency circumstances or for elective procedures and services, it is our policy to verify insurance prior to a patient beingtreated; however, there are various exceptions that can occur. Such exceptions can include, for example, instances where (1) we are unable to obtain verificationbecause the patient’s insurance company was unable to be reached or contacted, (2) a determination is made that a patient may be eligible for benefits undervarious government programs, such as Medicaid or Victims of Crime, and it takes several days or weeks before qualification for such benefits is confirmedor denied, and (3) under physician orders we provide services to patients that require immediate treatment. We provide for an allowance against accounts receivable that could become uncollectible by establishing an allowance to reduce the carrying value ofsuch receivables to their estimated net realizable value. We estimate this allowance based on the aging of our accounts receivable by hospital, our historicalcollection experience by hospital and for each type of payer over an 18-month look-back period, and other relevant factors. Based on our accounts receivablefrom self-pay patients and co-payments and deductibles owed to us by patients with insurance as of December 31, 2011, a 10% decrease or increase in ourself-pay collection rate, or approximately 3%, which we believe could be a reasonable likely change, would result in an unfavorable or favorable adjustment toprovision for doubtful accounts of approximately $6 million. There are various factors that can impact collection trends, such as changes in the economy,which in turn have an impact on unemployment rates and the number of uninsured and underinsured patients, the volume of patients through our emergencydepartments, the increased burden of co-payments and deductibles to be made by patients with insurance, and business practices related to collection efforts.These factors continuously change and can have an impact on collection trends and our estimation process. Our practice is to reduce the net carrying value of self-pay accounts receivable, including accounts related to the co-payments and deductibles duefrom patients with insurance, to their estimated net realizable value at the time of billing. Generally, uncollected balances are assigned to our Conifer collectionagency subsidiary between 90 to 180 days, once patient responsibility has been identified. When accounts are assigned to our Conifer collection agencysubsidiary by the hospital, the 72Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents accounts are completely written off the hospital’s books through the provision for doubtful accounts, and an estimated future recovery amount is calculatedand recorded as a receivable on the hospital’s books at the same time. The estimated future recovery amount is adjusted based on the aging of the accounts andchanges to actual recovery rates. The estimated future recovery amount for self-pay accounts is gradually written down whereby it is fully reserved if theamount is not paid within two years after the account is assigned to our Conifer collection agency subsidiary. Managed care accounts are collected through the regional business offices of Conifer, whereby the account balances remain in the related hospital’spatient accounting system and on the hospital’s books, and are adjusted based on an analysis of the net realizable value as they age. Managed care accountsare gradually written down whereby they are fully reserved if the accounts are not paid within two years. Changes in the collectability of aged managed care accounts receivable are ongoing and impact our provision for doubtful accounts. We continue toexperience payment pressure from managed care companies concerning amounts of past billings. We aggressively pursue collection of these accounts receivableusing all means at our disposal, including arbitration and litigation, but we may not be successful. ELECTRONIC HEALTH RECORD INCENTIVES Under certain provisions of ARRA, federal incentive payments are available to hospitals, physicians and certain other professionals when theyadopt, implement or upgrade (“AIU”) certified EHR technology or become “meaningful users,” as defined under ARRA, of EHR technology in ways thatdemonstrate improved quality, safety and effectiveness of care. Providers can become eligible for annual Medicare incentive payments by demonstratingmeaningful use of EHR technology in each period over four periods. Medicaid providers can receive their initial incentive payment by satisfying AIU criteria,but must demonstrate meaningful use of EHR technology in subsequent years in order to qualify for additional payments. Hospitals may be eligible for bothMedicare and Medicaid EHR incentive payments; however, physicians and other professionals may be eligible for either Medicare or Medicaid incentivepayments, but not both. Hospitals that are meaningful users under the Medicare EHR incentive payment program are deemed meaningful users under theMedicaid EHR incentive payment program and do not need to meet additional criteria imposed by a state. Medicaid EHR incentive payments to Providers are100% federally funded and administered by the states. CMS established calendar year 2011 as the first year states could offer EHR incentive payments.Before a state may offer EHR incentive payments, the state must submit and CMS must approve the state’s incentive plan. We recognize Medicaid EHR incentive payments in our consolidated statements of operations for the first payment year when: (1) CMS approves astate’s EHR incentive plan; and (2) our hospital or employed physician acquires certified EHR technology (i.e., when AIU criteria are met). Medicaid EHRincentive payments for subsequent payment years are recognized in the period during which the specified meaningful use criteria are met. We recognizeMedicare EHR incentive payments when: (1) the specified meaningful use criteria are met; and (2) contingencies in estimating the amount of the incentivepayments to be received are resolved. The meaningful use information submitted to CMS is subject to review, verification and audit. Additionally, the final Medicare and Medicaid EHRincentive payments under ARRA are based on financial and statistical data, which may be estimated using historical trends and current factors, in the settledMedicare cost report for the cost reporting period that begins in the federal fiscal year in which the criteria are met. We have acquired, developed andimplemented systems to accumulate the information necessary to demonstrate meaningful use of EHR technology. We also have a system and estimationprocess for recording the financial and statistical data utilized as part of the cost reporting process. Cost reports must generally be filed within five monthsafter the end of the annual cost report reporting period. Cost report settlements are subject to audit by Medicare and Medicaid auditors and administrative andjudicial review, and it can take several years until final settlement of such matters is determined and completely resolved. Because the laws, regulations,instructions and rule interpretations governing Medicare and Medicaid reimbursement are complex and change frequently, the estimates recorded by us couldchange by material amounts. Final settlement of cost reports, which could impact the financial and statistical data on which EHR incentives are based, or adetermination that meaningful use was not attained could result in adjustment to previously-recognized EHR incentive payments or retrospective recoupment ofincentive payments. 73Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents ACCRUALS FOR GENERAL AND PROFESSIONAL LIABILITY RISKS We accrue for estimated professional and general liability claims, to the extent not covered by insurance, when they are probable and can bereasonably estimated. We maintain reserves, which are based on actuarial estimates for the portion of our professional liability risks, including incurred butnot reported claims, to the extent we do not have insurance coverage. Our liability consists of estimates established based upon discounted actuarialcalculations using several factors, including the number of expected claims, estimates of losses for these claims based on recent and historical settlementamounts, estimates of incurred but not reported claims based on historical experience, the timing of historical payments, and risk free discount rates used todetermine the present value of projected payments. We consider the number of expected claims, average cost per claim and discount rate to be the mostsignificant assumptions in estimating accruals for general and professional liabilities. Our liabilities are adjusted for new claims information in the periodsuch information becomes known. Malpractice expense is recorded within other operating expenses in the accompanying Consolidated Statements ofOperations. Our estimated reserves for professional and general liability claims will change significantly if future claims differ from expected trends. We believe itis reasonably likely for there to be a 5% increase or decrease in the number of expected claims or average cost per claim. Based on our reserves and otherinformation as of December 31, 2011, a 5% increase in the number of expected claims would increase the estimated reserves by $41 million, and a 5%decrease in the number of expected claims would decrease the estimated reserves by $24 million. A 5% increase in the average cost per claim would increase theestimated reserves by $64 million, and a 5% decrease in the average cost per claim would decrease the estimated reserves by $44 million. Because ourestimated reserves for future claim payments are discounted to present value, a change in our discount rate assumption could also have a significant impact onour estimated reserves. Our discount rate was 1.35%, 2.71% and 2.69% at December 31, 2011, 2010 and 2009, respectively. A 100 basis point increase ordecrease in the discount rate would change the estimated reserves by $11 million. In addition, because of the complexity of the claims, the extended period oftime to settle the claims and the wide range of potential outcomes, our ultimate liability for professional and general liability claims could change materiallyfrom our current estimates. The table below shows the case reserves and incurred but not reported and loss development reserves as of December 31, 2011, 2010 and 2009: December 31,201120102009Case reserves$111$149$153Incurred but not reported and loss development reserves319357472Total undiscounted reserves$430$506$625 Several actuarial methods, including the incurred, paid loss development and Bornhuetter-Ferguson methods, are applied to our historical loss datato produce estimates of ultimate expected losses and the resulting incurred but not reported and loss development reserves. These methods use our specifichistorical claims data related to paid losses and loss adjustment expenses, historical and current case reserves, reported and closed claim counts, and a varietyof hospital census information. Based on these analyses, we determine our estimate of the professional liability claims, including the incurred but not reportedand loss development reserve estimates. The determination of our estimates involves subjective judgment and could result in material changes to our estimatesin future periods if our actual experience is materially different than our assumptions. Malpractice claims generally take 4 to 5 years to settle from the time of the initial reporting of the occurrence to the settlement payment. Accordingly,the percentage of undiscounted reserves as of December 31, 2011 and 2010 representing unsettled claims is approximately 98% and 99%, respectively. 74Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents The following table, which includes both our continuing and discontinued operations, presents the amount of our accruals for professional liabilityclaims and the corresponding activity therein: Years Ended December 31,201120102009Accrual for professional liability claims, beginning of the year$467$572$663Expense (income) related to:(1)Current year107125121Prior years10(98)(74)Expense from discounting22109Total incurred loss and loss expense1393756Paid claims and expenses related to:Current year(2)(2)(1)Prior years(192)(140)(146)Total paid claims and expenses(194)(142)(147)Accrual for professional liability claims, end of year$412$467$572 (1) Total malpractice expense for continuing operations, including premiums for insured coverage, was $110 million, $57 million and $89 million inthe years ended December 31, 2011, 2010 and 2009, respectively. ACCRUALS FOR SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS Our supplemental executive retirement plan benefit obligations and related costs are calculated using actuarial concepts. The discount rate is a criticalassumption in determining the elements of expense and liability measurement. We evaluate this critical assumption annually. Other assumptions includeemployee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increase. The discount rate enables us to state expected future cash payments for benefits as a present value on the measurement date. The guideline for settingthis rate is a high-quality long-term corporate bond rate. A lower discount rate increases the present value of benefit obligations and increases pension expense.Our discount rate for 2011 was 5.0% and for 2010 was 5.50%. The assumed discount rate for pension plans reflects the market rates for high-qualitycorporate bonds currently available. A 100 basis point decrease in the assumed discount rate would increase total net periodic pension expense for 2012 byapproximately $4 million and would increase the projected benefit obligation at December 31, 2011 by approximately $31 million. A 100 basis point increasein the assumed discount rate would decrease net periodic pension expense for 2012 by approximately $3 million and decrease the projected benefit obligation atDecember 31, 2011 by approximately $26 million. ACCRUALS FOR LITIGATION LOSSES We record reserves for litigation losses if a loss is probable and can be reasonably estimated. We record probable loss contingencies based on the bestestimate of the loss. If a range of loss can be reasonably estimated, but no single amount within the range appears to be a better estimate than any other amountwithin the range, the minimum amount in the range is accrued. These estimates are often initially developed earlier than when the ultimate loss is known, andthe estimates are adjusted if additional information becomes known. IMPAIRMENT OF LONG-LIVED ASSETS We evaluate our long-lived assets for possible impairment annually or whenever events or changes in circumstances indicate that the carrying amountof the asset, or related group of assets, may not be recoverable from estimated future undiscounted cash flows. If the estimated future undiscounted cash flowsare less than the carrying value of the assets, we calculate the amount of an impairment charge if the carrying value of the long-lived assets exceeds the fairvalue of the assets. The fair value of the assets is estimated based on appraisals, established market values of comparable assets or internal estimates of futurenet cash flows expected to result from the use and ultimate disposition of the asset. The estimates of these future cash flows are based on assumptions andprojections we believe to be reasonable and supportable. They require our subjective judgments and take into account assumptions about revenue and expensegrowth rates. These assumptions may vary by type of facility and presume stable, improving or, in some cases, declining results at our hospitals, dependingon their circumstances. If the presumed level of performance does not occur as expected, impairment may result. 75Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents We report long-lived assets to be disposed of at the lower of their carrying amounts or fair values less costs to sell. In such circumstances, ourestimates of fair value are based on appraisals, established market prices for comparable assets or internal estimates of future net cash flows. Fair value estimates can change by material amounts in subsequent periods. Many factors and assumptions can impact the estimates, including thefollowing risks: · future financial results of our hospitals, which can be impacted by volumes of insured patients and declines in commercial managed carepatients, terms of managed care payer arrangements, our ability to collect accounts due from uninsured and managed care payers, loss ofvolumes as a result of competition, and our ability to manage costs such as labor costs, which can be adversely impacted by union activityand the shortage of experienced nurses; · changes in payments from governmental health care programs and in government regulations such as reductions to Medicare and Medicaidpayment rates resulting from government legislation or rule-making or from budgetary challenges of states in which we operate; · how the hospitals are operated in the future; and · the nature of the ultimate disposition of the assets. During the year ended December 31, 2011, we recorded net impairment and restructuring charges of $27 million. This amount included a$6 million impairment charge for the write-down of buildings and equipment of one of our previously impaired hospitals to their estimated fair valuesprimarily due to a decline in the fair value of real estate in the market in which the hospital operates and a decline in the estimated fair value of equipment.Material adverse trends in our most recent estimates of future undiscounted cash flows of the hospital, consistent with our previous estimates in prior yearswhen impairment charges were recorded at this hospital, indicated the carrying value of the hospital’s long-lived assets was not recoverable from the estimatedfuture cash flows. We believe the most significant factors contributing to the continuing adverse financial trends include reductions in volumes of insuredpatients, shifts in payer mix from commercial to governmental payers combined with reductions in reimbursement rates from governmental payers, and highlevels of uninsured patients. As a result, we updated the estimate of the fair value of the hospital’s long-lived assets and compared the fair value estimate to thecarrying value of the hospital’s long-lived assets. Because the fair value estimate was lower than the carrying value of the hospital’s long-lived assets, animpairment charge was recorded for the difference in the amounts. Unless the anticipated future financial trends of this hospital improve to the extent that theestimated future undiscounted cash flows exceed the carrying value of the long-lived assets, this hospital is at risk of future impairments, particularly if wespend significant amounts of capital at the hospital without generating a corresponding increase in the hospital’s fair value or if the fair value of the hospital’sreal estate or equipment continues to decline. The aggregate carrying value of assets held and used of the hospital for which an impairment charge was recordedwas $20 million as of December 31, 2011 after recording the impairment charge. Additionally, in our most recent impairment analysis as of December 31,2011, we had three hospitals with an aggregate carrying value of long-lived assets of approximately $223 million whose estimated future undiscounted cashflows exceeded the carrying value of long-lived assets by an aggregate amount of approximately $450 million. These three hospitals had the smallest excess offuture undiscounted cash flows on an annual basis necessary to recover the carrying value of their assets. Future adverse trends that result in necessarychanges in the assumptions underlying these estimates of future undiscounted cash flows could result in the hospitals’ estimated cash flows being less thanthe carrying value of the assets, which would require a fair value assessment of the long-lived assets, and if the fair value amount is less than the carryingvalue of the assets, impairment charges would occur and could be material. We also recorded 2011 impairment charges of $1 million in connection with thesale of seven medical office buildings in Texas, $1 million related to a cost basis investment, $7 million in employee severance costs, $3 million in leasetermination costs, $1 million of acceleration of stock-based compensation costs and $2 million of other related costs. IMPAIRMENT OF GOODWILL Goodwill represents the excess of costs over the fair value of assets of businesses acquired. Goodwill and other intangible assets acquired in purchasebusiness combinations and determined to have indefinite useful lives are not amortized, but instead are subject to impairment tests performed at least annually.For goodwill, we perform the test at the reporting unit level, as defined by applicable accounting standards, when events occur that require an evaluation to beperformed or at least annually. If we determine the carrying value of goodwill is impaired, or if the carrying value of a business that is to be sold or otherwisedisposed of exceeds its fair value, then we reduce the carrying value, including any allocated goodwill, to fair value. Estimates of fair value are based onappraisals, established market prices for comparative assets or internal estimates of future 76Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents net cash flows and presume stable, improving or, in some cases, declining results at our hospitals, depending on their circumstances. If the presumed level ofperformance does not occur as expected, impairment may result. Our continuing operations are structured as follows: · Our California region includes all of our hospitals in California and Nebraska; · Our Central region includes all of our hospitals in Missouri, Tennessee and Texas; · Our Florida region includes all of our hospitals in Florida; and · Our Southern States region includes all of our hospitals in Alabama, Georgia, North Carolina, Pennsylvania and South Carolina. These regions are reporting units used to perform our goodwill impairment analysis and are one level below our operating segment level. Our hospitals inPennsylvania, which were previously part of a separate market, became part of our Southern States region effective May 1, 2011. This change did not haveany impact on our consolidated financial condition, results of operations or cash flows. In addition, we operate diagnostic imaging centers in Louisiana thatare not part of our regional structure described above and are considered a separate reporting unit for goodwill impairment analysis purposes. Futurerestructuring of our regions that changes our goodwill reporting units could also result in further impairments of our goodwill. Our goodwill balance is primarily related to our Southern States region, which totals approximately $346 million, and our Central region, whichtotals approximately $330 million. In our latest impairment analysis as of December 31, 2011, the estimated fair value of these regions exceeded the carryingvalue of long-lived assets, including goodwill, by approximately 30% and 53%, respectively. During the year ended December 31, 2011, we recorded a $6million charge for the write-off of goodwill associated with the diagnostic imaging centers in Louisiana. Material adverse trends in our most recent estimates ofoperating results of the centers, primarily due to our limited market presence, indicated that the carrying value of the goodwill exceeded its fair value. As aresult, we reduced the carrying value of the goodwill to its fair value determined based on an appraisal. ACCOUNTING FOR INCOME TAXES We account for income taxes using the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for theexpected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Income tax receivables andliabilities and deferred tax assets and liabilities are recognized based on the amounts that more likely than not will be sustained upon ultimate settlement withtaxing authorities. Developing our provision for income taxes and analysis of uncertain tax positions items requires significant judgment and knowledge of federal andstate income tax laws, regulations and strategies, including the determination of deferred tax assets and liabilities and, if necessary, any valuation allowancesthat may be required for deferred tax assets. We assess the realization of our deferred tax assets to determine whether an income tax valuation allowance is required. Based on all availableevidence, both positive and negative, and the weight of that evidence to the extent such evidence can be objectively verified, we determine whether it is morelikely than not that all or a portion of the deferred tax assets will be realized. The main factors that we consider include: · Cumulative profits/losses in recent years, adjusted for certain nonrecurring items; · Income/losses expected in future years; · Unsettled circumstances that, if unfavorably resolved, would adversely affect future operations and profit levels; · The availability, or lack thereof, of taxable income in prior carryback periods that would limit realization of tax benefits; and · The carryforward period associated with the deferred tax assets and liabilities. Prior to the year ended December 31, 2010, we had not included projections of future taxable income in the determination of the amount of therequired valuation allowance primarily as a result of negative evidence represented by our cumulative losses in recent years. However, during the year endedDecember 31, 2010, our judgment about the need for a 77Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents valuation allowance changed, and we concluded that the valuation allowance could be reduced to $66 million. As a result, the reduction in the valuationallowance of approximately $1.1 billion was recorded as a benefit in the provision for income taxes from continuing operations. Our change in judgmentresulted from our assessment that positive evidence outweighed negative evidence during 2010 thereby resulting in the inclusion of projections of future taxableincome in the determination of the amount of the required valuation allowance. The following factors were taken into account in our assessment: · Cumulative profits for the three years ended December 31, 2010; · Projected profits for 2011 based on current business plans; · Carryforward periods for utilization of federal net operating loss carryovers; · Significant improvement in operating performance in 2009 and 2010 as evidenced by:· Improved cost controls;· Successful renegotiation of managed care contracts on favorable terms;· Successful quality control initiatives as reflected by improved clinical outcomes;· Successful execution of physician alignment strategies; and· Expansion of our outpatient business; and · Formulation of strategic initiatives to address uncertainties presented by the Affordable Care Act and health information technology requirementsunder ARRA. During the year ended December 31, 2011, we reduced the valuation allowance by an additional $5 million based on 2011 profits and projected profits for2012. The remaining $61 million balance in the valuation allowance as of December 31, 2011 is primarily attributable to certain state net operating losscarryovers that, more likely than not, will expire unutilized. We consider many factors when evaluating our uncertain tax positions, and such judgments are subject to periodic review. Tax benefits associatedwith uncertain tax positions are recognized in the period in which one of the following conditions is satisfied: (1) the more likely than not recognition thresholdis satisfied; (2) the position is ultimately settled through negotiation or litigation; or (3) the statute of limitations for the taxing authority to examine andchallenge the position has expired. Tax benefits associated with an uncertain tax position are derecognized in the period in which the more likely than notrecognition threshold is no longer satisfied. While we believe we have adequately provided for our income tax receivables or liabilities and our deferred tax assets or liabilities, adversedeterminations by taxing authorities or changes in tax laws and regulations could have a material adverse effect on our consolidated financial position, resultsof operations or cash flows. ACCOUNTING FOR STOCK-BASED COMPENSATION We account for the cost of stock-based compensation using the fair-value method, under which the cost of stock option grants and other incentiveawards to employees, directors, advisors and consultants is measured by the fair value of the awards on their grant dates and is recognized over the requisiteservice periods of the awards, whether or not the awards had any intrinsic value during the period. We estimate the fair value of stock option grants as of thedate of each grant, using a binomial lattice model. The key assumptions of the binomial lattice model include: · Expected volatility;· Expected dividend yield;· Expected life;· Expected forfeiture rate;· Risk-free interest rate range;· Early exercise threshold; and· Early exercise rate. The expected volatility used in the binomial lattice model incorporates historical and implied share-price volatility and is based on an analysis ofhistorical prices of our stock and open market exchanged options. The expected volatility reflects the historical volatility for a duration consistent with thecontractual life of the options, and the volatility implied by the trading of options to purchase our stock on open-market exchanges. The historical share-pricevolatility excludes the movements in our stock price during the period October 1, 2002 through December 31, 2002 due to unique events occurring during thattime, 78Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents which caused extreme volatility of our stock price. The expected life of options granted is derived from the output of the binomial lattice model and representsthe period of time that the options are expected to be outstanding. This model incorporates an early exercise assumption in the event of a significant increase instock price. The risk-free interest rates are based on zero-coupon U.S. Treasury yields in effect at the date of grant consistent with the expected exercisetimeframes. The most critical of the above assumptions in our calculations of fair value is the expected life of an option, because it is a principal part of ourcalculations of expected volatility and interest rates. Accordingly, we reevaluate our estimate of expected life at each major grant date. Our reevaluation is basedon recent exercise patterns. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The table below presents information about certain of our market-sensitive financial instruments as of December 31, 2011. The fair values weredetermined based on quoted market prices for the same or similar instruments. The average effective interest rates presented are based on the rate in effect at thereporting date. The effects of unamortized premiums and discounts are excluded from the table. Maturity Date, Years Ending December 31,20122013201420152016ThereafterTotalFair Value(Dollars in Millions)Fixed rate long-term debt$66$226$67$476$2$3,572$4,409$4,628Average effective interestrates6.4%7.7%10.2%9.5%7.3%9.0%9.0% Variable rate long-term debt$—$—$—$—$80$—$80$80Average effective interestrates————2.78%—2.78% At December 31, 2011, the potential reduction of annual pretax earnings due to a one percentage point (100 basis point) increase in variable interestrates on long-term debt would be approximately $1 million. At December 31, 2011, we had long-term, market-sensitive investments held by our captive insurance subsidiaries. Our market risk associated withour investments in debt securities classified as non-current assets is substantially mitigated by the long-term nature and type of the investments in theportfolio. At December 31, 2011, the net accumulated unrealized gains related to our captive insurance companies’ investment portfolios were less than$1 million. We have no affiliation with partnerships, trusts or other entities (sometimes referred to as “special-purpose” or “variable-interest” entities) whosepurpose is to facilitate off-balance sheet financial transactions or similar arrangements by us. Thus, we have no exposure to the financing, liquidity, market orcredit risks associated with such entities. We do not hold or issue derivative instruments for trading purposes and are not a party to any instruments with leverage or prepayment features. 79Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING To Our Shareholders: Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. Management assessed the effectiveness of Tenet’s internal control over financial reporting as ofDecember 31, 2011. This assessment was performed under the supervision of and with the participation of management, including the chief executive officerand chief financial officer. In making this assessment, management used criteria based on the framework in Internal Control—Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on the assessment using the COSO framework, managementconcluded that Tenet’s internal control over financial reporting was effective as of December 31, 2011. Tenet’s internal control over financial reporting as of December 31, 2011 has been audited by Deloitte & Touche LLP, an independent registeredpublic accounting firm, as stated in their report, which is included herein. Deloitte & Touche LLP has also audited Tenet’s Consolidated Financial Statementsas of and for the year ended December 31, 2011, and that firm’s audit report on such Consolidated Financial Statements is also included herein. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherentlimitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment andbreakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override.Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financialreporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the processsafeguards to reduce, though not eliminate, this risk. /s/ TREVOR FETTER/s/ BIGGS C. PORTERTrevor FetterBiggs C. PorterPresident and Chief Executive OfficerChief Financial OfficerFebruary 27, 2012February 27, 2012 80Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders ofTenet Healthcare CorporationDallas, Texas We have audited the internal control over financial reporting of Tenet Healthcare Corporation and subsidiaries (the “Company”) as of December 31, 2011,based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the TreadwayCommission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testingand evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principalfinancial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accountingprinciples, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’sassets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override ofcontrols, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of theeffectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changesin conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on thecriteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financialstatements and financial statement schedule as of and for the year ended December 31, 2011, of the Company and our report dated February 27, 2012,expressed an unqualified opinion on those financial statements and financial statement schedule and included an explanatory paragraph regarding theCompany’s adoption of provisions of accounting guidance related to the presentation of the provision for doubtful accounts receivable in the consolidatedstatement of operations, effective December 31, 2011. /s/ DELOITTE & TOUCHE LLP Dallas, TexasFebruary 27, 2012 81Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders ofTenet Healthcare CorporationDallas, Texas We have audited the accompanying consolidated balance sheets of Tenet Healthcare Corporation and subsidiaries (the “Company”) as of December 31, 2011and 2010, and the related consolidated statements of operations, other comprehensive income (loss), changes in equity, and cash flows for each of the threeyears in the period ended December 31, 2011. Our audits also included the financial statement schedule listed in the Index at Item 15. These financialstatements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financialstatements and financial statement schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Tenet Healthcare Corporation andsubsidiaries at December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period endedDecember 31, 2011, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financialstatement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, theinformation set forth therein. As discussed in Note 1 to the consolidated financial statements, the Company adopted requirements of accounting guidance related to the presentation of theprovision for doubtful accounts receivable in the consolidated statement of operations, effective December 31, 2011. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal controlover financial reporting as of December 31, 2011, based on the criteria established in Internal Control—Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission and our report dated February 27, 2012, expressed an unqualified opinion on the Company’sinternal control over financial reporting. /s/ DELOITTE & TOUCHE LLP Dallas, TexasFebruary 27, 2012 82Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents CONSOLIDATED BALANCE SHEETSDollars in Millions December 31,December 31,20112010ASSETSCurrent assets:Cash and cash equivalents$113$405Accounts receivable, less allowance for doubtful accounts ($397 at December 31, 2011 and $352 atDecember 31, 2010)1,2781,143Inventories of supplies, at cost161156Income tax receivable722Current portion of deferred income taxes418282Assets held for sale214Other current assets378289Total current assets2,3572,311Investments and other assets156164Deferred income taxes, net of current portion374627Property and equipment, at cost, less accumulated depreciation and amortization ($3,386 atDecember 31, 2011 and $3,100 at December 31, 2010)4,3504,304Goodwill736652Other intangible assets, at cost, less accumulated amortization ($360 at December 31, 2011 and $302 atDecember 31, 2010)489442Total assets$8,462$8,500LIABILITIES AND EQUITYCurrent liabilities:Current portion of long-term debt$66$67Accounts payable760720Accrued compensation and benefits376363Professional and general liability reserves7584Accrued interest payable112115Accrued legal settlement costs648Other current liabilities362368Total current liabilities1,8151,725Long-term debt, net of current portion4,2943,997Professional and general liability reserves337383Accrued legal settlement costs222Other long-term liabilities506554Total liabilities6,9546,681Commitments and contingenciesRedeemable noncontrolling interests in equity of consolidated subsidiaries160Equity:Shareholders’ equity:Preferred stock, $0.15 par value; authorized 2,500,000 shares; 345,000 of 7% mandatory convertibleshares with a liquidation preference of $1,000 per share issued at both December 31, 2011 and 2010334334Common stock, $0.05 par value; authorized 1,050,000,000 shares; 551,468,550 shares issued atDecember 31, 2011 and 550,882,110 shares issued at December 31, 20102727Additional paid-in capital4,4074,449Accumulated other comprehensive loss(52)(43)Accumulated deficit(1,440)(1,522)Common stock in treasury, at cost, 136,442,696 shares at December 31, 2011 and 65,098,918 sharesat December 31, 2010(1,853)(1,479)Total shareholders’ equity1,4231,766Noncontrolling interests6953Total equity1,4921,819Total liabilities and equity$8,462$8,500 See accompanying Notes to Consolidated Financial Statements. 83Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents CONSOLIDATED STATEMENTS OF OPERATIONSDollars in Millions, Except Per-Share Amounts Years Ended December 31,201120102009Net operating revenues:Net operating revenues before provision for doubtful accounts$9,584$9,205$9,014Provision for doubtful accounts730738696Net operating revenues8,8548,4678,318Operating expenses:Salaries, wages and benefits4,0823,9003,857Supplies1,5821,5771,569Other operating expenses, net2,1001,9401,910Electronic health record incentives(55)00Depreciation and amortization413394386Impairment of long-lived assets and goodwill, and restructuring charges, net271027Litigation and investigation costs551231Operating income650634538Interest expense(375)(424)(445)Gain (loss) from early extinguishment of debt(117)(57)97Investment earnings350Net gain on sales of investments0015Income from continuing operations, before income taxes161158205Income tax benefit (expense)(61)97723Income from continuing operations, before discontinued operations1001,135228Discontinued operations:Income (loss) from operations(22)11(10)Impairment of long-lived assets and goodwill, and restructuring charges, net0(1)(12)Litigation and investigation costs(17)00Net losses on sales of facilities00(1)Income tax benefit (expense)337(8)Income (loss) from discontinued operations(6)17(31)Net income941,152197Less: Preferred stock dividends24246Less: Net income attributable to noncontrolling interests12910Net income attributable to Tenet Healthcare Corporation common shareholders$58$1,119$181Amounts attributable to Tenet Healthcare Corporation common shareholdersIncome from continuing operations, net of tax$64$1,102$212Income (loss) from discontinued operations, net of tax(6)17(31)Net income attributable to Tenet Healthcare Corporation common shareholders$58$1,119$181Earnings (loss) per share attributable to Tenet Healthcare Corporation commonshareholders:BasicContinuing operations$0.13$2.28$0.44Discontinued operations(0.01)0.03(0.06)$0.12$2.31$0.38DilutedContinuing operations$0.13$2.01$0.43Discontinued operations(0.01)0.03(0.06)$0.12$2.04$0.37Weighted average shares and dilutive securities outstanding (in thousands):Basic468,726484,321480,240Diluted485,181560,631507,277 See accompanying Notes to Consolidated Financial Statements. 84Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOMEDollars in Millions Years Ended December 31,201120102009 Net income$94$1,152$197Other comprehensive income (loss):Adjustments for supplemental executive retirement plans(15)(20)(3)Unrealized gains on securities held as available-for-sale013Reclassification adjustments for realized losses included in net income017Other comprehensive income (loss) before income taxes(15)(18)7Income tax benefit (expense) related to items of other comprehensive income (loss)67(2)Total other comprehensive income (loss), net of tax(9)(11)5Comprehensive income851,141202Less: Preferred stock dividends24246Less: Comprehensive income attributable to noncontrolling interests12910Comprehensive income attributable to Tenet Healthcare Corporation common shareholders$49$1,108$186 See accompanying Notes to Consolidated Financial Statements. 85Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYDollars in Millions,Share Amounts in Thousands Tenet Healthcare Corporation Shareholders’ EquityPreferred StockCommon StockAccumulatedSharesOutstandingIssuedAmountSharesOutstandingIssuedParAmountAdditionalPaid-inCapitalOtherComprehensiveLossAccumulatedDeficitTreasuryStockNoncontrollingInterestsTotalEquityBalances at December 31, 20080$0477,173$26$4,445$(37)$(2,852)$(1,479)$44$147Net income000000187010197Distributions paid to noncontrollinginterests00000000(7)(7)Contributions from noncontrollinginterests0000000044Other comprehensive income0000050005Issuance of mandatory convertiblepreferred stock345,0003340000000334Preferred stock dividends0000(6)0000(6)Stock-based compensation expenseand issuance of common stock003,962122000023Balances at December 31, 2009345,000$334481,135$27$4,461$(32)$(2,665)$(1,479)$51$697Net income0000001,143091,152Distributions paid to noncontrollinginterests00000000(8)(8)Contributions from noncontrollinginterests0000000011Other comprehensive income00000(11)000(11)Preferred stock dividends0000(24)0000(24)Stock-based compensation expenseand issuance of common stock004,648012000012Balances at December 31, 2010345,000$334485,783$27$4,449$(43)$(1,522)$(1,479)$53$1,819Net income0000008201294Distributions paid to noncontrollinginterests00000000(10)(10)Other comprehensive income00000(9)000(9)Purchases of businesses or jointventure interests000000001414Preferred stock dividends0000(24)0000(24)Repurchases of common stock00(75,766)0000(374)0(374)Stock-based compensation expenseand issuance of common stock005,0090(18)0000(18)Balances at December 31, 2011345,000$334415,026$27$4,407$(52)$(1,440)$(1,853)$69$1,492 See accompanying Notes to Consolidated Financial Statements. 86Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWSDollars in Millions Years Ended December 31,201120102009Net income$94$1,152$197Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization413394386Provision for doubtful accounts730738696Net gain on sales of investments00(15)Deferred income tax expense (benefit)81(952)20Stock-based compensation expense242223Impairment of long-lived assets and goodwill, and restructuring charges, net271027Litigation and investigation costs551231Loss (gain) from early extinguishment of debt11757(97)Fair market value adjustments related to interest rate swap and LIBOR cap agreements03(1)Amortization of debt discount and debt issuance costs303127Pre-tax loss (gain) from discontinued operations39(10)23Other items, net(15)(4)6Changes in cash from operating assets and liabilities:Accounts receivable(865)(742)(645)Inventories and other current assets(38)(17)(22)Income taxes(63)3(78)Accounts payable, accrued expenses and other current liabilities(35)(84)12Other long-term liabilities(6)(58)(13)Payments against reserves for restructuring charges and litigation costs andsettlements(44)(83)(192)Net cash provided by (used in) operating activities from discontinued operations,excluding income taxes(47)040Net cash provided by operating activities497472425Cash flows from investing activities:Purchases of property and equipment — continuing operations(475)(450)(397)Construction of new and replacement hospitals0(13)(58)Purchases of property and equipment — discontinued operations0(13)(1)Purchases of businesses or joint venture interests(84)(65)0Proceeds from sales of facilities and other assets — discontinued operations019221Proceeds from sales of marketable securities, long-term investments and other assets598467Purchases of marketable securities00(17)Distributions received from investments in Reserve Yield Plus Fund0112Proceeds from hospital authority bonds0049Release of escrow funds0150Other items, net(3)2(1)Net cash used in investing activities(503)(420)(125)Cash flows from financing activities:Repayments of borrowings under credit facility(365)00Proceeds from borrowings under credit facility44500Repayments of borrowings(843)(886)(1,291)Proceeds from borrowings900601885Deferred debt issuance costs(21)(27)(46)Repurchases of common stock(374)00Proceeds from issuance of mandatory convertible preferred stock00334Cash dividends on preferred stock(24)(24)0Distributions paid to noncontrolling interests(10)(8)(7)Other items, net678Net cash used in financing activities(286)(337)(117)Net increase (decrease) in cash and cash equivalents(292)(285)183Cash and cash equivalents at beginning of period405690507Cash and cash equivalents at end of period$113$405$690Supplemental disclosures:Interest paid, net of capitalized interest$(347)$(402)$(439)Proceeds from interest rate swap agreement$30$0$39Income tax (payments) refunds, net$(10)$34$(43) See accompanying Notes to Consolidated Financial Statements. Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 87Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SIGNIFICANT ACCOUNTING POLICIES Description of Business Tenet Healthcare Corporation (together with our subsidiaries, referred to as “Tenet,” the “Company,” “we” or “us”) is an investor-owned health careservices company whose subsidiaries and affiliates own and operate acute care hospitals and related health care facilities. At December 31, 2011, oursubsidiaries operated 50 hospitals, including four academic medical centers and one critical access hospital, with a combined total of 13,453 licensed beds,primarily serving urban and suburban communities in 11 states. Our subsidiaries also operated 98 free-standing and provider-based diagnostic imagingcenters, ambulatory surgery centers and urgent care centers, as well as one free-standing emergency department, in 12 states at December 31, 2011. We alsoown an interest in a health maintenance organization (“HMO”) and operate: various related health care facilities, including a long-term acute care hospital and anumber of medical office buildings (all of which are located on, or nearby, our hospital campuses); revenue cycle management, health care informationmanagement and patient communications services businesses; physician practices; captive insurance companies; a management services business thatprovides network development, utilization management, claims processing and contract negotiation services to physician organizations and hospitals thatassume managed care risk; and occupational and rural health care clinics. Basis of Presentation Our Consolidated Financial Statements include the accounts of Tenet and its wholly owned and majority-owned subsidiaries. We eliminateintercompany accounts and transactions in consolidation, and we include the results of operations of businesses that are newly acquired in purchasetransactions from their dates of acquisition. We account for significant investments in other affiliated companies using the equity method. Unless otherwiseindicated, all financial and statistical data included in these notes to our Consolidated Financial Statements relate to our continuing operations, with dollaramounts expressed in millions (except per-share amounts). Certain prior-year amounts have been reclassified to conform to current-year presentation. Effective December 31, 2011, we adopted Accounting Standards Update (“ASU”) 2011-07, “Health Care Entities (Topic 954): Presentation andDisclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities,” which requireshealth care entities to present the provision for doubtful accounts relating to patient service revenue as a deduction from patient service revenue in the statementof operations rather than as an operating expense. All periods presented have been reclassified in accordance with the provisions of ASU 2011-07. Alsoeffective December 31, 2011, we reclassified the electronic health record incentives previously recorded as net operating revenues to the operating expensessection of our consolidated statements of operations. Use of Estimates 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 Consolidated Financial Statements and these accompanying notes. Weregularly evaluate the accounting policies and estimates we use. In general, we base the estimates on historical experience and on assumptions that we believe tobe reasonable given the particular circumstances in which we operate. Although we believe all adjustments considered necessary for a fair presentation havebeen included, actual results may vary from those estimates. Financial and statistical information we report to other regulatory agencies may be prepared on abasis other than GAAP or using different assumptions or reporting periods and, therefore, may vary from amounts presented herein. Although we make everyeffort to ensure that the information we report to those agencies is accurate, complete and consistent with applicable reporting guidelines, we cannot beresponsible for the accuracy of the information they make available to the public. Net Operating Revenues Before Provision for Doubtful Accounts We recognize net operating revenues before provision for doubtful accounts in the period in which our services are performed. Net operating revenuesbefore provision for doubtful accounts primarily consist of net patient service revenues that are recorded based on established billing rates (i.e., gross charges),less estimated discounts for contractual and other allowances, principally for patients covered by Medicare, Medicaid, managed care and other health plans,as well as certain uninsured patients under our Compact with Uninsured Patients (“Compact”). Gross charges are retail charges. They are not the same as actual pricing, and they generally do not reflect what a hospital is ultimately paid and,therefore, are not displayed in our consolidated statements of operations. Hospitals are typically paid 88Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents amounts that are negotiated with insurance companies or are set by the government. Gross charges are used to calculate Medicare outlier payments and todetermine certain elements of payment under managed care contracts (such as stop-loss payments). Because Medicare requires that a hospital’s gross chargesbe the same for all patients (regardless of payer category), gross charges are also what hospitals charge all other patients prior to the application of discountsand allowances. Revenues under the traditional fee-for-service Medicare and Medicaid programs are based primarily on prospective payment systems. Retrospectivelydetermined cost-based revenues under these programs, which were more prevalent in earlier periods, and certain other payments, such as Indirect MedicalEducation, Direct Graduate Medical Education, disproportionate share hospital and bad debt expense, which are based on our hospitals’ cost reports, areestimated using historical trends and current factors. Cost report settlements under these programs are subject to audit by Medicare and Medicaid auditors andadministrative and judicial review, and it can take several years until final settlement of such matters is determined and completely resolved. Because the laws,regulations, instructions and rule interpretations governing Medicare and Medicaid reimbursement are complex and change frequently, the estimates recordedby us could change by material amounts. We have a system and estimation process for recording Medicare net patient revenue and estimated cost report settlements. This results in usrecording accruals to reflect the expected final settlements on our cost reports. For filed cost reports, we record the accrual based on those cost reports andsubsequent activity, and record a valuation allowance against those cost reports based on historical settlement trends. The accrual for periods for which a costreport is yet to be filed is recorded based on estimates of what we expect to report on the filed cost reports, and a corresponding valuation allowance is recordedas previously described. Cost reports generally must be filed within five months after the end of the annual cost reporting period. After the cost report is filed,the accrual and corresponding valuation allowance may need to be adjusted. Adjustments for prior-year cost reports and related valuation allowances,principally related to Medicare and Medicaid, increased revenues in the years ended December 31, 2011, 2010 and 2009 by $1 million, $1 million and $16million, respectively. Estimated cost report settlements and valuation allowances are deducted from accounts receivable in the accompanying ConsolidatedBalance Sheets (see Note 3). We believe that we have made adequate provision for any adjustments that may result from final determination of amounts earnedunder all the above arrangements with Medicare and Medicaid. Revenues under managed care plans are based primarily on payment terms involving predetermined rates per diagnosis, per-diem rates, discountedfee-for-service rates and/or other similar contractual arrangements. These revenues are also subject to review and possible audit by the payers. The payers arebilled for patient services on an individual patient basis. An individual patient’s bill is subject to adjustment on a patient-by-patient basis in the ordinarycourse of business by the payers following their review and adjudication of each particular bill. We estimate the discounts for contractual allowances at theindividual hospital level utilizing billing data on an individual patient basis. At the end of each month, on an individual hospital basis, we estimate ourexpected reimbursement for patients of managed care plans based on the applicable contract terms. Contractual allowance estimates are periodically reviewedfor accuracy by taking into consideration known contract terms as well as payment history. Although we do not separately accumulate and disclose theaggregate amount of adjustments to the estimated reimbursement for every patient bill, we believe our estimation and review process enables us to identifyinstances on a timely basis where such estimates need to be revised. We do not believe there were any adjustments to estimates of individual patient bills thatwere material to our revenues. In addition, on a corporate-wide basis, we do not record any general provision for adjustments to estimated contractualallowances for managed care plans. Managed care accounts, net of contractual allowances recorded, are further reduced to their net realizable value throughprovision for doubtful accounts based on historical collection trends for these payers and other factors that affect the estimation process. We know of no material claims, disputes or unsettled matters with any payer that would affect our revenues for which we have not adequatelyprovided for in the accompanying Consolidated Financial Statements. Under our Compact, the discount offered to uninsured patients is recognized as a contractual allowance, which reduces net operating revenues at thetime the self-pay accounts are recorded. The uninsured patient accounts, net of contractual allowances recorded, are further reduced to their net realizable valuethrough provision for doubtful accounts based on historical collection trends for self-pay accounts and other factors that affect the estimation process. We also provide charity care to patients who are financially unable to pay for the health care services they receive. Most patients who qualify forcharity care are charged a per-diem amount for services received, subject to a cap. Except for the per-diem amounts, our policy is not to pursue collection ofamounts determined to qualify as charity care; therefore, we do not report these amounts in net operating revenues or in provision for doubtful accounts.Patient advocates from our Medical Eligibility Program screen patients in the hospital to determine whether those patients meet eligibility requirements forfinancial assistance programs. They also expedite the process of applying for these government programs. 89Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents The table below shows the sources of net operating revenues before provision for doubtful accounts from continuing operations: Years Ended December 31,201120102009Medicare$2,123$2,109$2,168Medicaid825764700Managed care5,2184,9834,862Indemnity, self-pay and other981975942Acute care hospitals other revenue126135136Other operations311239206Net operating revenues before provision for doubtful accounts$9,584$9,205$9,014 Provision for Doubtful Accounts Although outcomes vary, our policy is to attempt to collect amounts due from patients, including co-payments and deductibles due from patientswith insurance, at the time of service while complying with all federal and state laws and regulations, including, but not limited to, the Emergency MedicalTreatment and Active Labor Act (“EMTALA”). Generally, as required by EMTALA, patients may not be denied emergency treatment due to inability to pay.Therefore, services, including the legally required medical screening examination and stabilization of the patient, are performed without delaying to obtaininsurance information. In non-emergency circumstances or for elective procedures and services, it is our policy to verify insurance prior to a patient beingtreated; however, there are various exceptions that can occur. Such exceptions can include, for example, instances where (1) we are unable to obtain verificationbecause the patient’s insurance company was unable to be reached or contacted, (2) a determination is made that a patient may be eligible for benefits undervarious government programs, such as Medicaid or Victims of Crime, and it takes several days or weeks before qualification for such benefits is confirmedor denied, and (3) under physician orders we provide services to patients that require immediate treatment. We provide for an allowance against accounts receivable that could become uncollectible by establishing an allowance to reduce the carrying value ofsuch receivables to their estimated net realizable value. We estimate this allowance based on the aging of our accounts receivable by hospital, our historicalcollection experience by hospital and for each type of payer over an 18-month look-back period, and other relevant factors. A significant portion of ourprovision for doubtful accounts relates to self-pay patients, as well as co-payments and deductibles owed to us by patients with insurance. Payment pressurefrom managed care payers also affects our provision for doubtful accounts. We typically experience ongoing managed care payment delays and disputes;however, we continue to work with these payers to obtain adequate and timely reimbursement for our services. There are various factors that can impactcollection trends, such as changes in the economy, which in turn have an impact on unemployment rates and the number of uninsured and underinsuredpatients, the volume of patients through our emergency departments, the increased burden of co-payments and deductibles to be made by patients withinsurance, and business practices related to collection efforts. These factors continuously change and can have an impact on collection trends and ourestimation process. Electronic Health Record Incentives Under certain provisions of the American Recovery and Reinvestment Act of 2009 (“ARRA”), federal incentive payments are available to hospitals,physicians and certain other professionals (“Providers”) when they adopt, implement or upgrade (“AIU”) certified electronic health record (“EHR”) technologyor become “meaningful users,” as defined under ARRA, of EHR technology in ways that demonstrate improved quality, safety and effectiveness of care.Providers can become eligible for annual Medicare incentive payments by demonstrating meaningful use of EHR technology in each period over four periods.Medicaid providers can receive their initial incentive payment by satisfying AIU criteria, but must demonstrate meaningful use of EHR technology insubsequent years in order to qualify for additional payments. Hospitals may be eligible for both Medicare and Medicaid EHR incentive payments; however,physicians and other professionals may be eligible for either Medicare or Medicaid incentive payments, but not both. Hospitals that are meaningful usersunder the Medicare EHR incentive payment program are deemed meaningful users under the Medicaid EHR incentive payment program and do not need tomeet additional criteria imposed by a state. Medicaid EHR incentive payments to Providers are 100% federally funded and administered by the states. TheCenters for Medicare and Medicaid Services (“CMS”) established calendar year 2011 as the first year states could offer EHR incentive payments. Before astate may offer EHR incentive payments, the state must submit and CMS must approve the state’s incentive plan. We recognize Medicaid EHR incentive payments in our consolidated statements of operations for the first payment year when: (1) CMS approves astate’s EHR incentive plan; and (2) our hospital or employed physician acquires certified EHR technology (i.e., when AIU criteria are met). Medicaid EHRincentive payments for subsequent payment years are recognized in 90Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents the period during which the specified meaningful use criteria are met. We recognize Medicare EHR incentive payments when: (1) the specified meaningful usecriteria are met; and (2) contingencies in estimating the amount of the incentive payments to be received are resolved. During the year ended December 31,2011, certain of our hospitals and physicians satisfied the CMS AIU and/or meaningful use criteria. As a result, we recognized approximately $55 million ofMedicaid EHR incentive payments as a reduction to expense in our Consolidated Statement of Operations for that period. Cash Equivalents We treat highly liquid investments with original maturities of three months or less as cash equivalents. Cash and cash equivalents wereapproximately $113 million and $405 million at December 31, 2011 and 2010, respectively. As of December 31, 2011 and, 2010, our book overdrafts wereapproximately $252 million and $243 million, respectively, which were classified as accounts payable. At December 31, 2011 and 2010, approximately $92 million and $109 million, respectively, of total cash and cash equivalents in theaccompanying Consolidated Balance Sheets were intended for the operations of our captive insurance subsidiaries. During the year ended December 31, 2011,we repatriated $21 million of excess cash from our foreign insurance subsidiary to our corporate domestic bank account. Also at December 31, 2011 and 2010, we had $109 million and $91 million, respectively, of property and equipment purchases accrued for itemsreceived but not yet paid. Of these amounts, $104 million and $87 million, respectively, were included in accounts payable. During the year ended December 31, 2011, we entered into non-cancellable capital leases of approximately $23 million, primarily for equipment. Investments in Debt and Equity Securities We classify investments in debt and equity securities as either available-for-sale, held-to-maturity or as part of a trading portfolio. AtDecember 31, 2011 and 2010, we had no significant investments in securities classified as either held-to-maturity or trading. We carry securities classified asavailable-for-sale at fair value. We report their unrealized gains and losses, net of taxes, as accumulated other comprehensive income (loss) unless we determinethat a loss is other-than-temporary, at which point we would record a loss in our consolidated statements of operations. We include realized gains or losses inour consolidated statements of operations based on the specific identification method. Property and Equipment Additions and improvements to property and equipment costing $500 or more with a useful life greater than one year are capitalized at cost.Expenditures for maintenance and repairs are charged to expense as incurred. We use the straight-line method of depreciation for buildings, buildingimprovements and equipment. The estimated useful life for buildings and improvements is primarily 25 to 40 years and, for equipment, three to 15 years. Werecord capital leases at the beginning of the lease term as assets and liabilities. The value recorded is the lower of either the present value of the minimum leasepayments or the fair value of the asset. Such assets, including improvements, are amortized over the shorter of either the lease term or their estimated usefullife. Interest costs related to construction projects are capitalized. In the years ended December 31, 2011, 2010 and 2009, capitalized interest was $8 million,$4 million and $9 million, respectively. We evaluate our long-lived assets for possible impairment annually or whenever events or changes in circumstances indicate that the carrying amountof the asset, or related group of assets, may not be recoverable from estimated future undiscounted cash flows. If the estimated future undiscounted cash flowsare less than the carrying value of the assets, we calculate the amount of an impairment if the carrying value of the long-lived assets exceeds the fair value ofthe assets. The fair value of the assets is estimated based on appraisals, established market values of comparable assets or internal estimates of future net cashflows expected to result from the use and ultimate disposition of the asset. The estimates of these future cash flows are based on assumptions and projectionswe believe to be reasonable and supportable. They require our subjective judgments and take into account assumptions about revenue and expense growthrates. These assumptions may vary by type of facility and presume stable, improving or, in some cases, declining results at our hospitals, depending on theircircumstances. We report long-lived assets to be disposed of at the lower of their carrying amounts or fair values less costs to sell. In such circumstances, ourestimates of fair value are based on appraisals, established market prices for comparable assets or internal estimates of future net cash flows. 91Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Asset Retirement Obligations We recognize the fair value of a liability for legal obligations associated with asset retirements, primarily related to asbestos abatement and costsassociated with underground storage tanks, in the period in which it is incurred if a reasonable estimate of the fair value of the obligation can be made. Whenthe liability is initially recorded, we capitalize the cost of the asset retirement obligation by increasing the carrying amount of the related long-lived asset. Overtime, the liability is accreted to its present value each period, and the capitalized cost associated with the retirement obligation is depreciated over the useful lifeof the related asset. Upon settlement of the obligation, any difference between the cost to settle the asset retirement obligation and the liability recorded isrecognized as a gain or loss in our consolidated statements of operations. Goodwill and Other Intangible Assets Goodwill represents the excess of costs over the fair value of assets of businesses acquired. Goodwill and other intangible assets acquired in purchasebusiness combinations and determined to have indefinite useful lives are not amortized, but instead are subject to impairment tests performed at least annually.For goodwill, we perform the test at the reporting unit level when events occur that require an evaluation to be performed or at least annually. If we determine thecarrying value of goodwill is impaired, or if the carrying value of a business that is to be sold or otherwise disposed of exceeds its fair value, we reduce thecarrying value, including any allocated goodwill, to fair value. Estimates of fair value are based on appraisals, established market prices for comparativeassets or internal estimates of future net cash flows and presume stable, improving or, in some cases, declining results at our hospitals, depending on theircircumstances. Other intangible assets primarily consist of capitalized software costs, which are amortized on a straight-line basis over the estimated useful life ofthe software, which ranges from three to 15 years. Also included in intangible assets are costs associated with the issuance of our long-term debt, which areprimarily being amortized under the effective interest method based on the terms of the specific notes. Accruals for General and Professional Liability Risks We accrue for estimated professional and general liability claims, to the extent not covered by insurance, when they are probable and can bereasonably estimated. The accrual, which includes an estimate for incurred but not reported claims, is updated each quarter based on an actuarial calculationof projected payments using case-specific facts and circumstances and our historical loss reporting, development and settlement patterns and is discounted toits net present value using a risk-free discount rate (1.35% at December 31, 2011 and 2.71% at December 31, 2010). To the extent that subsequent claimsinformation varies from our estimates, the liability is adjusted in the period such information becomes available. Malpractice liability expense is presentedwithin other operating expenses in the accompanying Consolidated Statements of Operations. Income Taxes We account for income taxes using the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for theexpected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Income tax receivables andliabilities and deferred tax assets and liabilities are recognized based on the amounts that more likely than not will be sustained upon ultimate settlement withtaxing authorities. Developing our provision for income taxes and analysis of uncertain tax positions items requires significant judgment and knowledge of federal andstate income tax laws, regulations and strategies, including the determination of deferred tax assets and liabilities and, if necessary, any valuation allowancesthat may be required for deferred tax assets. We assess the realization of our deferred tax assets to determine whether an income tax valuation allowance is required. Based on all availableevidence, both positive and negative, and the weight of that evidence to the extent such evidence can be objectively verified, we determine whether it is morelikely than not that all or a portion of the deferred tax assets will be realized. The main factors that we consider include: · Cumulative profits/losses in recent years, adjusted for certain nonrecurring items; · Income/losses expected in future years; · Unsettled circumstances that, if unfavorably resolved, would adversely affect future operations and profit levels; 92Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents · The availability, or lack thereof, of taxable income in prior carryback periods that would limit realization of tax benefits; and · The carryforward period associated with the deferred tax assets and liabilities. We consider many factors when evaluating our uncertain tax positions, and such judgments are subject to periodic review. Tax benefits associatedwith uncertain tax positions are recognized in the period in which one of the following conditions is satisfied: (1) the more likely than not recognition thresholdis satisfied; (2) the position is ultimately settled through negotiation or litigation; or (3) the statute of limitations for the taxing authority to examine andchallenge the position has expired. Tax benefits associated with an uncertain tax position are derecognized in the period in which the more likely than notrecognition threshold is no longer satisfied. Segment Reporting We operate acute care hospitals and related health care facilities. Our general hospitals generated 96.8%, 97.4% and 97.7% of our net operatingrevenues before provision for doubtful accounts in the years ended December 31, 2011, 2010 and 2009, respectively. Each of our operating regions reportsdirectly to our president of hospital operations. Major decisions, including capital resource allocations, are made at the consolidated level, not at the regional,market or hospital level. Costs Associated With Exit or Disposal Activities We recognize costs associated with exit (including restructuring) or disposal activities when they are incurred and can be measured at fair value,rather than at the date of a commitment to an exit or disposal plan. NOTE 2. EQUITY Mandatory Convertible Preferred Stock In September 2009, we sold 345,000 shares of 7% mandatory convertible preferred stock for net proceeds of approximately $334 million. Each shareof mandatory convertible preferred stock will automatically convert on October 1, 2012 into between 142.4501 and 170.9402 shares of our common stock,subject to anti-dilution adjustments, depending on the average of the closing prices per share of our common stock on each of the 20 consecutive trading daysending on the third trading day immediately preceding the mandatory conversion date, subject to certain conditions. At any time prior to October 1, 2012,holders may elect to convert shares of the mandatory convertible preferred stock at the minimum conversion rate of 142.4501 shares of our common stock,subject to anti-dilution adjustments. If holders elect to convert shares of the mandatory convertible preferred stock during a specified period in connection witha make-whole event, as defined in the certificate of designation relating to the mandatory convertible preferred stock, the conversion rate will be adjusted undercertain circumstances and holders will also be entitled to receive a make-whole amount in cash, common stock or a combination thereof as elected by us. We accrued approximately $6 million, or $17.50 per share, for dividends on our 7% mandatory convertible preferred stock in each of the threemonths ended March 31, June 30, September 30, and December 31, 2011, and paid the dividends in April 2011, July 2011, October 2011, andJanuary 2012, respectively. We accrued approximately $6 million, or $17.50 per share, for dividends on the mandatory convertible preferred stock in each ofthe three months ended March 31, June 30, September 30, and December 31, 2010, and paid the dividends in April 2010, July 2010, October 2010 andJanuary 2011, respectively. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company resulting in a distribution of assets to the holders of anyclass or series of our capital stock, each holder of the mandatory convertible preferred stock will be entitled to receive the liquidation preference of $1,000 pershare, plus an amount equal to accrued, accumulated and unpaid dividends. 93Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Share Repurchase Program On May 9, 2011, we announced that our board of directors had authorized the repurchase of up to $400 million of our common stock through ashare repurchase program. Under the program, shares could be purchased in the open market or through privately negotiated transactions in a mannerconsistent with applicable securities laws and regulations, including pursuant to a Rule 10b5-1 plan maintained by the Company, at times and in amountsbased on market conditions and other factors. The share repurchase program, which was scheduled to expire on May 9, 2012, was completed inJanuary 2012. Pursuant to the program, we repurchased a total of 75,765,585 shares for approximately $374 million during the year ended December 31,2011 as shown in the following table: Period Total Numberof SharesPurchasedAverage PricePaid PerShareTotal Number ofShares Purchased asPart of PubliclyAnnounced ProgramMaximumDollar Value ofShares ThatMay Yet BePurchasedUnder theProgram(In Millions)May 12, 2011 through May 31, 20114,582,299$6.444,582,299$370June 1, 2011 through June 30, 20116,882,1306.176,882,130328Three Months Ended June 30, 201111,464,4296.2811,464,429328July 1, 2011 through July 31, 20115,354,4196.165,354,419295August 1, 2011 through August 31, 201111,326,5565.0211,326,556238September 1, 2011 through September 30, 20117,333,5684.637,333,568204Three Months Ended September 30, 201124,014,5435.1524,014,543204October 1, 2011 through October 31, 201124,259,0714.3124,259,071100November 1, 2011 through November 30, 201100.000100December 1, 2011 through December 31, 201116,027,6424.6016,027,64226Three Months Ended December 31, 201140,286,7134.4240,286,713$26Total75,765,585$4.9475,765,585 In January 2012, we paid approximately $26 million (or an average of $4.93 per share) to repurchase a total of 5,308,179 shares under the program.Repurchased shares are recorded based on settlement date and are held as treasury stock. Rights Agreement On September 12, 2011, the rights issued under our Section 382 Rights Agreement dated as of January 7, 2011 (the “Rights Agreement”) expired andare no longer outstanding. The Rights Agreement was adopted to diminish the risk of a potential loss of our ability to use our net operating loss carryforwardsto reduce future federal income tax obligations as a result of an “ownership change,” as defined in Section 382 of the Internal Revenue Code. 94Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents NOTE 3. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS The principal components of accounts receivable are shown in the table below: December 31,20112010Continuing operations:Patient accounts receivable$1,645$1,472Allowance for doubtful accounts(391)(337)Estimated future recoveries from accounts assigned to our collection agency subsidiary6433Net cost report settlements payable and valuation allowances(38)(26)1,2801,142Discontinued operations:Patient accounts receivable617Allowance for doubtful accounts(6)(15)Estimated future recoveries from accounts assigned to our collection agency subsidiary01Net cost report settlements payable and valuation allowances(2)(2)(2)1Accounts receivable, net$1,278$1,143 Our self-pay collection rate, which is the blended collection rate for uninsured and balance-after insurance accounts receivable, was approximately27.8% and 28.3% as of December 31, 2011 and 2010, respectively. These self-pay collection rates include payments made by patients, including co-paymentsand deductibles paid by patients with insurance, prior to an account being classified and assigned to our Conifer collection agency subsidiary. Our estimatedcollection rate from managed care payers was approximately 98.2% and 98.4% at December 31, 2011 and 2010, respectively, which includes collections frompoint-of-service through collections by our Conifer collection agency subsidiary. Accounts that are pursued for collection through the regional business offices of Conifer are maintained on our hospitals’ books and reflected inpatient accounts receivable with an allowance for doubtful accounts established to reduce the carrying value of such receivables to their estimated net realizablevalue. We estimate this allowance based on the aging of our accounts receivable by hospital, our historical collection experience by hospital and for each type ofpayer over an 18-month look-back period, and other relevant factors. As of December 31, 2011 and 2010, our allowance for doubtful accounts for self-paywas 76.3% and 76.0%, respectively, of our self-pay patient accounts receivable, including co-pays and deductibles owed by patients with insurance. As ofDecember 31, 2011 and 2010, our allowance for doubtful accounts for managed care was 8.9% and 8.4%, respectively, of our managed care patient accountsreceivable. Accounts assigned to our Conifer collection agency subsidiary are written off and excluded from patient accounts receivable and allowance fordoubtful accounts; however, an estimate of future recoveries from all accounts at our Conifer collection agency subsidiary is determined based on historicalexperience and recorded on our hospitals’ books as a component of accounts receivable in the accompanying Consolidated Balance Sheets. The estimated costs (based on selected operating expenses, which include salaries, wages and benefits, supplies and other operating expenses) ofcaring for our self-pay patients for the years ended December 31, 2011, 2010 and 2009 were approximately $406 million, $377 million and $365 million,respectively. We also provide charity care to patients who are financially unable to pay for the health care services they receive. Most patients who qualify forcharity care are charged a per-diem amount for services received, subject to a cap. Except for the per-diem amounts, our policy is not to pursue collection ofamounts determined to qualify as charity care; therefore, we do not report these amounts in net operating revenues. Most states include an estimate of the costof charity care in the determination of a hospital’s eligibility for Medicaid disproportionate share hospital (“DSH”) payments. Revenues attributable to DSHpayments and other state-funded subsidy payments for the years ended December 31, 2011, 2010 and 2009 were approximately $260 million, $181 millionand $171 million, respectively. These payments are intended to mitigate our cost of uncompensated care, as well as reduced Medicaid funding levels. Ourestimated costs (based on the selected operating expenses described above) of caring for charity care patients for the years ended December 31, 2011, 2010 and2009 were $125 million, $120 million and $118 million, respectively. Our method of measuring the estimated costs uses adjusted self-pay/charity patientdays multiplied by selected operating expenses per adjusted patient day. The adjusted self-pay/charity patient days represents actual self-pay/charity patientdays adjusted to include self-pay/charity outpatient services by multiplying actual self-pay/charity patient days by the sum of gross self-pay/charity inpatientrevenues and gross self-pay/charity outpatient revenues and dividing the results by gross self-pay/charity inpatient revenues. 95Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents NOTE 4. DISCONTINUED OPERATIONS Effective April 1, 2010, we completed the sale of certain of our owned assets at NorthShore Regional Medical Center (“NorthShore”), located inSlidell, Louisiana, for approximately $16 million of cash proceeds. At that time, we also terminated our operating lease agreement for the hospital. We recorded$1 million of net impairment and restructuring charges in discontinued operations during the year ended December 31, 2010, consisting of a $3 million write-down of land to expected sales proceeds related to a previously divested hospital, partially offset by $1 million in impairment credits to discontinuedoperations relating to an increase in the estimated fair values of NorthShore’s long-lived assets, less estimated costs to sell, and $1 million for a reduction inreserves recorded in previous periods. We recorded $12 million of net impairment and restructuring charges in discontinued operations during the year ended December 31, 2009,consisting of $3 million for the write-down of long-lived assets to their estimated fair values, less estimated costs to sell, a $2 million charge for the write-downof goodwill related to NorthShore, and $7 million in employee severance, lease termination and other exit costs. Net operating revenues and income (loss) before income taxes reported in discontinued operations are as follows: Years Ended December 31,201120102009Net operating revenues$17$38$202Income (loss) before income taxes(39)10(23) Included in loss before income taxes from discontinued operations in the year ended December 31, 2011 is approximately $14 million of expense related to thesettlement of two Hurricane Katrina-related class action lawsuits, which amount is net of approximately $10 million of expected recoveries from ourreinsurance carriers in connection with the settlement. We had previously recorded a $5 million reserve for this matter as of December 31, 2010. Also includedin loss before income taxes from discontinued operations in the year ended December 31, 2011 is approximately $17 million of expense recorded in litigationand investigation costs allocable to certain of our previously divested hospitals related to changes in the reserve estimate established in connection with agovernmental review and an accrual for a hospital-related tort claim, each as further described in Note 15. Should we dispose of additional hospitals or other assets in the future, we may incur additional asset impairment and restructuring charges in futureperiods. NOTE 5. IMPAIRMENT AND RESTRUCTURING CHARGES We recognized impairment charges on long-lived assets in 2011, 2010 and 2009 because the fair values of those assets or groups of assets indicatedthat the carrying amount was not recoverable. The fair value estimates were derived from appraisals, established market values of comparable assets, orinternal estimates of future net cash flows. These fair value estimates can change by material amounts in subsequent periods. Many factors and assumptionscan impact the estimates, including the future financial results of the hospitals, how the hospitals are operated in the future, changes in health care industrytrends and regulations, and the nature of the ultimate disposition of the assets. In certain cases, these fair value estimates assume the highest and best use ofhospital assets in the future to a market place participant is other than as a hospital. In these cases, the estimates are based on the fair value of the real propertyand equipment if utilized other than as a hospital. The impairment recognized does not include the costs of closing the hospitals or other future operating costs,which could be substantial. Accordingly, the ultimate net cash realized from the hospitals, should we choose to sell them, could be significantly less than theirimpaired value. Our impairment tests presume stable, improving or, in some cases, declining results in our hospitals, which are based on programs and initiativesbeing implemented that are designed to achieve the hospital’s most recent projections. If these projections are not met, or if in the future negative trends occurthat impact our future outlook, impairments of long-lived assets and goodwill may occur, and we may incur additional restructuring charges, which could bematerial. As of December 31, 2011, our continuing operations were structured as follows: · Our California region included all of our hospitals in California and Nebraska; · Our Central region included all of our hospitals in Missouri, Tennessee and Texas; · Our Florida region included all of our hospitals in Florida; and 96Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents · Our Southern States region included all of our hospitals in Alabama, Georgia, North Carolina, Pennsylvania and South Carolina. These regions are reporting units used to perform our goodwill impairment analysis and are one level below our operating segment level. Our hospitals inPennsylvania, which were previously part of a separate market, became part of our Southern States region effective May 1, 2011. This change did not haveany impact on our consolidated financial condition, results of operations or cash flows. In addition, we operate a diagnostic imaging center business inLouisiana that is not part of our regional operations described above and is considered a separate reporting unit for goodwill impairment analysis purposes. Year Ended December 31, 2011 During the year ended December 31, 2011, we recorded net impairment and restructuring charges of $27 million. This amount included a $6million impairment charge for the write-down of buildings and equipment of one of our previously impaired hospitals to their estimated fair values primarilydue to a decline in the fair value of real estate in the market in which the hospital operates and a decline in the estimated fair value of equipment. Materialadverse trends in our most recent estimates of future undiscounted cash flows of the hospital, consistent with our previous estimates in prior years whenimpairment charges were recorded at this hospital, indicated the carrying value of the hospital’s long-lived assets was not recoverable from the estimated futurecash flows. We believe the most significant factors contributing to the continuing adverse financial trends include reductions in volumes of insured patients,shifts in payer mix from commercial to governmental payers combined with reductions in reimbursement rates from governmental payers, and high levels ofuninsured patients. As a result, we updated the estimate of the fair value of the hospital’s long-lived assets and compared the fair value estimate to the carryingvalue of the hospital’s long-lived assets. Because the fair value estimate was lower than the carrying value of the hospital’s long-lived assets, an impairmentcharge was recorded for the difference in the amounts. Unless the anticipated future financial trends of this hospital improve to the extent that the estimatedfuture undiscounted cash flows exceed the carrying value of the long-lived assets, this hospital is at risk of future impairments, particularly if we spendsignificant amounts of capital at the hospital without generating a corresponding increase in the hospital’s fair value or if the fair value of the hospital’s realestate or equipment continues to decline. The aggregate carrying value of assets held and used of the hospital for which an impairment charge was recordedwas $20 million as of December 31, 2011 after recording the impairment charge. In addition, we recorded a $6 million charge in 2011 for the write-off ofgoodwill associated with our diagnostic imaging center business in Louisiana. Material adverse trends in our most recent estimates of future operating resultsof the centers, primarily due to our limited market presence, indicated that the carrying value of the goodwill exceeded its fair value. As a result, we reduced thecarrying value of the goodwill to its fair value determined based on an appraisal. In 2011, we also recorded impairment charges of $1 million in connectionwith the sale of seven medical office buildings in Texas, $1 million related to a cost basis investment, $7 million in employee severance costs, $3 million inlease termination costs, $1 million of acceleration of stock-based compensation costs and $2 million of other related costs. Year Ended December 31, 2010 During the year ended December 31, 2010, we recorded net impairment and restructuring charges of $10 million. This amount included a $5 millionnet impairment charge for the write-down of buildings, equipment and other long-lived assets, primarily capitalized software costs classified in other intangibleassets, of one of our previously impaired hospitals to their estimated fair values primarily due to a decline in the fair value of real estate in the market in whichthe hospital operates and a decline in the estimated fair value of equipment. The aggregate carrying value of assets held and used of the hospital for which animpairment charge was recorded was $25 million as of December 31, 2010 after recording the impairment charge. In addition, we recorded a $5 million netimpairment charge in connection with the sale of nine medical office buildings in Florida and $2 million in employee severance and other related costs. Thesecharges were partially offset by a $2 million credit related to the collection of a note receivable due from a buyer of one of our previously divested hospitals,which had been fully reserved in a prior year. Year Ended December 31, 2009 During the year ended December 31, 2009, we recorded net impairment and restructuring charges of $27 million. This amount included a $7 millionnet impairment charge for the write-down of buildings, equipment and other long-lived assets, primarily capitalized software costs classified in other intangibleassets, of one of our previously impaired hospitals to their estimated fair values, primarily due to a decline in the fair value of real estate in the market inwhich the hospital operates. We also recorded a $10 million net impairment charge for the write-down of land and buildings at the campus of one hospital thatmoved to a new, replacement campus during 2010. Our estimates of the future undiscounted cash flows from the use of the former campus for several monthsduring 2010 and from estimated disposition proceeds were less than the carrying values of the land and buildings of the campus. We compared the estimatedfair values to the carrying values and, because the fair value estimate was lower than the carrying values of the assets, an impairment charge was recorded forthe difference in the amounts. The remaining net impairment and restructuring charges for the year ended December 31, 2009 include $4 million of employeeseverance and 97Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents other related costs, a $3 million impairment charge for the write-down of a note receivable due from a buyer of one of our previously divested hospitals as aresult of the buyer filing for bankruptcy, and a $3 million impairment charge for the write-down of other assets primarily related to an option to purchasecertain real property near one of our hospitals that no longer had value due to the financial condition of the owner of the real property. Accrued Restructuring Charges The tables below are reconciliations of beginning and ending liability balances in connection with restructuring charges recorded during the yearsended December 31, 2011, 2010 and 2009 in continuing and discontinued operations: Balances atBeginning ofPeriodRestructuringCharges, NetCashPaymentsOtherBalancesat Endof PeriodYear Ended December 31, 2011Continuing operations:Lease and other costs, and employeeseverance-related costs in connectionwith hospital cost-control programsand general overhead-reduction plans$4$13$(10)$(1)$6Discontinued operations:Employee severance-related costs, andother estimated costs associated withthe sale or closure of hospitals andother facilities60(1)05$10$13$(11)$(1)$11Year Ended December 31, 2010Continuing operations:Lease and other costs, and employeeseverance-related costs in connectionwith hospital cost-control programsand general overhead-reduction plans$6$2$(4)$0$4Discontinued operations:Employee severance-related costs, andother estimated costs associated withthe sale or closure of hospitals andother facilities8(1)(1)06$14$1$(5)$0$10Year Ended December 31, 2009Continuing operations:Lease and other costs, and employeeseverance-related costs in connectionwith hospital cost-control programsand general overhead-reduction plans$12$4$(9)$(1)$6Discontinued operations:Employee severance-related costs, andother estimated costs associated withthe sale or closure of hospitals andother facilities157(14)08$27$11$(23)$(1)$14 The above liability balances at December 31, 2011 and 2010 are included in other current liabilities and other long-term liabilities in the accompanyingConsolidated Balance Sheets. Cash payments to be applied against these accruals at December 31, 2011 are expected to be approximately $5 million in 2012and $6 million thereafter. The column labeled “Other” above represents charges recorded in restructuring expense that are not recorded in the liability account,such as the acceleration of stock-based compensation expense related to severance agreements. 98Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents NOTE 6. LONG-TERM DEBT AND LEASE OBLIGATIONS The table below shows our long-term debt as of December 31, 2011 and December 31, 2010: December 31,20112010Senior notes:6%, due 2011$0$656%, due 201257577%, due 20132162169%, due 201460609%, due 20154744748%, due 20206006006%, due 2031430430Senior secured notes:9%, due 201517146%, due 2018900010%, due 20187147148/%, due 2019925925Credit facility due 2016800Capital leases and mortgage notes326Unamortized note discounts(129)(197)Total long-term debt4,3604,064Less current portion6667Long-term debt, net of current portion$4,294$3,997 Credit Agreement We have a senior secured revolving credit facility, as amended November 29, 2011 (“Credit Agreement”), that provides, subject to borrowingavailability, for revolving loans in an aggregate principal amount of up to $800 million, with a $300 million subfacility for standby letters of credit. TheCredit Agreement has a scheduled maturity date of November 29, 2016, subject to our repayment or refinancing on or before December 3, 2014 ofapproximately $238 million of the aggregate outstanding principal amount of our 9/% senior notes due 2015 (approximately $474 million of which wasoutstanding at December 31, 2011). If such repayment or refinancing does not occur, borrowings under the Credit Agreement will be due December 3, 2014.The revolving credit facility is collateralized by patient accounts receivable of all of our wholly owned acute care and specialty hospitals. In addition,borrowings under the Credit Agreement are guaranteed by our wholly owned hospital subsidiaries. Outstanding revolving loans accrue interest during a six-month initial period ending in May 2012 at the rate of either (i) a base rate plus a margin of 1.25% or (ii) the London Interbank Offered Rate (“LIBOR”) plus amargin of 2.25% per annum. Thereafter, outstanding revolving loans accrue interest at a base rate plus a margin ranging from 1.00% to 1.50% or LIBOR plusa margin ranging from 2.00% to 2.50% per annum based on available credit. An unused commitment fee will be payable on the undrawn portion of therevolving loans at a six-month initial rate ending in May 2012 of 0.438% per annum. Thereafter, the unused commitment fee will range from 0.375% to0.500% per annum based on available credit. Our borrowing availability is based on a specified percentage of eligible accounts receivable, including self-payaccounts. At December 31, 2011, we had $80 million of cash borrowings outstanding under the revolving credit facility subject to an interest rate of 2.78%,and we had approximately $164 million of standby letters of credit outstanding. Based on our eligible receivables, approximately $527 million was availablefor borrowing under the revolving credit facility at December 31, 2011. Senior Notes In August 2010, we sold $600 million aggregate principal amount of 8% senior notes due 2020. The notes will mature on August 1, 2020. We payinterest on the 8% senior notes semi-annually in arrears on February 1 and August 1 of each year, which payments commenced on February 1, 2011. Also in August 2010, we purchased approximately $782 million aggregate principal amount of our 7/% senior notes due 2013 and $6 millionaggregate principal amount of our 9/% senior notes due 2014 for approximately $835 million, including approximately $4 million in accrued and unpaidinterest through the dates of purchase. We purchased the senior notes with the net proceeds of approximately $585 million from our sale of new 8% seniornotes due 2020 as described above and cash on hand. In connection with these purchases, we recorded a loss from early extinguishment of debt ofapproximately $52 million related to the 993812387814781478143878Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents difference between the purchase prices and the par values of the purchased notes, as well as the write-off of unamortized note discounts, issuance costs andunrecognized interest rate hedge settlements associated with the notes. In July 2010, we purchased $34 million aggregate principal amount of our 9/% senior notes due 2014 and approximately $7 million aggregateprincipal amount of our 9/% senior notes due 2015 for total cash of approximately $43 million, including less than $1 million in accrued and unpaidinterest through the dates of purchase. In connection with these purchases, we recorded a loss from early extinguishment of debt of approximately $3 millionrelated to the difference between the purchase prices and the par values of the purchased notes, as well as the write-off of unamortized note discounts andissuance costs. In June 2010, we purchased $2 million aggregate principal amount of our 7% senior notes due 2013 and $2 million aggregate principal amount ofour 9/% senior notes due 2015 for total cash of approximately $4 million. In March 2010, we purchased $6 million aggregate principal amount of our9/% senior notes due 2015 for cash of approximately $6 million. These transactions resulted in no gain or loss from early extinguishment of debt. All of our senior notes are general unsecured senior debt obligations that rank equally in right of payment with all of our other unsecured seniorindebtedness, but are effectively subordinated to our senior secured notes described below, the obligations of our subsidiaries and any obligations under ourCredit Agreement to the extent of the collateral. We may redeem any series of our senior notes, in whole or in part, at any time at a redemption price equal to100% of the principal amount of the notes redeemed, plus a make-whole premium specified in the applicable indenture, together with accrued and unpaidinterest to the redemption date. Senior Secured Notes In November 2011, we sold $900 million aggregate principal amount of 6/% senior secured notes due 2018. The notes will mature on November 1,2018. We will pay interest on the 6/% senior secured notes semi-annually in arrears on May 1 and November 1 of each year, with payments commencing onMay 1, 2012. The notes rank equally with our 8% senior secured notes due 2019, our 9% senior secured notes due 2015 and our 10% senior secured notesdue 2018, which we issued in the year ended December 31, 2009. Also in November 2011, we purchased approximately $713 million aggregate principal amount of our 9% senior secured notes due 2015 for totalcash of approximately $776 million, including approximately $4 million in accrued and unpaid interest through the dates of purchase. We purchased thesenior secured notes with a portion of the proceeds from our sale of new 6/% senior secured notes due 2018, as described above. In connection with thepurchase, we recorded a loss from early extinguishment of debt of approximately $117 million related to the difference between the purchase prices and the parvalues of the purchased notes, as well as the write-off of unamortized note discounts and issuance costs associated with the notes. All of our senior secured notes are guaranteed by and secured by a first-priority pledge of the capital stock and other ownership interests of certain ofour subsidiaries. All of our senior secured notes and the related subsidiary guarantees are our and the subsidiary guarantors’ senior secured obligations. Oursenior secured notes rank senior to any subordinated indebtedness that we or such subsidiary guarantors may incur; they are effectively senior to our andsuch subsidiary guarantors’ existing and future unsecured indebtedness and other liabilities to the extent of the value of the collateral securing the notes and thesubsidiary guarantees; they are effectively subordinated to our and such subsidiary guarantors’ obligations under our Credit Agreement to the extent of thevalue of the collateral securing borrowings thereunder; and they are structurally subordinated to all obligations of our non-guarantor subsidiaries. The indentures setting forth the terms of our senior secured notes contain provisions governing our ability to redeem the notes and the terms by whichwe may do so. At our option, we may redeem our 6¼% senior secured notes, in whole or in part, at any time at a redemption price equal to 100% of theprincipal amount of the notes redeemed plus the make-whole premium set forth in the related indenture, together with accrued and unpaid interest thereon, ifany, to the redemption date. At any time or from time to time prior to July 1, 2012 in the case of the 8% senior secured notes and May 1, 2012 in the case ofthe 9% and 10% senior secured notes, we, at our option, may redeem up to 35% of the aggregate principal amount of any of these series of senior secured noteswith the net cash proceeds of one or more qualified equity offerings (as defined in the applicable indenture) at a redemption price equal to a specified percentage— 108.875% in the case of the 8% senior secured notes, 109% in the case of the 9% senior secured notes and 110% in the case of the 10% senior securednotes — of the principal amount of the notes to be redeemed, plus accrued and unpaid interest thereon, if any, to the date of redemption. In addition, we, at ouroption, may redeem our 8%, 9% and 10% senior secured notes, in whole or in part, or on or prior to July 1, 2014 in the case of the 8% senior securednotes, May 1, 2012 in the case of the 9% senior secured notes and May 1, 2014 in the case of the 10% senior secured notes, at a redemption price equal to100% of the principal amount of the notes redeemed plus the applicable make-whole 10078143814141414781478787878Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents premium set forth in the applicable indenture, together with accrued and unpaid interest thereon, if any, to the redemption date. At any time or from time totime after July 1, 2014 in the case of the 8% senior secured notes, May 1, 2012 in the case of the 9% senior secured notes and May 1, 2014 in the case ofthe 10% senior secured notes, we, at our option, may redeem the notes, in whole or in part, at the redemption prices set forth in the applicable indenture,together with accrued and unpaid interest thereon, if any, to the redemption date. In addition, we may be required to purchase for cash all or any part of each series of our senior secured notes upon the occurrence of a change ofcontrol (as defined in the applicable indentures) for a cash purchase price of 101% of the aggregate principal amount of the notes, plus accrued and unpaidinterest. Covenants Our Credit Agreement contains customary covenants for an asset-backed facility, including a minimum fixed charge coverage ratio to be met whenthe available credit under the revolving credit facility falls below $80 million, as well as limits on debt, asset sales and prepayments of senior debt. The CreditAgreement also includes a provision, which we believe is customary in receivables-backed credit facilities, that gives our banks the right to require thatproceeds of collections of substantially all of our consolidated accounts receivable be applied directly to repay outstanding loans and other amounts that aredue and payable under the Credit Agreement at any time that unused borrowing availability under the revolving credit facility is less than $100 million or if anevent of default has occurred and is continuing thereunder. In that event, we would seek to re-borrow under the Credit Agreement to satisfy our operating cashrequirements. Our ability to borrow under the Credit Agreement is subject to conditions that we believe are customary in revolving credit facilities, includingthat no events of default then exist. The indentures governing our senior notes contain covenants and conditions that have, among other requirements, limitations on (1) liens onprincipal properties and (2) sale and lease-back transactions with respect to principal properties. A principal property is defined in the indentures as a hospitalthat has an asset value on our books in excess of 5% of our consolidated net tangible assets, as defined. The above limitations do not apply, however, to(1) debt that is not secured by principal properties or (2) debt that is secured by principal properties if the aggregate of such secured debt does not exceed15% of our consolidated net tangible assets, as further described in the indentures. The indentures also prohibit the consolidation, merger or sale of all orsubstantially all assets unless no event of default would result after giving effect to such transaction. The indentures governing our senior secured notes contain covenants that, among other things, restrict our ability and the ability of our subsidiariesto incur liens, consummate asset sales, enter into sale and lease-back transactions or consolidate, merge or sell all or substantially all of our or their assets,other than in certain transactions between one or more of our wholly owned subsidiaries. These restrictions, however, are subject to a number of importantexceptions and qualifications. In particular, there are no restrictions on our ability or the ability of our subsidiaries to incur additional indebtedness, makerestricted payments, pay dividends or make distributions in respect of capital stock, purchase or redeem capital stock, enter into transactions with affiliatesor make advances to, or invest in, other entities (including unaffiliated entities). In addition, the indentures governing our senior secured notes contain acovenant that neither we nor any of our subsidiaries will incur secured debt, unless at the time of and after giving effect to the incurrence of such debt, theaggregate amount of all such secured debt (including the aggregate principal amount of senior secured notes outstanding at such time) does not exceed thegreater of (i) $3.2 billion or (ii) the amount that would cause the secured debt ratio (as defined in the indentures) to exceed 4.0 to 1.0; provided that the aggregateamount of all such debt secured by a lien on par to the lien securing the senior secured notes may not exceed the greater of (a) $2.6 billion or (b) the amountthat would cause the secured debt ratio to exceed 3.0 to 1.0. Interest Rate Swap and LIBOR Cap Agreements We were party to an interest rate swap agreement for an aggregate notional amount of $600 million from February 14, 2011 through August 2, 2011.The interest rate swap agreement was designated as a fair value hedge and was being used to manage our exposure to future changes in interest rates. It had theeffect of converting our 10% senior secured notes due 2018 from a fixed interest rate paid semi-annually to a variable interest rate paid semi-annually based onthe six-month LIBOR plus a floating rate spread of 6.60%. During the term of the interest rate swap agreement, changes in the fair value of the interest rateswap agreement and changes in the fair value of the 10% senior secured notes, which we expected to substantially offset each other, were recorded in interestexpense. During the year ended December 31, 2011, our interest rate swap agreement generated approximately $8 million of cash interest savings and a $22million gain on the settlement of the agreement. In the year ended December 31, 2009, we entered into a LIBOR cap agreement to mitigate risks associated with potential significant increases in theone-month LIBOR relative to an interest rate swap agreement that we entered into in May 2009 and terminated in November 2009. The fair value of the LIBORcap agreement included in investments and other assets in the accompanying Consolidated Balance Sheets totaled less than $1 million at December 31, 2011and 2010. During the years ended 10178Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents December 31, 2011 and 2010, mark-to-market adjustments of the LIBOR cap agreement of less than $1 million and approximately $3 million, respectively,were included in interest expense in the accompanying Consolidated Statements of Operations. In addition, see Note 18 for the disclosure of the fair value ofthe LIBOR cap agreement. Future Maturities Future long-term debt maturities and minimum operating lease payments as of December 31, 2011 are as follows: Years Ending December 31,LaterTotal20122013201420152016YearsLong-term debt, including capitallease obligations$4,489$66$226$67$476$82$3,572Long-term non-cancelableoperating leases$416$109$99$59$40$30$79 Rental expense under operating leases, including short-term leases, was $146 million, $136 million and $143 million in the years endedDecember 31, 2011, 2010 and 2009, respectively. Included in rental expense for these periods was sublease income of $8 million, $12 million and$17 million, respectively, which was recorded as a reduction to rental expense. NOTE 7. GUARANTEES Consistent with our policy on physician relocation and recruitment, we provide income guarantee agreements to certain physicians who agree torelocate to fill a community need in the service area of one of our hospitals and commit to remain in practice in the area for a specified period of time. Undersuch agreements, we are required to make payments to the physicians in excess of the amounts they earn in their practices up to the amount of the incomeguarantee. The income guarantee periods are typically 12 months. If a physician does not fulfill his or her commitment period to the community, which istypically three years subsequent to the guarantee period, we seek recovery of the income guarantee payments from the physician on a prorated basis. We alsoprovide revenue collection guarantees to hospital-based physician groups providing certain services at our hospitals with terms generally ranging from one tothree years. At December 31, 2011, the maximum potential amount of future payments under our income and revenue collection guarantees was $145 million.We had a liability of $106 million recorded for the fair value of these guarantees included in other current liabilities at December 31, 2011. We have also guaranteed minimum rent revenue to certain landlords who built medical office buildings on or near our hospital campuses. Themaximum potential amount of future payments under these guarantees at December 31, 2011 was $6 million. We had a liability of $4 million recorded for thefair value of these guarantees, of which $1 million was included in other current liabilities and $3 million was included in other long-term liabilities, atDecember 31, 2011. NOTE 8. EMPLOYEE BENEFIT PLANS Share-Based Compensation Plans We currently grant stock-based awards to our directors and key employees pursuant to our 2008 Stock Incentive Plan, which was approved by ourshareholders at their 2008 annual meeting. At December 31, 2011, approximately 21 million shares of common stock were available under our 2008 StockIncentive Plan for future stock option grants and other incentive awards, including restricted stock units. Options have an exercise price equal to the fairmarket value of the shares on the date of grant and generally expire 10 years from the date of grant. A restricted stock unit is a contractual right to receive oneshare of our common stock or the equivalent value in cash in the future. Options and restricted stock units typically vest one-third on each of the first threeanniversary dates of the grant; however, from time to time, we grant performance-based options and restricted stock units that vest subject to the achievementof specified performance goals within a specified timeframe. 102Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Our income from continuing operations for the years ended December 31, 2011, 2010 and 2009 includes $25 million, $22 million and $23 million,respectively, of pretax compensation costs related to our stock-based compensation arrangements ($15 million, $14 million and $14 million, respectively,after-tax, excluding the impact of the deferred tax valuation allowance). The table below shows the stock option and restricted stock unit grants and otherawards that comprise the $25 million of stock-based compensation expense recorded in salaries, wages and benefits in the year ended December 31, 2011.Compensation cost is measured by the fair value of the awards on their grant dates and is recognized over the requisite service period of the awards, whether ornot the awards had any intrinsic value during the period. Grant DateAwardsExercise PricePer ShareFair ValuePer Share atGrant DateStock-BasedCompensation Expensefor Year EndedDecember 31, 2011(In Thousands)(In Millions)Stock Options:February 25, 2010960$5.03$2.89$1February 26, 200911,1911.140.713February 26, 20097,9851.140.611March 6, 20082,5634.942.431Restricted Stock Units:November 4, 20112684.86(1)1February 23, 20113,8646.907February 25, 20104,3275.037March 6, 20082,6574.942Other grants2$25 (1) End of month fair market value was used for this grant to calculate compensation expense. Prior to our shareholders approving the 2008 Stock Incentive Plan, we granted stock-based awards to our directors and employees pursuant to otherplans. Stock options remain outstanding under those other plans, but no additional stock-based awards will be granted under them. Pursuant to the terms of our stock-based compensation plans, awards granted under the plans vest and may be exercised as determined by thecompensation committee of our board of directors. In the event of a change in control, the compensation committee may, at its sole discretion without obtainingshareholder approval, accelerate the vesting or performance periods of the awards. 103Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Stock Options The following table summarizes stock option activity during the years ended December 31, 2011, 2010 and 2009: OptionsWeightedAverageExercisePrice PerShareAggregateIntrinsicValueWeightedAverageRemainingLife(In Millions)Outstanding as of December 31, 200831,905,42618.48Granted22,146,1801.17Exercised0Forfeited/Expired(5,734,351)18.21Outstanding as of December 31, 200948,317,25510.58Granted964,0085.03Exercised(2,081,978)1.21Forfeited/Expired(4,043,736)20.62Outstanding as of December 31, 201043,155,5499.97Granted0Exercised(2,516,084)1.31Forfeited/Expired(6,645,893)32.23Outstanding as of December 31, 201133,993,572$6.26$655.3 yearsVested and expected to vest at December 31, 201133,925,303$6.27$655.3 yearsExercisable as of December 31, 201126,798,092$7.53$394.8 years There were 2,516,084 stock options exercised during the year ended December 31, 2011 with a $14 million aggregate intrinsic value, and2,081,978 stock options exercised in 2010 with a $9 million aggregate intrinsic value. As of December 31, 2011, there were $2 million of total unrecognized compensation costs related to stock options. These costs are expected to berecognized over a weighted average period of 0.6 years. In the year ended December 31, 2011, there were no stock options granted. In the year ended December 31, 2010, we granted an aggregate of 964,008stock options under our 2008 Stock Incentive Plan to certain of our senior officers. Half of these stock options are subject to time-vesting and the remainderwere granted subject to performance-based vesting. Because all conditions were met, the performance-based stock options will vest and be settled ratably over athree-year period from the date of the grant. The weighted average estimated fair value of stock options we granted in the year ended December 31, 2010 was $2.89 per share for our top 11employees. We did not grant stock options to any other employees in the year ended December 31, 2010. These fair values were calculated based on each grantdate using a binomial lattice model with the following assumptions: Year Ended December 31, 2010Top Eleven EmployeesExpected volatility53%Expected dividend yield0%Expected life7 yearsExpected forfeiture rate2%Risk-free interest rate3.29%Early exercise threshold75% gainEarly exercise rate20% per year The expected volatility used in the binomial lattice model incorporated historical and implied share-price volatility and was based on an analysis ofhistorical prices of our stock and open-market exchanged options. The expected volatility reflects the historical volatility for a duration consistent with thecontractual life of the options, and the volatility implied by the trading of options to purchase our stock on open-market exchanges. The historical share-pricevolatility excludes the movements in our stock price during the period October 1, 2002 through December 31, 2002 due to unique events occurring during thattime, which caused extreme volatility in our stock price. The expected life of options granted is derived from the output of the binomial lattice model andrepresents the period of time that the options are expected to be outstanding. This model incorporates an early exercise 104Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents assumption in the event of a significant increase in stock price. The risk-free interest rates are based on zero-coupon U.S. Treasury yields in effect at the dateof grant consistent with the expected exercise timeframes. The following table summarizes information about our outstanding stock options at December 31, 2011: Options OutstandingWeighted AverageOptions ExercisableRange of Exercise Prices Number ofOptionsRemainingContractual LifeWeighted AverageExercise PriceNumber ofOptionsWeighted AverageExercise Price$0.00 to $1.14915,912,3267.2 years$1.149,473,119$1.14$1.15 to $10.63910,968,0235.0 years7.2510,211,7507.45$10.64 to $13.9592,870,8012.2 years12.112,870,80112.11$13.96 to $17.5893,594,4221.1 years17.093,594,42217.09$17.59 to $28.759612,0000.8 years28.16612,00028.16$28.76 and over36,0000.6 years45.1436,00045.1433,993,5725.3 years$6.2626,798,092$7.53 As of December 31, 2011, approximately 73.5% of our outstanding options were held by current employees and approximately 26.5% were held byformer employees. Approximately 56.5% of our outstanding options were in-the-money, that is, they had an exercise price less than the $5.13 market price ofour common stock on December 31, 2011, and approximately 43.5% were out-of-the-money, that is, they had an exercise price of more than $5.13 as shownin the table below: In-the-Money OptionsOut-of-the-Money OptionsAll OptionsOutstanding% of TotalOutstanding% of TotalOutstanding% of TotalCurrent employees20,128,97299.6%8,241,20739.7%28,370,17973.5%Former employees59,3340.4%5,564,05960.3%5,623,39326.5%Totals20,188,306100.0%13,805,266100.0%33,993,572100.0%% of all outstanding options56.5%43.5%100.0% Restricted Stock Units The following table summarizes restricted stock unit activity during the years ended December 31, 2011, 2010 and 2009: Restricted StockUnitsWeighted AverageGrant Date Fair ValuePer UnitUnvested as of December 31, 20088,670,318$6.04Granted542,3242.35Vested(4,069,831)5.84Forfeited(336,370)5.59Unvested as of December 31, 20094,806,4415.82Granted5,139,2995.03Vested(2,500,853)5.70Forfeited(1,123,617)6.26Unvested as of December 31, 20106,321,2705.14Granted4,553,3996.76Vested(2,889,882)4.98Forfeited(275,561)5.93Unvested as of December 31, 20117,709,226$6.13 In the year ended December 31, 2011, we granted 3,529,448 restricted stock units subject to time-vesting. In addition, we granted 755,436performance-based restricted stock units to certain of our senior officers. Because all conditions were met, the performance-based restricted stock units willvest and be settled ratably over a three-year period from the date of the grant. In the year ended December 31, 2011, we also granted 268,515 restricted stockunits to our directors, which vested immediately on the grant date and may be settled in cash, shares of our common stock or a combination of cash andstock. The fair value of restricted stock units granted to directors will be adjusted based on our share price at the end of each calendar quarter. Annual grantsof restricted stock units to our directors settle on the earlier of the third anniversary of the date of the grant or termination of board service, unless settlementhas been deferred by the director. Initial grants of restricted stock units to newly appointed directors are settled only upon termination of board service. 105Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents In the year ended December 31, 2010, we granted 4,081,030 restricted stock units subject to time-vesting. In addition, we granted 832,030performance-based restricted stock units to certain of our senior officers. Because all conditions were met, the performance-based restricted stock units willvest and be settled ratably over a three-year period from the date of the grant. In the year ended December 31, 2010, we also granted 226,239 restricted stockunits to our directors, which vested immediately on the grant date and may be settled, as described above, in cash, shares of our common stock or acombination of cash and stock. As of December 31, 2011 and 2010, there were $29 million and $19 million, respectively, of total unrecognized compensation costs related torestricted stock units. These costs are expected to be recognized over a weighted average period of 2.1 years. Employee Stock Purchase Plan We have an employee stock purchase plan under which we are currently authorized to issue up to 20,250,000 shares of common stock to our eligibleemployees. As of December 31, 2011, there were approximately 2,651,815 shares available for issuance under our employee stock purchase plan. Under theterms of the plan, eligible employees may elect to have between 1% and 10% of their base earnings withheld each quarter to purchase shares of our commonstock. Shares are purchased at a price equal to 95% of the closing price on the last day of the quarter. The plan requires a one-year holding period for allshares issued. The holding period does not apply upon termination of employment. Under the plan, no individual may purchase, in any year, shares with afair market value in excess of $25,000. The plan is currently not considered to be compensatory. We sold the following numbers of shares under our employee stock purchase plan in the years ended December 31, 2011, 2010 and 2009: Years Ended December 31,201120102009Number of shares749,637771,3191,715,591Weighted average price$5.36$4.93$1.34 Employee Retirement Plans Substantially all of our employees, upon qualification, are eligible to participate in a defined contribution 401(k) plan. Under the plan, employeesmay contribute 1% to 75% of their eligible compensation, and we match such contributions annually up to a maximum percentage for participants activelyemployed as of December 31. As of January 1, 2009, the employer match was made discretionary, employees must work 1,000 hours or more during the planyear to be eligible to receive any match and the matching percentage was reduced from 3% to 1.5%. However, based on our improved profitability in 2009, werecorded, in the three months ended December 31, 2009, discretionary contribution expense of $16 million for contributions to the 401(k) plan accounts ofemployees who were not eligible for incentive compensation awards. Plan expenses, primarily related to our contributions to the plan, were approximately$32 million, $27 million and $44 million for the years ended December 31, 2011, 2010 and 2009, respectively. Such amounts are reflected in salaries, wagesand benefits in the accompanying Consolidated Statements of Operations. 106Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents We maintain one active and two frozen non-qualified defined benefit pension plans (“SERPs”) that provide supplemental retirement benefits to certainof our current and former executives. The plans are not funded, and plan obligations are paid from our working capital. Pension benefits are generally basedon years of service and compensation. The following tables summarize the balance sheet impact, as well as the benefit obligations, funded status and rateassumptions associated with the SERPs based on actuarial valuations prepared as of December 31, 2011 and 2010: December 31,20112010Reconciliation of funded status of plans and the amounts included in the Consolidated BalanceSheets:Projected benefit obligations(1) Beginning obligations$(268)$(249)Service cost(2)(2)Interest cost(14)(14)Actuarial loss(19)(21)Benefits paid1818Ending obligations(285)(268)Fair value of plans’ assets00Funded status of plans$(285)$(268)Amounts recognized in the Consolidated Balance Sheets consist of:Other current liability$(20)$(19)Other long-term liability(265)(249)Accumulated other comprehensive loss6549$(220)$(219) Assumptions:Discount rate5.00%5.50%Compensation increase rate3.00%3.00%Measurement dateDecember 31, 2011December 31, 2010 (1) The accumulated benefit obligation at December 31, 2011 and 2010 was approximately $280 million and $265 million, respectively. The components of net periodic benefit costs and related assumptions are as follows: Years Ended December 31,201120102009 Service costs$2$2$1Interest costs141414Amortization of prior-year service costs003Amortization of net actuarial loss311Net periodic benefit cost$19$17$19 Assumptions:Discount rate5.50%5.75%5.75%Long-term rate of return on assetsn/an/an/aCompensation increase rate3.00%3.00%4.00%Measurement dateJanuary 1, 2011January 1, 2010January 1, 2009Census dateJanuary 1, 2011January 1, 2010January 1, 2009 Net periodic benefit costs for the current year are based on assumptions determined at the valuation date of the prior year. We recorded loss adjustments of $16 million, $20 million and $3 million in other comprehensive income (loss) in the three months endedDecember 31, 2011, 2010 and 2009, respectively, to recognize changes in the funded status of our SERPs. Changes in the funded status are recorded as adirect increase or decrease to shareholders’ equity through accumulated other comprehensive loss. Net actuarial losses of $19 million, $21 million and$7 million during the years ended December 31, 2011, 2010 and 2009, respectively, and the amortization of net prior service costs of less than $1 million forthe years ended December 31, 2011 and 2010 and approximately $3 million for the year ended December 31, 2009 were recognized in other comprehensiveincome (loss). Cumulative net actuarial losses of $65 million, $49 million and $29 million as of December 31, 2011, 2010 and 2009, respectively, andunrecognized prior service costs of less than $1 million as of all of the years 107Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents ended December 31, 2011, 2010 and 2009, have not yet been recognized as components of net periodic benefit costs. During the year endingDecember 31, 2012, no net prior service costs are expected to be recognized as components of net periodic benefit costs. The following table presents our estimated future benefit payments for the next five years and in the aggregate for the five years thereafter: Years Ending December 31,Five YearsTotal20122013201420152016ThereafterSERP benefit payments$200$20$20$20$20$20$100 The SERP obligations of $285 million at December 31, 2011 are classified in the accompanying Consolidated Balance Sheet as an other currentliability ($20 million) and an other noncurrent liability ($265 million) based on an estimate of the expected payment patterns. NOTE 9. OTHER CURRENT ASSETS The principal components of other current assets are shown in the table below: December 31,20112010Prepaid expenses$73$70Physician receivables and relocation agreements5862Physician and group coverage guarantees10470Disproportionate share hospital revenue receivables2733Vendor and other nonpatient receivables4722Grant receivable related to medical residency program22Electronic health record incentives receivable130Supplemental California Medi-Cal payment receivable160Sublease receivables22Other, net3628Other current assets$378$289 Of the total amounts in other current assets, $38 million and $17 million was past due more than 90 days as of December 31, 2011 and 2010, respectively,primarily related to disproportionate share hospital revenue receivables and vendor and other nonpatient receivables. NOTE 10. PROPERTY AND EQUIPMENT The principal components of property and equipment are shown in the table below: December 31,20112010Land$350$352Buildings and improvements4,1023,984Construction in progress236205Equipment3,0482,8637,7367,404Accumulated depreciation and amortization(3,386)(3,100)Net property and equipment$4,350$4,304 Property and equipment is stated at cost, less accumulated depreciation and amortization and impairment write-downs related to assets held andused. At December 31, 2011 and 2010, we had $109 million and $91 million, respectively, of property and equipment purchases accrued for items receivedbut not yet paid. Of these amounts, $104 million and $87 million, respectively, were included in accounts payable. 108Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents NOTE 11. GOODWILL AND OTHER INTANGIBLE ASSETS The following table provides information on changes in the carrying amount of goodwill, which is included in the accompanying ConsolidatedBalance Sheets as of December 31, 2011 and 2010: 20112010As of January 1:Goodwill$3,076$3,031Accumulated impairment losses(2,424)(2,424)Total652607Goodwill acquired during the year9045Impairment of goodwill(6)0Total$736$652 As of December 31:Goodwill$3,166$3,076Accumulated impairment losses(2,430)(2,424)Total$736$652 The following table provides information regarding other intangible assets, which are included in the accompanying Consolidated Balance Sheets asof December 31, 2011 and 2010: GrossCarryingAmountAccumulatedAmortizationNet BookValueAs of December 31, 2011:Capitalized software costs$756$(344)$412Long-term debt issuance costs88(15)73Other5(1)4Total$849$(360)$489As of December 31, 2010:Capitalized software costs$658$(288)$370Long-term debt issuance costs84(14)70Other202Total$744$(302)$442 Estimated future amortization of intangibles with finite useful lives as of December 31, 2011 is as follows: Years Ending December 31,LaterTotal20122013201420152016YearsAmortization of intangible assets$489$69$63$59$52$51$195 109Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents NOTE 12. INVESTMENTS AND OTHER ASSETS The principal components of investments and other assets in our accompanying Consolidated Balance Sheets are as follows: December 31,20112010Marketable debt securities$22$26Equity investments in unconsolidated health care entities(1)2327Total investments4553Cash surrender value of life insurance policies1818Long-term deposits4749Land held for expansion, long-term receivables and other assets4644Investments and other assets$156$164 (1) Equity earnings of unconsolidated affiliates are included in net operating revenues in the accompanying Consolidated Statements of Operations andwere $8 million and $5 million in the years ended December 31, 2011 and 2010, respectively. Our policy is to classify investments that may be needed for cash requirements as “available-for-sale.” In doing so, the carrying values of the sharesand debt instruments are adjusted at the end of each accounting period to their market values through a credit or charge to other comprehensive income (loss),net of taxes. At both December 31, 2011 and 2010, there were less than $1 million of accumulated unrealized gains on these investments. NOTE 13. ACCUMULATED OTHER COMPREHENSIVE LOSS Our accumulated other comprehensive loss is comprised of the following: December 31,20112010Unamortized realized losses from interest rate lock derivatives$(1)$(1)Adjustments for supplemental executive retirement plans(51)(42)Accumulated other comprehensive loss$(52)$(43) There was a tax effect allocated to the adjustments for supplemental executive retirement plans for the years ended December 31, 2011 and 2010 of $7and $8 million, respectively. NOTE 14. PROPERTY AND PROFESSIONAL AND GENERAL LIABILITY INSURANCE Property Insurance We have property, business interruption and related insurance coverage to mitigate the financial impact of catastrophic events or perils that is subjectto deductible provisions based on the terms of the policies. These policies are on an occurrence basis. For the policy periods April 1, 2011 through March 31,2012, April 1, 2010 through March 31, 2011 and April 1, 2009 through March 31, 2010, we have coverage totaling $600 million per occurrence, afterdeductibles and exclusions, with annual aggregate sub-limits of $100 million each for floods and earthquakes and a per-occurrence sub-limit of $100 millionfor windstorms with no annual aggregate. With respect to fires and other perils, excluding floods, earthquakes and windstorms, the total $600 million limit ofcoverage per occurrence applies. Deductibles are 5% of insured values up to a maximum of $25 million for floods, California earthquakes and wind-relatedclaims, and 2% of insured values for New Madrid fault earthquakes, with a maximum per claim deductible of $25 million. Other covered losses, includingfires and other perils, have a minimum deductible of $1 million. Professional and General Liability Insurance At December 31, 2011 and 2010, the aggregate current and long-term professional and general liability reserves in our accompanying ConsolidatedBalance Sheets were approximately $412 million and $467 million, respectively. These reserves include the reserves recorded by our captive insurancesubsidiaries and our self-insured retention reserves recorded based on actuarial estimates for the portion of our professional and general liability risks,including incurred but not reported claims, for which we do not have insurance coverage. We estimated the reserves for losses and related expenses usingexpected loss-reporting 110Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents patterns discounted to their present value under a risk-free rate approach using a Federal Reserve seven-year maturity rate of 1.35%, 2.71% and 2.69% atDecember 31, 2011, 2010 and 2009, respectively. Self-insured retentions are determined for each claim period based on the following insurance policies in effect: · Policy period June 1, 2011 through May 31, 2012—Our hospitals generally have a self-insurance retention of $5 million per occurrence forall claims incurred. Our captive insurance company, The Healthcare Insurance Corporation (“THINC”), retains $10 million per occurrencecoverage above our hospitals’ $5 million self-insurance retention level. The next $10 million of claims in excess of these aggregate self-insuranceretentions of $15 million per occurrence are 65% reinsured by THINC with independent reinsurance companies, with THINC retaining 35% ora maximum of $3.5 million. Claims in excess of $25 million are covered by our excess professional and general liability insurance policies withmajor independent insurance companies, on a claims-made basis, subject to an aggregate limit of $175 million. · Policy period June 1, 2010 through May 31, 2011—Our hospitals generally have a self-insurance retention of $5 million per occurrence forall claims incurred. THINC retains $10 million per occurrence coverage above our hospitals’ $5 million self-insurance retention level. The next$10 million of claims in excess of these aggregate self-insurance retentions of $15 million per occurrence are 55% reinsured by THINC withindependent reinsurance companies, with THINC retaining 45% or a maximum of $4.5 million. Claims in excess of $25 million are covered byour excess professional and general liability insurance policies with major independent insurance companies, on a claims-made basis, subject toan aggregate limit of $175 million. · Policy period June 1, 2009 through May 31, 2010—Our hospitals generally have a self-insurance retention of $5 million per occurrence forall claims incurred. THINC retains $10 million per occurrence above our hospitals’ $5 million self-insurance retention level. The next$10 million of claims in excess of these aggregate self-insurance retentions of $15 million per occurrence are 65% reinsured by THINC withindependent reinsurance companies, with THINC retaining 35% or a maximum of $3.5 million. Claims in excess of $25 million are covered byour excess professional and general liability insurance policies with major independent insurance companies, on a claims-made basis, subject toan aggregate limit of $175 million, with Tenet retaining 20% of the initial $50 million layer in excess of $25 million per claim or a maximum of$10 million. · Policy period June 1, 2008 through May 31, 2009—Our hospitals generally have a self-insurance retention of $5 million per occurrence forall claims incurred. THINC retains $10 million per occurrence above our hospitals’ $5 million self-insurance retention level. Claims in excessof these aggregate self-insurance retentions of $15 million per occurrence are substantially reinsured up to $25 million, with THINC retaining30% of the next $10 million for each claim that exceeds $15 million or a maximum of $3 million. Claims in excess of $25 million are coveredby our excess professional and general liability insurance policies with major independent insurance companies, on a claims-made basis,subject to an aggregate limit of $275 million. If the aggregate limit of any of our professional and general liability policies is exhausted, in whole or in part, it could deplete or reduce the limitsavailable to pay any other material claims applicable to that policy period. Included in other operating expenses, net, in the accompanying Consolidated Statements of Operations is malpractice expense of $110 million,$57 million and $89 million for the years ended December 31, 2011, 2010 and 2009, respectively. NOTE 15. CLAIMS AND LAWSUITS We operate in a highly regulated and litigious industry. As a result, various lawsuits, claims, and legal and regulatory proceedings have been and canbe expected to continue to be instituted or asserted against us. The resolution of any of these matters could have a material adverse effect on our results ofoperations, financial condition or cash flows in a given period. In accordance with the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 450, “Contingencies,” and relatedguidance, we record accruals for estimated losses relating to claims and lawsuits when available information indicates that a loss is probable and the amountof the loss, or range of loss, can be reasonably estimated. Where a loss on a material matter is reasonably possible and estimable, we disclose an estimate ofthe loss or a range of loss. In cases where we have not disclosed an estimate, we have concluded that the loss is either not reasonably possible or the loss, or arange of loss, is not reasonably estimable, based on available information. 111Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents 1. Governmental Reviews—Health care companies are subject to numerous investigations by various governmental agencies. Further, private partieshave the right to bring qui tam or “whistleblower” lawsuits against companies that submit false claims for payments to, or improperly retainoverpayments from, the government and, in some states, private payers. Certain of our individual facilities have received inquiries from governmentagencies, and our facilities may receive such inquiries in future periods. The following is an update of material pending governmental reviews, all of which have been previously reported. · Inpatient Rehabilitation Facilities Review. In October 2007, we notified the Office of Inspector General (“OIG”) of the U.S. Department ofHealth and Human Services that we had completed a preliminary review of admissions to our inpatient rehabilitation unit at South FultonMedical Center that suggested further review was necessary to determine whether the hospital had received Medicare overpaymentsreportable under our now-expired corporate integrity agreement (“CIA”). In February 2009, the U.S. Department of Justice (“DOJ”), whichis participating in this matter with the OIG, requested additional information regarding, among other things, the basis for our submissionof this matter to the OIG. The government’s review expanded to include all of our active and divested inpatient hospitals and units for theperiod May 15, 2005 through December 31, 2007. In October 2010 and January 2011, we met with the DOJ to discuss an examination of this matter originally presented to the DOJ inMarch 2010. Beginning in April 2011, the DOJ initiated a series of informal, non-binding and exploratory discussions with us about apotential non-judicial resolution of this matter. On December 16, 2011, the parties reached an agreement in principle on potential settlementterms, including a potential settlement amount, all of which remains subject to final approval within the DOJ. Although the parties have notexecuted a formal settlement agreement (which remains under negotiation), and although the agreement in principle requires formal approvalby the DOJ, we believe that it is probable that a settlement will be reached; accordingly, we increased our reserve by approximately $23million (approximately $12 million of which related to continuing operations and approximately $11 million of which related todiscontinued operations) in the three months ended December 31, 2011 to reflect our current estimate of our probable liability for thismatter. · Kyphoplasty Review. The DOJ, in coordination with the OIG, has contacted a number of hospitals requesting information regarding theirbilling practices for kyphoplasty procedures. Kyphoplasty is a surgical procedure used to treat pain and related conditions associated withcertain vertebrae injuries. As of December 31, 2011, seven of our hospitals had received information requests from the DOJ regarding theseprocedures. The government requested the information in connection with its review of the appropriateness of Medicare patients receivingkyphoplasty procedures on an inpatient as opposed to an outpatient basis. · Review of Florida Medical Center’s Partial Hospitalization Program. In February 2009, the fiscal intermediary for our Florida MedicalCenter began a probe review of the group billing practices of that facility’s partial hospitalization program, a psychiatric treatment programthat had the capacity to treat 15 patients on an outpatient basis. We also examined the records reviewed by the fiscal intermediary andindependently determined that patients had multiple outpatient admissions with lengths of stay longer than expected for this type ofprogram. As a result of our review of this matter, we closed the program and, pursuant to the CIA, notified the OIG about our findings inJune 2009. Our subsequent submission of this matter into the OIG’s voluntary self-disclosure protocol was accepted. The review of thismatter is ongoing, but the parties are engaged in informal, non-binding and exploratory discussions about a potential non-judicial resolutionof this matter. · Review of ICD Implantation Procedures. In March 2010, the DOJ issued a civil investigative demand (“CID”) pursuant to the federalFalse Claims Act to one of our hospitals. The CID requested information regarding Medicare claims submitted by our hospital inconnection with the implantation of implantable cardioverter defibrillators (“ICDs”) during the period 2002 to the date of the letter. Thegovernment is seeking this information to determine if ICD implantation procedures were performed in accordance with Medicare coveragerequirements. The DOJ has since notified us that it also intends to review records and documents from 32 of our other hospitals in additionto the hospital that originally received the CID. We understand that the DOJ has submitted similar requests to other hospital companies aswell. Our analysis of several of these matters is still ongoing, and we are unable to predict with any certainty the progress or final outcome of anydiscussions with government agencies at this time. However, based on currently available information, as of December 31, 2011, we have recordedreserves of approximately $50 million in the aggregate with 112Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents respect to the foregoing governmental proceedings. Changes in the reserves may be required in the future as additional information becomes available.We cannot predict the ultimate resolution of any governmental review, and the final amounts paid in settlement or otherwise, if any, could differmaterially from our currently recorded reserves. 2. Class Action Lawsuits Resulting from Hurricane Katrina—In March 2011, we agreed to settle two previously reported class action lawsuits relatingto alleged injuries suffered by persons at Memorial Medical Center, one of our former New Orleans area hospitals, following Hurricane Katrina for a$25 million cash payment, which was fully reserved at March 31, 2011. The court approved the final settlement agreement at a fairness hearingheld in October 2011. In January 2012, we reached an agreement in principle to settle for approximately $12 million a similar purported class action lawsuit filed on behalfof persons allegedly injured following Hurricane Katrina at Lindy Boggs Medical Center (another one of our former New Orleans area hospitals). Thesettlement, which will be covered in full by our excess insurance carrier, will be apportioned among the eligible class members who file a proof ofclaim once the Civil District Court for the Parish of Orleans certifies the class in that case — which is captioned Dunn, et al. v. Tenet Mid-CityMedical, L.L.C. (formerly d/b/a Lindy Boggs Medical Center), et al. We anticipate the parties will execute a final settlement agreement by earlyMarch 2012 and will submit it to the court for preliminary approval shortly thereafter. Following the court’s preliminary approval, the settlement willbe subject to a fairness hearing with class members and final review by the court. In addition, we are defendants in 17 individual Hurricane Katrina-related lawsuits filed in the Civil District Court for the Parish of Orleans. As ofDecember 31, 2011, trial dates had not been set in these individual cases. In general, the plaintiffs allege that the hospitals were negligent in failing toproperly prepare for Hurricane Katrina by, among other things, failing to evacuate patients ahead of the storm and failing to have properly configuredemergency generator systems. The plaintiffs seek unspecified damages for the alleged wrongful death of some patients, aggravation of pre-existingillnesses or injuries to other patients, and additional claims. Although we are unable to predict the ultimate resolution of the pending lawsuits, we donot believe the outcome of these matters, either individually or collectively, will have a material adverse effect on our business, financial condition,results of operations or cash flows. 3. Hospital-Related Tort Claim—On November 16, 2011, following a trial in the Superior Court in Los Angeles County, California, a jury awardedthe plaintiff in the matter of Rosenberg v. Encino-Tarzana Regional Medical Center and Tenet Healthcare Corporation compensatory damagesin the amount of approximately $2.4 million. In her complaint, the plaintiff alleged that she was assaulted in April 2006 by a hospital employee whilea patient at Tarzana Regional Medical Center (a hospital we have since divested). On November 17, 2011, the jury awarded the plaintiff a $65million verdict against our former hospital for punitive damages. We intend to vigorously contest the verdicts in this case. Based on available information, and after taking into account the verdicts of the jury (which we intend to appeal), management determined in thethree months ended December 31, 2011 that a loss with respect to this matter is probable and, as a result, recorded a reserve of approximately $6million in discontinued operations. For purposes of computing the reserve, management estimated that the probable range of loss would be betweenapproximately $6 million and $25 million (including approximately $1 million in attorneys’ fees) based on our expectation, after analysis ofrelevant case law, that a California court would apply U.S. Supreme Court opinions that generally limit, as a matter of constitutional law, theamount of a punitive award to be no more than a multiple of nine times the compensatory award and, in the case of a substantial compensatoryaward, to be no more than a multiple of one times that award. At this time, management has concluded that no amount within this range is any morelikely than any other; therefore, in accordance with ASC 450, the accrual was recorded at the low end of the estimated range. 4. Ordinary Course Matters—As previously reported, we are defendants in two coordinated lawsuits in Los Angeles Superior Court alleging that ourhospitals violated certain provisions of California’s labor laws and applicable wage and hour regulations. The cases are: McDonough, et al. v. TenetHealthcare Corporation (which was filed June 2003) and Tien, et al. v. Tenet Healthcare Corporation (which was filed in May 2004). Theplaintiffs seek back pay, statutory penalties, interest and attorneys’ fees. The plaintiffs’ requests for class certification were denied in the lowercourt, and the appellate court affirmed the lower court’s ruling. The California Supreme Court granted the plaintiffs’ petition for review of the lowercourt’s ruling, but has deferred further action in the matter pending its decision in a similar case, which is expected in April 2012. Based onavailable information, we believe at this time that the ultimate resolution of the coordinated lawsuits will not have a material adverse effect on ourbusiness, financial condition, results of operations or cash flows. In addition to the matters described above, our hospitals are subject to investigations, claims and legal proceedings in the ordinary course of ourbusiness. Most of these matters involve allegations of medical malpractice or other injuries suffered at our hospitals. We are also party in the normalcourse of business to regulatory proceedings and private litigation concerning the terms of our union agreements and the application of various federaland state labor laws, rules and regulations governing, among other things, a variety of workplace wage and hour issues. Furthermore, our hospitalsare routinely subject to sales and use tax audits and personal property tax audits by the state and local government jurisdictions in which they dobusiness. The results of the audits are frequently disputed, and such disputes are ordinarily resolved by administrative appeals or litigation. It ismanagement’s opinion that the ultimate resolution of these ordinary course investigations, claims and legal proceedings will not have a materialadverse effect on our business, financial condition, results of operations or cash flows. New claims or inquiries may be initiated against us from time to time. These matters could (1) require us to pay substantial damages or amounts in judgmentsor settlements, which individually or in the aggregate could exceed amounts, if any, that may be 113Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents recovered under our insurance policies where coverage applies and is available, (2) cause us to incur substantial expenses, (3) require significant time andattention from our management, and (4) cause us to close or sell hospitals or otherwise modify the way we conduct business. The table below presents reconciliations of the beginning and ending liability balances in connection with legal settlements and related costs recordedduring the years ended December 31, 2011, 2010 and 2009: Balances atBeginningof PeriodLitigation andInvestigationCostsCashPaymentsOtherBalances atEnd ofPeriodYear Ended December 31, 2011Continuing operations$30$55$(36)$0$49Discontinued operations0170017$30$72$(36)$0$66Year Ended December 31, 2010Continuing operations$95$12$(78)$1$30Discontinued operations00000$95$12$(78)$1$30Year Ended December 31, 2009Continuing operations$240$31$(181)$5$95Discontinued operations00000$240$31$(181)$5$95 For the years ended December 31, 2011, 2010 and 2009, we recorded net costs of $72 million, $12 million and $31 million, respectively, inconnection with significant legal proceedings and investigations. The 2011 costs primarily relate to costs associated with our evaluation of an unsolicitedacquisition proposal received in November 2010 (which was subsequently withdrawn), changes in reserve estimates established in connection with certaingovernmental reviews described above, accruals for a physician privileges case and certain hospital-related tort claims, the settlement of a union arbitrationclaim, and costs to defend the Company in various matters. The 2010 costs primarily relate to costs to defend the Company in various matters and changes inreserve estimates established in connection with certain governmental reviews described above, as well as costs associated with our evaluation of theunsolicited acquisition proposal received in November 2010. The 2009 costs primarily relate to reserves established in connection with certain governmentalreviews described above. The 2009 costs also include amounts paid to indemnify a former officer of the Company in a matter to which the Company was nota party and costs to defend the Company in various matters. The 2009 payments primarily relate to a wage and hour settlement and payments related to our2006 civil settlement with the federal government. The amounts for 2010 and 2009 in the column entitled “Other” above relate to the reclassification ofpreviously recorded reserves associated with certain of the matters described above to the accrued legal settlement costs caption in the accompanyingConsolidated Balance Sheets. NOTE 16. INCOME TAXES The provision for income taxes for continuing operations for the years ended December 31, 2011, 2010 and 2009 consists of the following: Years Ended December 31,201120102009Current tax expense (benefit):Federal$0$6$(53)State(6)011(6)6(42)Deferred tax expense (benefit):Federal62(929)17State5(54)267(983)19$61$(977)$(23) 114Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents A reconciliation between the amount of reported income tax expense (benefit) and the amount computed by multiplying income (loss) from continuingoperations before income taxes by the statutory federal income tax rate is shown below: Years Ended December 31,201120102009Tax expense at statutory federal rate of 35%$57$55$72State income taxes, net of federal income tax benefit101010Tax attributable to noncontrolling interests(4)(3)(4)Other changes in valuation allowance(2)(1,054)(114)Change in tax contingency reserves, including interest(12)16(24)Termination of company-owned life insurance policies0037Prior-year provision to return adjustment and other changes in deferred taxes, netof valuation allowance7(3)(1)Other items521$61$(977)$(23) Deferred income taxes reflect the tax effects of temporary differences between the carrying amount of assets and liabilities for financial reportingpurposes and the amount used for income tax purposes. The following table discloses those significant components of our deferred tax assets and liabilities,including any valuation allowance: December 31, 2011December 31, 2010AssetsLiabilitiesAssetsLiabilitiesDepreciation and fixed-asset differences$0$418$0$469Reserves related to discontinued operations and restructuringcharges5040Receivables (doubtful accounts and adjustments)17801530Deferred gain on debt exchanges053053Accruals for retained insurance risks19702170Intangible assets01150103Other long-term liabilities530520Benefit plans19001850Other accrued liabilities310140Investments and other assets5040Net operating loss carryforwards69508420Stock-based compensation440830Other items4104601,4395861,600625Valuation allowance(61)0(66)0$1,378$586$1,534$625 Below is a reconciliation of the deferred tax assets and liabilities and the corresponding amounts reported in the accompanying Consolidated BalanceSheets. December 31,20112010Current portion of deferred income taxes$418$282Deferred income taxes, net of current portion374627Noncurrent deferred income tax liability00Net deferred tax asset (liability)$792$909 The provision for income taxes in the year ended December 31, 2010 included an income tax benefit of $993 million in continuing operations relatedto a decrease in the valuation allowance for our deferred tax assets and other tax adjustments. The net decrease in the valuation allowance during the year endedDecember 31, 2010 is primarily attributable to the estimated realization of deferred tax assets resulting from the utilization of net operating loss carryforwardsagainst projected future years’ taxable income. After considering all available evidence, both positive (including cumulative profits, carryforward periods forutilization of federal net operating loss carryovers and other factors) and negative (including cumulative losses in past years and other factors), we concludedthat the valuation allowance against our deferred tax assets should be reduced by approximately $1.06 billion. The remaining $66 million balance in thevaluation allowance as of December 31, 2010 was primarily attributable to certain state net operating loss carryovers and federal tax credits that, more likelythan not, will expire unutilized. Based on the 115Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents improvement of our operating results in 2009 and 2010 and our assessment of projected future results of operations, we determined that realization of thedeferred income tax benefit was more likely than not. As a result, our judgment about the need for this valuation allowance changed and the reduction in thevaluation allowance was recorded as a benefit in the provision for income taxes. Effective January 1, 2007, we adopted ASC 740-10-25, which prescribes a comprehensive model for the financial statement recognition,measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. The table below summarizes the totalchanges in unrecognized tax benefits during the years ended December 31, 2011, 2010 and 2009. The additions and reductions for tax positions include theimpact of items for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductions. Such amountsinclude unrecognized tax benefits that have impacted deferred tax assets and liabilities at December 31, 2011, 2010 and 2009. ContinuingOperationsDiscontinuedOperationsTotalBalance at December 31, 2008611778Additions for prior-year tax positions000Reductions for tax positions of prior years(16)(4)(20)Additions for current-year tax positions202Reductions for current-year tax positions000Reductions due to settlements with taxing authorities(11)(1)(12)Reductions due to a lapse of statute of limitations(2)0(2)Balance at December 31, 2009341246Additions for prior-year tax positions12012Reductions for tax positions of prior years(12)(11)(23)Additions for current-year tax positions101Reductions for current-year tax positions000Reductions due to settlements with taxing authorities000Reductions due to a lapse of statute of limitations(1)0(1)Balance at December 31, 2010$34$1$35Additions for prior-year tax positions15015Reductions for tax positions of prior years(2)0(2)Additions for current-year tax positions303Reductions for current-year tax positions000Reductions due to settlements with taxing authorities(12)0(12)Reductions due to a lapse of statute of limitations(4)0(4)Balance at December 31, 2011$34$1$35 The total amounts of unrecognized tax benefits as of December 31, 2009 and 2010 were $46 million and $35 million, respectively, of which $46 million and$23 million, if recognized, would affect our effective tax rate and income tax expense (benefit) from continuing and discontinued operations. Income taxexpense in the year ended December 31, 2011 includes a benefit of $21 million ($2 million related to continuing operations and $19 million related todiscontinued operations) attributable to a reduction in our estimated liabilities for uncertain tax positions, net of related deferred tax effects. The total amount ofunrecognized tax benefits as of December 31, 2011 was $35 million, which, if recognized, would impact our effective tax rate and income tax expense (benefit)from continuing and discontinued operations. Income tax expense in the year ended December 31, 2010 includes a benefit of $58 million ($45 million relatedto continuing operations and $13 million related to discontinued operations) attributable to a reduction in our estimated liabilities for uncertain tax positions,net of related deferred tax effects, primarily as a result of audit settlements and the expiration of statutes of limitation. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense in our consolidated statements of operations.Approximately $1 million of interest and penalties related to accrued liabilities for uncertain tax positions ($1 million of income related to continuing operationsand $2 million of expense related to discontinued operations) are included in the accompanying Consolidated Statement of Operations for the year endedDecember 31, 2011. Total accrued interest and penalties on unrecognized tax benefits as of December 31, 2011 were $9 million ($10 million related tocontinuing operations and $(1) million related to discontinued operations). 116Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents The Internal Revenue Service (“IRS”) has completed the audits of our tax returns for all tax years ending on or before December 31, 2007. Alldisputed issues with respect to these audits have been resolved and all related tax assessments (including interest) have been paid. Tax returns for years endedafter December 31, 2007 are not currently under examination by the IRS. During 2011, the resolution of tax and interest computations by the IRS resulted in anet refund of tax and interest of $18 million with respect to the tax years ended May 31, 1998 through December 31, 2003, and payment of $15 million of taxand interest with respect to the tax years ended December 31, 2006 and 2007. As of December 31 2011, approximately $9 million of unrecognized federal and state tax benefits, as well as reserves for interest and penalties, maydecrease in the next 12 months as a result of the settlement of audits, the filing of amended tax returns or the expiration of statutes of limitations. At December 31, 2011, our carryforwards available to offset future taxable income consisted of (1) federal net operating loss (“NOL”) carryforwardsof approximately $1.7 billion pretax expiring in 2024 to 2030, (2) approximately $20 million in alternative minimum tax credits with no expiration, (3) generalbusiness credit carryforwards of approximately $14 million expiring in 2023 through 2031, and (4) state NOL carryforwards of $3.3 billion expiring in 2012through 2031 for which the associated deferred tax benefit, net of valuation allowance and federal tax impact, is $32 million. Our ability to utilize NOLcarryforwards to reduce future taxable income may be limited under Section 382 of the Internal Revenue Code if certain ownership changes in our companyoccur during a rolling three-year period. These ownership changes include the offering of stock by us, the purchase or sale of our stock by 5% shareholders,as defined in the Treasury regulations, or the issuance or exercise of rights to acquire our stock. If such ownership changes by 5% shareholders result inaggregate increases that exceed 50 percentage points during the three-year period, then Section 382 imposes an annual limitation on the amount of our taxableincome that may be offset by the NOL carryforwards. NOTE 17. EARNINGS PER COMMON SHARE The table below is a reconciliation of the numerators and denominators of our basic and diluted earnings (loss) per common share calculations forincome from continuing operations for the years ended December 31, 2011, 2010 and 2009. Income is expressed in millions and weighted average shares areexpressed in thousands. Income(Numerator)WeightedAverageShares(Denominator)Per-ShareAmountYear Ended December 31, 2011Income available to Tenet Healthcare Corporation common shareholders for basicearnings per share$64468,726$0.13Effect of dilutive stock options and restricted stock units016,4550.00Income available to Tenet Healthcare Corporation common shareholders fordiluted earnings per share$64485,181$0.13 Year Ended December 31, 2010Income available to Tenet Healthcare Corporation common shareholders for basicearnings per share$1,102484,321$2.28Effect of dilutive stock options, restricted stock units and mandatory convertiblepreferred stock2476,310(0.27)Income available to Tenet Healthcare Corporation common shareholders fordiluted earnings per share$1,126560,631$2.01 Year Ended December 31, 2009Income available to Tenet Healthcare Corporation common shareholders for basicearnings per share$212480,240$0.44Effect of dilutive stock options, restricted stock units and mandatory convertiblepreferred stock627,037(0.01)Income available to Tenet Healthcare Corporation common shareholders fordiluted earnings per share$218507,277$0.43 117Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Stock options (in thousands) whose exercise price exceeded the average market price of our common stock and, therefore, were not included in thecomputation of diluted shares for the years ended December 31, 2011, 2010 and 2009 were 13,685, 20,171 and 26,843 shares, respectively. NOTE 18. FAIR VALUE MEASUREMENTS Our financial assets and liabilities recorded at fair value on a recurring basis primarily relate to investments in available-for-sale securities held byour captive insurance subsidiaries and our derivative contracts. The following tables present information about our assets and liabilities that are measured atfair value on a recurring basis as of December 31, 2011 and 2010. The following tables also indicate the fair value hierarchy of the valuation techniques weutilized to determine such fair values. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identicalassets or liabilities. We consider a security that trades at least weekly to have an active market. Fair values determined by Level 2 inputs utilize data points thatare observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset orliability, and include situations where there is little, if any, market activity for the asset or liability. December 31, 2011Quoted Prices in ActiveMarkets forIdentical Assets(Level 1)Significant OtherObservable Inputs(Level 2)SignificantUnobservableInputs(Level 3)Investments:Investments in Reserve Yield Plus Fund$2$0$2$0Marketable debt securities — noncurrent226151$24$6$17$1Derivative Contracts (see Note 6):LIBOR cap agreement asset$0$0$0$0 December 31, 2010Quoted Prices in ActiveMarkets forIdentical Assets(Level 1)Significant OtherObservable Inputs(Level 2)SignificantUnobservableInputs(Level 3)Investments:Investments in Reserve Yield Plus Fund$1$0$1$0Marketable debt securities — noncurrent268171$27$8$18$1Derivative Contracts (see Note 6):LIBOR cap agreement asset$0$0$0$0 There was no change in the fair value of our auction rate securities valued using significant unobservable inputs during the years endedDecember 31, 2011 or 2010. At December 31, 2011, one of our captive insurance subsidiaries held $1 million of preferred stock and other securities that were distributed fromauction rate securities whose auctions have failed due to sell orders exceeding buy orders. We were not required to record an other-than-temporary impairment ofthese securities during the years ended December 31, 2011 or 2010. Our non-financial assets and liabilities not permitted or required to be measured at fair value on a recurring basis typically relate to long-lived assetsheld and used, long-lived assets held for sale and goodwill. We are required to provide additional disclosures about fair value measurements as part of ourfinancial statements for each major category of assets and liabilities measured at fair value on a non-recurring basis. The following table presents thisinformation as of December 31, 2011 and 2010, and indicates the fair value hierarchy of the valuation techniques we utilized to determine such fair values. Ingeneral, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities, which generally are notapplicable to non-financial assets and liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as definitive salesagreements, appraisals or established market values of comparable assets. Fair values determined by Level 3 inputs are unobservable data points for the assetor liability and include situations where there is little, if any, market activity for the asset or liability, such as internal estimates of future cash flows. 118Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents December 31, 2011Quoted Prices in ActiveMarkets forIdentical Assets(Level 1)Significant OtherObservable Inputs(Level 2)SignificantUnobservableInputs(Level 3)Long-lived assets held and used$20$0$20$0Goodwill$0$0$0$0 December 31, 2010Quoted Prices in ActiveMarkets forIdentical Assets(Level 1)Significant OtherObservable Inputs(Level 2)SignificantUnobservableInputs(Level 3)Long-lived assets held and used$25$0$25$0 As described in Note 5, we recorded $12 million in impairment charges in continuing operations in the year ended December 31, 2011 consisting of(i) $6 million for the write-down of buildings and equipment of one of our previously impaired hospitals to their estimated fair values of $20 million primarilydue to a decline in the fair value of real estate in the market in which the hospital operates and a decline in the estimated fair value of equipment and (ii) $6million for the write-off of goodwill associated with our diagnostic imaging center business in Louisiana to its implied fair value of $0. We recorded a $5 million impairment charge in continuing operations in the year ended December 31, 2010 for the write-down of buildings,equipment and other long-lived assets, primarily capitalized software costs classified in other intangible assets, of one of our previously impaired hospitals totheir estimated fair values of $25 million primarily due to a decline in the fair value of real estate in the market in which the hospital operates and a decline inthe estimated fair value of equipment. The fair value of our long-term debt is based on quoted market prices. At December 31, 2011 and 2010, the estimated fair value of our long-term debtwas approximately 104.9% and 106.3%, respectively, of the carrying value of the debt. NOTE 19. ACQUISITIONS During the year ended December 31, 2011, we acquired 15 outpatient centers — four diagnostic imaging centers, a majority interest in one otherdiagnostic imaging center, three oncology centers, an urgent care center, a majority interest in five ambulatory surgery centers, and a majority interest in oneother ambulatory surgery center in which we previously held a minority interest. In 2011, we also acquired 26 physician practice entities. The fair value of theconsideration conveyed in the acquisitions (the “purchase price”) was $84 million. During the year ended December 31, 2010, we acquired various outpatient centers in California, Florida, Missouri, New Mexico, South Carolina,Tennessee and Texas. The aggregate purchase price of these acquisitions was $65 million. We are required to allocate the purchase prices of the acquired businesses to assets acquired, liabilities assumed and, if applicable, noncontrollinginterests based on their fair values. The excess of the purchase price allocation over those fair values is recorded as goodwill. We are in process of finalizing thepurchase price allocations, including valuations of the acquired property and equipment, for substantially all of the centers acquired during the year endedDecember 31, 2011; therefore, the purchase price allocations for those centers are subject to adjustment once the valuations are completed. During the yearended December 31, 2011, we finalized the purchase price allocations for the various centers acquired in 2010, which resulted in an increase in goodwill of $4million with a corresponding reduction in property and equipment. 119Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Purchase price allocations for the acquisitions made during the years ended December 31, 2011 and 2010 are as follows: Years Ended December 31,20112010Current assets$8$0Property and equipment3420Other intangible assets20Goodwill8645Current liabilities(7)0Long-term liabilities(8)0Redeemable noncontrolling interests in equity ofconsolidated subsidiaries(16)0Noncontrolling interests(15)0Net cash paid$84$65 The goodwill generated from these transactions, which we anticipate will be fully deductible for income tax purposes, can be attributed to the benefits that weexpect to realize from operating efficiencies and increased reimbursement. Approximately $4 million and $3 million in transaction costs related to prospectiveand closed acquisitions were expensed during the years ended December 31, 2011 and 2010, respectively. NOTE 20. SALE OF INVESTMENT During the year ended December 31, 2009, we recorded a gain on sale of investment of approximately $15 million in continuing operations related tothe sale of our 50% membership interest in Peoples Health Network, the company that administered the operations of Tenet Choices, Inc., our wholly ownedMedicare Advantage HMO insurance subsidiary in Louisiana. NOTE 21. RECENT ACCOUNTING STANDARDS Changes in Accounting Principle Effective January 1, 2011, we adopted ASU 2010-24, “Health Care Entities (Topic 954): Presentation of Insurance Claims and Related InsuranceRecoveries,” which clarifies that a health care entity should not net insurance recoveries against a related claim liability. The adoption had no impact on ourfinancial condition, results of operations or cash flows. Effective January 1, 2011, we adopted ASU 2010-23, “Health Care Entities (Topic 954): Measuring Charity Care for Disclosure,” which prescribesa specific measurement basis of charity care for disclosure. The adoption had no impact on our financial condition, results of operations or cash flows. Effective December 31, 2011, we adopted ASU 2011-07, “Health Care Entities (Topic 954): Presentation and Disclosure of Patient Service Revenue,Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities,” which requires health care entities to present theprovision for doubtful accounts relating to patient service revenue as a deduction from patient service revenue in the statement of operations rather than as anoperating expense. Additional disclosures relating to sources of patient revenue and the allowance for doubtful accounts related to patient accounts receivable arealso required. Such additional disclosures are included in Notes 1 and 3. The adoption of this ASU had no impact on our financial condition, results ofoperations or cash flows. Recently Issued Accounting Standards In April 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments toAchieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” The guidance provided in this ASU is effective for fiscalyears beginning after December 15, 2011. The adoption of this standard by us in 2012 is not expected to have any impact on our financial condition, resultsof operations or cash flows. In May 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income,” which requires thatall nonowner changes in shareholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutivestatements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statementthat should present the components of other comprehensive income and the total of comprehensive income. The guidance provided in this ASU is effective forfiscal 120Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents years, and interim periods within those years, beginning after December 15, 2011. The adoption of this standard by us in 2012 is not expected to have anyimpact on our financial condition, results of operations or cash flows. The FASB issued ASU 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation ofReclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” in December 2011, whichsupersedes certain pending paragraphs in ASU 2011-05, to effectively defer only those changes in ASU 2011-05 that relate to the presentation ofreclassification adjustments out of accumulated other comprehensive income. The deferral of the amendments will be temporary to allow the FASB time toredeliberate the presentation requirements for reclassifications out of accumulated other comprehensive income for annual and interim financial statements forpublic, private and non-profit entities. The guidance provided in this ASU is effective for fiscal years, and interim periods within those years, beginning afterDecember 15, 2011. The adoption of this standard by us in 2012 is not expected to have any impact on our financial condition, results of operations or cashflows. In September 2011, the FASB issued ASU 2011-08, “Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment,” whichpermits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carryingamount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The guidance provided inthis ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of thisstandard by us in 2012 is not expected to have any impact on our financial condition, results of operations or cash flows. Also in September 2011, the FASB issued ASU 2011-09, “Compensation—Retirement Benefits—Multiemployer Plans (Subtopic 715-80):Disclosures about an Employer’s Participation in a Multiemployer Plan,” which requires that employers provide additional separate disclosures formultiemployer pension plans and multiemployer other postretirement benefit plans. The guidance provided in this ASU was effective for us beginning in theannual reporting period ended December 31, 2011. The adoption of this standard did not have any impact on our financial condition, results of operations orcash flows. 121Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents SUPPLEMENTAL FINANCIAL INFORMATION SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Year Ended December 31, 2011FirstSecondThirdFourthNet operating revenues$2,299$2,179$2,150$2,226Net income attributable to Tenet Healthcare Corporationcommon shareholders$73$55$6$(76)Earnings per share attributable to Tenet HealthcareCorporation common shareholders:Basic$0.15$0.11$0.02$(0.17)Diluted$0.14$0.11$0.02$(0.17) Year Ended December 31, 2010FirstSecondThirdFourthNet operating revenues$2,151$2,130$2,075$2,111Net income attributable to Tenet Healthcare Corporationcommon shareholders$88$25$932$74Earnings per share attributable to Tenet HealthcareCorporation common shareholders:Basic$0.18$0.05$1.92$0.15Diluted$0.17$0.05$1.68$0.14 Quarterly operating results are not necessarily indicative of the results that may be expected for the full year. Reasons for this include, but are notlimited to: overall revenue and cost trends, particularly the timing and magnitude of price changes; fluctuations in contractual allowances and cost report andcommercial contract settlements and valuation allowances; managed care contract negotiations, settlements or terminations and payer consolidations; changesin Medicare and Medicaid regulations; Medicaid funding levels set by the states in which we operate; the timing of approval by CMS of Medicaid provider feerevenue programs; trends in patient accounts receivable collectability and associated provisions for doubtful accounts; fluctuations in interest rates; levels ofmalpractice insurance expense and settlement trends; the timing of when we meet the criteria to recognize electronic health record incentives; impairment oflong-lived assets and goodwill; restructuring charges; losses, costs and insurance recoveries related to natural disasters; litigation and investigation costs;acquisitions and dispositions of facilities and other assets; income tax rates and deferred tax asset valuation allowance activity; changes in estimates ofaccruals for annual incentive compensation; the timing and amounts of stock option and restricted stock unit grants to employees and directors; gains orlosses from early extinguishment of debt; and changes in occupancy levels and patient volumes. Factors that affect patient volumes and, thereby, our resultsof operations at our hospitals and related health care facilities include, but are not limited to: the business environment, economic conditions and demographicsof local communities; the number of uninsured and underinsured individuals in local communities treated at our hospitals; seasonal cycles of illness; climateand weather conditions; physician recruitment, retention and attrition; advances in technology and treatments that reduce length of stay; local health carecompetitors; managed care contract negotiations or terminations; any unfavorable publicity about us, which impacts our relationships with physicians andpatients; changes in health care regulation; and the timing of elective procedures. These considerations apply to year-to-year comparisons as well. Previously reported net operating revenues in the above table have been adjusted to reflect the impact of the adoption of Accounting Standards Update(“ASU”) 2011-07, “Health Care Entities (Topic 954): Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance forDoubtful Accounts for Certain Health Care Entities,” as of December 31, 2011, which requires health care entities to present the provision for doubtfulaccounts relating to patient service revenue as a deduction from patient service revenue in the statement of operations rather than as an operating expense. Allperiods presented have been reclassified in accordance with the provisions of ASU 2011-07. Also effective December 31, 2011, we reclassified the electronichealth record incentives previously recorded as net operating revenues to the operating expenses section of our consolidated statements of operations. 122Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined by Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. The evaluation was performed under the supervision and with the participationof management, including our chief executive officer and chief financial officer. Based upon that evaluation, the chief executive officer and chief financialofficer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in accumulating andcommunicating, in a timely manner, the material information related to the Company (including its consolidated subsidiaries) required to be included in ourperiodic Securities and Exchange Commission filings. Management’s report on internal control over financial reporting is set forth on page 80 and is incorporated herein by reference. The independentregistered public accounting firm that audited the financial statements included in this report has issued an attestation report on our internal control overfinancial reporting as set forth on page 81 herein. During the fourth quarter of 2011, there were no changes to our internal control over financial reporting, or in other factors, that have materiallyaffected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. 123Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents PART III. ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Certain information required by this Item is hereby incorporated by reference to our definitive proxy statement in accordance with General InstructionG(3) to Form 10-K. Information concerning our executive officers appears under Part I, Item I, of this report on Form 10-K under the caption “ExecutiveOfficers.” ITEM 11. EXECUTIVE COMPENSATION Information required by this Item is hereby incorporated by reference to our definitive proxy statement in accordance with General Instruction G(3) toForm 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS Information required by this Item is hereby incorporated by reference to our definitive proxy statement in accordance with General Instruction G(3) toForm 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information required by this Item is hereby incorporated by reference to our definitive proxy statement in accordance with General Instruction G(3) toForm 10-K. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Information required by this Item is hereby incorporated by reference to our definitive proxy statement in accordance with General Instruction G(3) toForm 10-K. 124Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents PART IV. ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES FINANCIAL STATEMENTS The Consolidated Financial Statements and notes thereto can be found on pages 83 through 121. FINANCIAL STATEMENT SCHEDULES Schedule II—Valuation and Qualifying Accounts (included on page 132). All other schedules and financial statements of the Registrant are omitted because they are not applicable or not required or because the requiredinformation is included in the Consolidated Financial Statements or notes thereto. EXHIBITS (3) Articles of Incorporation and Bylaws (a) Amended and Restated Articles of Incorporation of the Registrant, as amended and restated May 8, 2008 (Incorporated by reference toExhibit 3(a) to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, filed August 5, 2008) (b) Certificate of Designation for 7.00% Mandatory Convertible Preferred Stock, par value $0.15 per share, dated September 24, 2009(Incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K, dated September 22, 2009 and filedSeptember 25, 2009) (c) Certificate of Designation, Preferences, and Rights of Series A Junior Participating Preferred Stock, par value $0.15 per share, datedJanuary 7, 2011 (Incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K, dated and filed January 7, 2011) (d) Amended and Restated Bylaws of the Registrant, as amended and restated effective January 7, 2011 (Incorporated by reference toExhibit 3.2 to Registrant’s Current Report on Form 8-K, dated and filed January 7, 2011) (4) Instruments Defining the Rights of Security Holders, Including Indentures (a) Indenture, dated as of November 6, 2001, between the Registrant and The Bank of New York, as trustee (Incorporated by reference toExhibit 4.1 to Registrant’s Current Report on Form 8-K, dated November 6, 2001 and filed November 9, 2001) (b) Third Supplemental Indenture, dated as of November 6, 2001, between the Registrant and The Bank of New York, as trustee, relating to6/% Senior Notes due 2031 (Incorporated by reference to Exhibit 4.4 to Registrant’s Current Report on Form 8-K, datedNovember 6, 2001 and filed November 9, 2001) (c) Fourth Supplemental Indenture, dated as of March 7, 2002, between the Registrant and The Bank of New York, as trustee, relating to 6/% Senior Notes due 2012 (Incorporated by reference to Exhibit 4.3 to Registrant’s Current Report on Form 8-K, dated and filedMarch 7, 2002) (d) Sixth Supplemental Indenture, dated as of January 28, 2003, between the Registrant and The Bank of New York, as trustee, relating to 7/% Senior Notes due 2013 (Incorporated by reference to Exhibit 4.3 to Registrant’s Current Report on Form 8-K, dated January 28, 2003and filed January 31, 2003) (e) Seventh Supplemental Indenture, dated as of June 18, 2004, between the Registrant and The Bank of New York, as trustee, relating to 9/% Senior Notes due 2014 (Incorporated by reference to Exhibit 4(a) to Registrant’s Quarterly Report on Form 10-Q for the quarter endedJune 30, 2004, filed August 3, 2004) (f) Eighth Supplemental Indenture, dated as of January 28, 2005, between the Registrant and The Bank of New York, as trustee, relating to9 /% Senior Notes due 2015 (Incorporated by reference to Exhibit 4(g) to Registrant’s Annual Report on Form 10-K for the year endedDecember 31, 2004, filed March 8, 2005) 1257812387814Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents (g) Ninth Supplemental Indenture, dated as of March 3, 2009, by and among the Registrant, The Bank of New York Mellon TrustCompany, N.A., as successor trustee to The Bank of New York, and the guarantors party thereto, relating to 9% Senior Secured Notesdue 2015 (Incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K, dated March 3, 2009 and filedMarch 5, 2009) (h) Tenth Supplemental Indenture, dated as of March 3, 2009, by and among the Registrant, The Bank of New York Mellon TrustCompany, N.A., as successor trustee to The Bank of New York, and the guarantors party thereto, relating to 10% Senior Secured Notesdue 2018 (Incorporated by reference to Exhibit 4.2 to Registrant’s Current Report on Form 8-K, dated March 3, 2009 and filedMarch 5, 2009) (i) Eleventh Supplemental Indenture, dated as of June 15, 2009, by and among the Registrant, The Bank of New York Mellon TrustCompany, N.A., as successor trustee to The Bank of New York, and the guarantors party thereto, relating to 8/% Senior SecuredNotes due 2019 (Incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K, dated June 15, 2009 and filedJune 16, 2009) (j) Twelfth Supplemental Indenture, dated as of August 17, 2010, between the Registrant and The Bank of New York Mellon TrustCompany, N.A., as successor trustee to The Bank of New York, relating to 8% Senior Notes due 2020 (Incorporated by reference toExhibit 4.1 to Registrant’s Current Report on Form 8-K, dated and filed August 17, 2010) (k) Thirteenth Supplemental Indenture, dated as of November 21, 2011, to Ninth Supplemental Indenture, dated as of March 3, 2009, byand among the Registrant, The Bank of New York Mellon Trust Company, N.A., as successor trustee to The Bank of New York, andthe guarantors party thereto, relating to 9% Senior Secured Notes due 2015 (Incorporated by reference to Exhibit 4.1 to Registrant’sCurrent Report on Form 8-K, dated November 21, 2011 and filed November 22, 2011) (l) Fourteenth Supplemental Indenture, dated as of November 21, 2011, by and among the Registrant, The Bank of New York MellonTrust Company, N.A., as successor trustee to The Bank of New York, and the guarantors party thereto, relating to 6 /% SeniorSecured Notes due 2018 (Incorporated by reference to Exhibit 4.2 to Registrant’s Current Report on Form 8-K, dated November 21, 2011and filed November 22, 2011) (10) Material Contracts (a) Amended and Restated Credit Agreement, dated as of October 19, 2010, among the Registrant, the lenders and issuers party thereto,Citicorp USA, Inc., as administrative agent, Bank of America, N.A., as syndication agent, Citigroup Global Markets Inc. and Banc ofAmerica Securities LLC, as joint lead arrangers, and the joint bookrunners and co-documentation agents named therein (Incorporated byreference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated October 19, 2010 and filed October 20, 2010) (b) Amendment No. 1, dated as of November 29, 2011, to that certain Amended and Restated Credit Agreement, dated as of October 19,2010, among the Registrant, the lenders and issuers party thereto, Citicorp USA, Inc., as administrative agent, Bank of America, N.A.,as syndication agent, Citigroup Global Markets Inc. and Banc of America Securities LLC, as joint lead arrangers, and the jointbookrunners and co-documentation agents named therein (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report onForm 8-K, dated November 29, 2011 and filed December 1, 2011) (c) Stock Pledge Agreement, dated as of March 3, 2009, by and among the Registrant, as pledgor, The Bank of New York Mellon TrustCompany, N.A., as collateral trustee, and the other pledgors party thereto (Incorporated by reference to Exhibit 10.1 to Registrant’sCurrent Report on Form 8-K, dated March 3, 2009 and filed March 5, 2009) (d) Second Amendment to Stock Pledge Agreement, dated as of June 15, 2009, by and among the Registrant, as pledgor, The Bank of NewYork Mellon Trust Company, N.A., as collateral trustee, and the other pledgors party thereto (Incorporated by reference to Exhibit 10.1 toRegistrant’s Current Report on Form 8-K, dated June 15, 2009 and filed June 16, 2009) 1267814Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents (e) Collateral Trust Agreement, dated as of March 3, 2009, by and among the Registrant, as pledgor, The Bank of New York Mellon TrustCompany, N.A., as collateral trustee, and the other pledgors party thereto (Incorporated by reference to Exhibit 10.2 to Registrant’sCurrent Report on Form 8-K, dated March 3, 2009 and filed March 5, 2009) (f) Exchange and Registration Rights Agreement, dated as of November 21, 2011, by and among the Registrant, Merrill Lynch, Pierce,Fenner & Smith Incorporated and the guarantors party thereto (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report onForm 8-K, dated November 21, 2011 and filed November 22, 2011) (g) Second Amended and Restated Information Technology and Management Agreement, dated as of November 16, 2006, between theRegistrant and Perot Systems Corporation (Incorporated by reference to Exhibit 10(d) to Registrant’s Annual Report on Form 10-K for theyear ended December 31, 2006, filed February 27, 2007)· (h) Letter from the Registrant to Trevor Fetter, dated November 7, 2002 (Incorporated by reference to Exhibit 10(k) to Registrant’s TransitionReport on Form 10-K for the seven-month transition period ended December 31, 2002, filed May 15, 2003)* (i) Letter from the Registrant to Trevor Fetter dated September 15, 2003 (Incorporated by reference to Exhibit 10(l) to Registrant’s QuarterlyReport on Form 10-Q for the quarter ended September 30, 2003, filed November 10, 2003)* (j) Letter from the Registrant to Britt T. Reynolds, dated December 15, 2011*† (k) Letter from the Registrant to Biggs C. Porter, accepted May 22, 2006 (Incorporated by reference to Exhibit 10(a) to Registrant’s QuarterlyReport on Form 10-Q for the quarter ended June 30, 2006, filed August 9, 2006)* (l) Letter from the Registrant to Gary Ruff, accepted August 1, 2008 (Incorporated by reference to Exhibit 10(k) to Registrant’s AnnualReport on Form 10-K for the year ended December 31, 2008, filed February 24, 2009)* (m) Letter from the Registrant to Cathy Fraser, dated August 29, 2006 (Incorporated by reference to Exhibit 10(k) to Registrant’s AnnualReport on Form 10-K for the year ended December 31, 2007, filed February 26, 2008)* (n) Tenet First Amended and Restated Executive Severance Plan, as amended and restated effective December 31, 2008 (Incorporated byreference to Exhibit 10(o) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, filed February 24, 2009)* (o) Board of Directors Retirement Plan, effective January 1, 1985, as amended August 18, 1993, April 25, 1994 and July 30, 1997(Incorporated by reference to Exhibit 10(q) to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, filedNovember 10, 2003)* (p) Tenet Healthcare Corporation Sixth Amended and Restated Supplemental Executive Retirement Plan, as amended and restated effectiveDecember 31, 2008 (Incorporated by reference to Exhibit 10(q) to Registrant’s Annual Report on Form 10-K for the year endedDecember 31, 2008, filed February 24, 2009)* (q) Eighth Amended and Restated Tenet 2001 Deferred Compensation Plan, as amended and restated effective December 31, 2008(Incorporated by reference to Exhibit 10(r) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, filedFebruary 24, 2009)* (r) First Amended and Restated Tenet 2006 Deferred Compensation Plan, as amended and restated effective December 31, 2008 (Incorporatedby reference to Exhibit 10(s) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, filedFebruary 24, 2009)* 127Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents (s) Tenet Healthcare Corporation Second Amended and Restated 1994 Directors Stock Option Plan (Incorporated by reference toExhibit 10(u) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2006, filed February 27, 2007)* (t) First Amended and Restated 1991 Stock Incentive Plan (Incorporated by reference to Exhibit 10(v) to Registrant’s Annual Report onForm 10-K for the year ended December 31, 2006, filed February 27, 2007)* (u) Second Amended and Restated 1995 Stock Incentive Plan (Incorporated by reference to Exhibit 10(w) to Registrant’s Annual Report onForm 10-K for the year ended December 31, 2006, filed February 27, 2007)* (v) Second Amended and Restated Tenet Healthcare Corporation 1999 Broad-Based Stock Incentive Plan (Incorporated by reference toExhibit 10(x) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2006, filed February 27, 2007)* (w) Fourth Amended and Restated Tenet Healthcare Corporation 2001 Stock Incentive Plan, as amended and restated effectiveDecember 31, 2008 (Incorporated by reference to Exhibit 10(x) to Registrant’s Annual Report on Form 10-K for the year endedDecember 31, 2008, filed February 24, 2009)* (x) Form of Stock Award used to evidence grants of stock options and/or restricted units under the Fourth Amended and Restated TenetHealthcare Corporation 2001 Stock Incentive Plan (Incorporated by reference to Exhibit 10.3 to Registrant’s Current Report on Form 8-K,dated February 14, 2006 and filed February 17, 2006)* (y) Second Amended and Restated Tenet Healthcare 2008 Stock Incentive Plan (Incorporated by reference to Exhibit 4.1 to Registrant’sRegistration Statement on Form S-8, filed May 12, 2010)* (z) Amendment One to Second Amended and Restated Tenet Healthcare 2008 Stock Incentive Plan (Incorporated by reference to Exhibit 4.2 toRegistrant’s Registration Statement on Form S-8, filed May 12, 2010)* (aa) Forms of Award used to evidence (i) initial grants of restricted stock units to directors, (ii) annual grants of restricted stock units todirectors, (iii) grants of stock options to executives, and (iv) grants of restricted stock units to executives, all under the Amended andRestated Tenet Healthcare 2008 Stock Incentive Plan (Incorporated by reference to Exhibit 10(aa) to Registrant’s Annual Report onForm 10-K for the year ended December 31, 2008, filed February 24, 2009)* (bb) Form of Award used to evidence grants of performance cash awards under the Fourth Amended and Restated Tenet HealthcareCorporation 2001 Stock Incentive Plan and the Amended and Restated Tenet Healthcare 2008 Stock Incentive Plan (Incorporated byreference to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009, filed February 23, 2010)* (cc) Tenet Special RSU Deferral Plan (Incorporated by reference to Exhibit 10(d) to Registrant’s Quarterly Report on Form 10-Q for the quarterended March 31, 2009, filed May 5, 2009)* (dd) First Amended Tenet Healthcare Corporation Annual Incentive Plan, as amended and restated effective December 31, 2008 (Incorporatedby reference to Exhibit 10(bb) to Registrant’s Annual Report onForm 10-K for the year ended December 31, 2008, filed February 24, 2009)* (ee) Form of Indemnification Agreement entered into with each of the Registrant’s directors (Incorporated by reference to Exhibit 10(a) toRegistrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed November 1, 2005) (21) Subsidiaries of the Registrant† (23) Consent of Deloitte & Touche LLP† 128Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents (31) Rule 13a-14(a)/15d-14(a) Certifications (a) Certification of Trevor Fetter, President and Chief Executive Officer† (b) Certification of Biggs C. Porter, Chief Financial Officer† (32) Section 1350 Certifications of Trevor Fetter, President and Chief Executive Officer, and Biggs C. Porter, Chief Financial Officer† (101 INS) XBRL Instance Document (101 SCH) XBRL Taxonomy Extension Schema Document (101 CAL) XBRL Taxonomy Extension Calculation Linkbase Document (101 DEF) XBRL Taxonomy Extension Definition Linkbase Document (101 LAB) XBRL Taxonomy Extension Label Linkbase Document (101 PRE) XBRL Taxonomy Extension Presentation Linkbase Document · Portions of this exhibit have been omitted pursuant to a request for confidential treatment submitted to the Securities and Exchange Commission.* Management contract or compensatory plan or arrangement.† Filed herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes ofSections 11 and 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is notsubject to liability under these sections. 129oooooooSource: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. TENET HEALTHCARE CORPORATION(Registrant) Date: February 27, 2012By:/s/ DANIEL J. CANCELMIDaniel J. CancelmiSenior Vice President and Controller(Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theRegistrant and in the capacities and on the dates indicated. Date: February 27, 2012By:/s/ TREVOR FETTERTrevor FetterPresident, Chief Executive Officer and Director(Principal Executive Officer) Date: February 27, 2012By:/s/ BIGGS C. PORTERBiggs C. PorterChief Financial Officer(Principal Financial Officer) Date: February 27, 2012By:/s/ DANIEL J. CANCELMIDaniel J. CancelmiSenior Vice President and Controller(Principal Accounting Officer) Date: February 27, 2012By:/s/ JOHN ELLIS BUSHJohn Ellis BushDirector Date: February 27, 2012By:/s/ BRENDA J. GAINESBrenda J. GainesDirector Date: February 27, 2012By:/s/ KAREN M. GARRISONKaren M. GarrisonDirector 130Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Date: February 27, 2012By:/s/ EDWARD A. KANGASEdward A. KangasDirector Date: February 27, 2012By:/s/ J. ROBERT KERREYJ. Robert KerreyDirector Date: February 27, 2012By:/s/ FLOYD D. LOOPFloyd D. Loop, M.D.Director Date: February 27, 2012By:/s/ RICHARD R. PETTINGILLRichard R. PettingillDirector Date: February 27, 2012By:/s/ RONALD A. RITTENMEYERRonald A. RittenmeyerDirector Date: February 27, 2012By:/s/ JAMES A. UNRUHJames A. UnruhDirector 131Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS(In Millions) Balance atAdditions Charged To:Balance atBeginningof PeriodCosts andExpenses(1)(2)OtherAccountsDeductions(3)OtherItemsEnd ofPeriodAllowance for doubtful accounts:Year ended December 31, 2011$352$721$—$(676)$—$397Year ended December 31, 2010$369$730$—$(747)$—$352Year ended December 31, 2009$396$696$—$(723)$—$369 Valuation allowance for deferred tax assetsYear ended December 31, 2011$66$(5)$—$—$—$61Year ended December 31, 2010$1,127$(1,061)$—$—$—$66Year ended December 31, 2009$1,265$(139)$1$—$—$1,127 (1) Includes amounts recorded in discontinued operations.(2) Before considering recoveries on accounts or notes previously written off.(3) Accounts written off. 132Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 10(j) [TENET LETTERHEAD] December 15, 2011 [Address Omitted] Dear Britt: I am pleased to offer you the position of President-Hospital Operations with Tenet Employment, Inc. (herein referred to as “Tenet”) located in Dallas, Texas. This position will be reporting to Trevor Fetter, President and Chief Executive Officer. All offers are contingent upon satisfactory completion of a pre-workdrug screen, background investigation and reference checks. The following are the terms and conditions of your employment with the company. 1. Start Date: You will assume your role of President-Hospital Operations on January 3, 2012. However you will be placed on payroll as a Tenetemployee on December 19, 2011. The period between the date you are employed with Tenet and the date you assume your role will be used forpersonal transition activities (“transition period”). During this transition period, you will only receive base compensation and benefits. Othercompensation will commence on January 3, 2012. 2. Compensation and Benefits: You will be entitled to compensation and benefits as follows: A. Base Compensation: Your base compensation will be an annual exempt rate of $650,000.00, payable bi-weekly. B. Benefits: You are eligible to receive all standard employee benefits in accordance with Tenet plans. C. Annual Incentive Plan: Your position is eligible to participate in Tenet’s Annual Incentive Plan (AIP) according to the terms of the Plan. Your target award is 95% of your base salary. Participation in the AIP does not guarantee that an award will be made. D. Manager’s Plan: You are eligible to participate in the company’s paid time off plan (the “MTO Plan”) according to your tenure with thecompany. E. Long Term Incentives: As President-Hospital Operations, you will be eligible for future long-term incentives, which are typically awardedannually and based on the guidelines established by the Compensation Committee. In the recent past, long-term incentives for seniorofficers have been a combination of equity and cash grants. In addition, you will be granted 225,000 fully vested, non-qualified restrictedstock units, which will be granted on the last business day of the month you assume the role of President-Hospital Operations. If youvoluntarily terminate your employment, alter your full time status, or are terminated for cause within three years of your start date, thegrant will be subject to reimbursement based on the following schedule: ·Termination within less than one year– 100%·Termination between one and two years– 66%·Termination between two and three years– 33% If reimbursement is required, you will be advised in writing of the exact amount and form of reimbursement, which will be due within 90days of your last day worked. F. Sign-On Bonus: You will receive a fully taxable sign-on bonus in the amount of $462,000.00. Your bonus will be paid with your firstpaycheck after you assume your role as President-Hospital Operations. If you voluntarily terminate your employment, alter your full timestatus, or are Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. terminated for cause within two years of your start date, you will be required to reimburse Tenet for all monies paid to you or on yourbehalf. The amount due is based on the following schedule: ·Termination within less than one year– 100%·Termination between one and two years– 50% G. Relocation: Tenet’s goal is to make your relocation process as smooth as possible. Therefore, it is very important that you first contactShelley Giles, Tenet’s Relocation Director, at 469-893-6131, to initiate your relocation benefits, prior to any relocation activities, e.g.marketing and/or selling your home. An itemized list of your relocation benefits is attached. After review, please initial these pages and return with your signed offer letter. If youvoluntarily terminate your employment, alter your full time status, or are terminated for cause within two years of your start date in the newlocation all monies paid to you or on your behalf are subject to reimbursement based on the following schedule: ·Termination within less than one year– 100%·Termination between one and two years– 50% If payback is required, you will be advised in writing of the exact amount and payment will be due and payable within 90 days of yourlast day worked. H. Executive Severance Plan: You will be eligible to participate in the Executive Severance Plan effective as of start of employment onDecember 19, 2011, which will provide you with certain severance benefits in the event of a Qualifying Termination as defined in theplan. Participation will require execution of a Tenet Executive Severance Plan Agreement. You will receive a separate communicationcontaining more details about the plan, your participation in the plan and an agreement which you will need to sign, from the ExecutiveCompensation Department following your employment date with Tenet. I. Supplemental Executive Retirement Plan: You will be named to the supplemental executive retirement plan (SERP) which providesenhanced retirement, disability and life insurance benefits. Details of that plan will be provided under separate cover. 3. Employment Status: Your employment with Tenet will be on an at-will basis, which means that either you or the company may terminate theemployment relationship, with or without notice and with or without cause at any time. As used in this letter, the term “cause” shall include, butshall not be limited to, dishonesty, fraud, willful misconduct, self-dealing or violations of the Tenet Standards of Conduct, breach of fiduciary duty(whether or not involving personal profit), failure, neglect or refusal to perform your duties in any material respect, violation of law (except trafficviolations or similar minor infractions), violation of Tenet’s Human Resources or other Policies, or any material breach of this letter. 4. Compliance with Tenet Policies, Rules and Regulations: By signing this letter below, you agree to abide by all Tenet Human Resources and otherpolicies, procedures, rules and regulations currently in effect or that may be adopted from time to time, including the Tenet Performance Managementpolicy and the Tenet Standards of Conduct. To the extent that any such policies, rules or regulations, or any benefit plans in which you are aparticipant, conflict with the terms of this letter, the actual terms of those policies or plans shall control. A. Ethics & Compliance: All Tenet employees are required to attend Ethics & Compliance classes within established Tenet policyguidelines, as well as a refresher course every year. Please contact your Human Resources representative for more information or access thecompany intranet site (www.eTenet.com) for additional information. 5. Standards of Conduct: As an employee of Tenet, you agree to abide by Tenet’s Standards of Conduct, which reflect Tenet’s basic values of high-quality, cost-effective health services; honesty, trustworthiness, and reliability in all relationships; leadership in the development of partnershiparrangements with providers of 2Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. health services; good corporate citizenship of the communities where Tenet provides services; pursuit of fiscal responsibility and growth; compliancewith all applicable rules, regulations, policies and procedures; and fair treatment of employees. 6. Conflict Resolution: As a condition of employment, you agree to abide by Tenet’s Fair Treatment Process which includes final and bindingArbitration as a resolution to any grievance that results out of your employment or termination of employment with Tenet. 7. Orientation/Onboarding: Sherri Moore, Director of Human Resources, will be in touch with you soon regarding onboarding at Tenet. On your firstday you will need to bring two original forms of identification to complete the I-9 form. 8. Executive Orientation: Trevor Fetter and his Senior Leadership team host Executive Orientation meetings at the corporate office in Dallas, Texas. This two-day program is designed to acquaint you with your executive leadership and Tenet’s national strategies. As a new leader within Tenet, youwill be required to attend the next Executive Orientation session, at a date to be determined. If you accept this offer, please sign and date the original of this letter and return it to Sherri Moore in the Corporate Human Resources Department byDecember 19, 2011. A copy of this letter is enclosed for your records. Thank you. Sincerely, /s/ Cathy Fraser Cathy FraserSVP, Human Resources Acknowledged and accepted: /s/ Britt T. ReynoldsDate:12/17, 2011Signature 3Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 21 Subsidiaries of the RegistrantAs of December 31, 2011 All of the subsidiaries listed below are 100% owned by Tenet Healthcare Corporation unless otherwise indicated. Conifer Health Solutions, Inc.(a) Conifer Ethics and Compliance, Inc.(a) Conifer Patient Communications, Inc.(a) Conifer Revenue Cycle Solutions, Inc.(b) Conifer HIM & Revenue Integrity Services, Inc.(b) Syndicated Office Systems NME Headquarters, Inc. NME Properties Corp.(a) NME Properties, Inc.(b) Lake Health Care Facilities, Inc.(a) NME Property Holding Co., Inc.(a) Tenet HealthSystem SNF-LA, Inc. NME Psychiatric Hospitals, Inc.(a) The Huron Corporation NME Rehabilitation Properties, Inc.(a) R.H.S.C. El Paso, Inc. TenetCare, Inc.(a) National Diagnostic Imaging Centers, Inc.(b) Centennial ASC, L.P. (1% GP: TenetCare Frisco, Inc.; 99% LP: TENET HOSPITALS LIMITED)(a) TenetCare Tennessee, Inc. Tenet Healthcare Foundation Tenet HealthSystem Holdings, Inc.(a) Tenet HealthSystem Medical, Inc.(b) American Medical (Central), Inc.(c) Amisub (Heights), Inc.(c) Amisub (Twelve Oaks), Inc.(c) Lifemark Hospitals, Inc.(d) Amisub of Texas, Inc.(d) Houston Network, Inc.(d) Houston Specialty Hospital, Inc.(d) LIFEMARK HOSPITALS OF FLORIDA, INC.(d) Lifemark Hospitals of Louisiana, Inc.(d) TH Healthcare, Ltd. — ownership — GP: Lifemark Hospitals, Inc. (1%);LP: Amisub of Texas, Inc. (70.1%); LP: Amisub (Heights), Inc. (10.3%); LP: Amisub (Twelve Oaks),Inc. (18.6%)(e) NMC Lessor, L.P. (99% LP: TH Healthcare, Ltd.; 1% GP: Tenet HealthSystem Nacogdoches ASC LP, Inc.)(e) NMC Investors, Ltd. (49% LP:TH Healthcare, Ltd.; 51% non-Tenet)(e) Park Plaza Hospital Billing Center, L.L.C.(c) Tenet Employment, Inc.(b) AMI Ambulatory Centres, Inc.(b) AMI Diagnostic Services, Inc.(b) AMI Information Systems Group, Inc. Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c) American Medical International N.V.(b) AMI/HTI Tarzana Encino Joint Venture — ownership — Tenet HealthSystem Medical, Inc. (30%)Amisub of California, Inc. (26%); New H Acute, Inc. (12%)AMI Information Systems Group, Inc. (7%)(b) Amisub (Hilton Head), Inc.(c) Hilton Head Health System, L.P. — ownership — Amisub (Hilton Head), Inc. (79%)Tenet Physician Services - Hilton Head, Inc. (21%)(b) Amisub (North Ridge Hospital), Inc.(c) NRMC Physician Services, L.L.C.(b) Amisub (Saint Joseph Hospital), Inc.(c) Creighton Saint Joseph Regional HealthCare System, L.L.C. — ownership —Amisub (Saint Joseph Hospital), Inc. (74.06%)Creighton Healthcare, Inc. (25.94%)(d) Nebraska Diagnostic Imaging, L.L.C.(b) Amisub (SFH), Inc.(c) Saint Francis Hospital Billing Center, L.L.C.(c) Saint Francis Surgery Center, L.L.C.(c) Tenet HealthSystem SF-SNF, Inc.(b) Amisub of California, Inc.(b) Amisub of North Carolina, Inc.(c) American Homepatient of Sanford, LLC (50% member interest)(c) Central Carolina Ambulatory Surgery Center, LLC(c) CENCARE, Inc. — ownership — Physicians (50%); Amisub of North Carolina, Inc. (50%)(b) Amisub of South Carolina, Inc.(c) Piedmont Medical Equipment, G.P. — ownership — Amisub of South Carolina, Inc. (50%)America Home Patient, Inc. (50%)(c) Rock Hill Surgery Center, L.P. — ownership — Amisub of South Carolina, Inc. (72%)Surgical Center of Rock Hill (28%)(c) Tenet Rehab Piedmont, Inc.(d) Piedmont Healthsouth Rehabilitation, LLC (2.5% member interest)(c) Piedmont/Carolina’s Radiation Therapy, LLC (50% member interest)(b) Brookwood Center Development Corporation(c) BWP Associates, Ltd. — ownership — Brookwood Center Development Corporation (80%)Brookwood Development, Inc. (20%)(c) Hoover Doctors Group, Inc.(c) Medplex Land Associates — ownership — Brookwood Center Development Corporation (49%)Hoover Doctors’ Group II (51%)(c) Medplex Outpatient Medical Centers, Inc.(c) Medplex Outpatient Surgery Center, Ltd. — ownership — Others (15%)Brookwood Center Development Corporation (8% GP, 73.765% LP); Hoover Doctors Group,Inc. (1% LP); Medplex Outpatient Medical Centers, Inc. (1% LP)(b) Brookwood Development, Inc.(b) Brookwood Health Services, Inc.(c) Brookwood Garages, L.L.C.(c) Brookwood Primary Care Network — McCalla, L.L.C.(b) Brookwood Parking Associates, Ltd. — ownership — (99%)(b) Coastal Carolina Medical Center, Inc.(c) Coastal Carolina Pro Fee Billing, L.L.C.(b) Coastal Carolina Physician Practices, L.L.C.(c) Hardeeville Medical Group, L.L.C.(c) Hardeeville Primary Care, L.L.C.(b) Cumming Medical Ventures, Inc.(b) East Cooper Community Hospital, Inc.(b) Eastern Professional Properties, Inc. 2Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (b) Frye Regional Medical Center, Inc.(c) Catawba Valley Heart Management Services, LLC (50% member interest)(c) Catawba Valley Radiation Oncology Management, LLC (50% member interest)(c) Catawba Valley Imaging Services, LLC (50% member interest)(c) FryeCare Outpatient Imaging, L.L.C.(c) Frye Home Infusion, Inc.(c) Guardian Health Services, L.L.C.(c) Shared Medical Ventures, L.L.C. — ownership — (33 /%)(d) Mobile Imaging Services, L.L.C.(c) Tate Surgery Center, LLC(c) Unifour Neurosurgery, L.L.C.(c) Viewmont Surgery Center, L.L.C.(b) Kenner Regional Medical Center, Inc.(b) New H Acute, Inc.(b) North Fulton Medical Center, Inc.(c) North Fulton GI Center, L.L.C.(c) Northwoods Surgery Center, LLC(c) NorthPoint Health System, Inc.(c) Northwoods Member, Inc.(c) Roswell Georgia Surgery Center, L.L.C.(b) North Fulton MOB Ventures, Inc.(c) North Fulton Professional Building I, L.P. — ownership — (16.407% LP)(b) PALM BEACH GARDENS COMMUNITY HOSPITAL, INC.(c) Gardens Surgery Center of Palm Beach County, Ltd . — ownership — (0.5% GP; 49.5% LP)(b) Piedmont Urgent Care and Industrial Health Centers, Inc.(c) Catawba-Piedmont Cardiothoracic Surgery, L.L.C.(c) Imaging Center at Baxter Village, L.L.C.(c) Piedmont Behavioral Medicine Associates, L.L.C.(c) Piedmont Cardiovascular Physicians, L.L.C.(c) Piedmont Carolina OB/GYN of York County, L.L.C.(c) Piedmont Carolina Vascular Surgery, L.L.C.(c) Piedmont East Urgent Care Center, L.L.C.(c) Piedmont Family Practice at Rock Hill, L.L.C.(c) Piedmont Family Practice at Tega Cay, L.L.C.(c) Piedmont General Surgery Associates, L.L.C.(c) Piedmont Internal Medicine at Baxter Village, L.L.C.(c) Piedmont Internal Medicine and Family Practice at York, L.L.C.(c) Piedmont Pulmonology, L.L.C.(c) Piedmont Surgical Specialists, L.L.C.(c) Piedmont Urgent Care Center at Baxter Village, LLC(c) Piedmont West Urgent Care Center LLC(b) Quality Medical Management, Inc.(b) Roswell Medical Ventures, Inc.(c) North Fulton Parking Deck, L.P. (79.672% GP; 10.164% LP)(b) SIERRA VISTA HOSPITAL, INC.(c) Orange County Kidney Stone Center, L.P. — ownership —Medical Center of Garden Grove, Inc. (42.5805%)OCKSC Assoc., Inc. & 11 others (57.4195%)(c) Orange County Kidney Stone Center Assoc., G. P. - ownership - Physicians (67.9%)Medical Center of Garden Grove, Inc. (32.1%) (c) San Dimas Surgery Center, L.L.C.(b) South Carolina Health Services, Inc.(c) Bluffton Okatie Primary Care, L.L.C.(c) Broad River Primary Care, L.L.C.(c) Burnt Church Primary and Urgent Care, L.L.C. 313Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c) Cardiovascular & Thoracic Surgery, L.L.C.(c) Okatie Surgical Partners, L.L.C.(c) Hardeeville Hospitalists, L.L.C.(c) Hilton Head Occupational Medicine, L.L.C.(c) Hilton Head Regional Anesthesia Partners, L.L.C.(c) Hilton Head Regional Endocrinology Associates, L.L.C.(c) Hilton Head Regional OB/GYN Partners, L.L.C.(c) Mid-Island Primary and Urgent Care, L.L.C.(c) Orthopedic Associates of the Lowcountry, L.L.C.(c) Tenet Hilton Head Heart, L.L.C.(c) Tenet South Carolina Lowcountry OB/GYN, L.L.C.(b) Tenet Central Carolina Physicians, Inc.(b) Tenet DISC Imaging, Inc.(b) Tenet EKG, Inc.(b) Tenet Finance Corp.(b) Tenet Good Samaritan, Inc.(c) Good Samaritan Surgery, L.L.C.(b) Tenet Gulf Coast Imaging, Inc.(b) Tenet HealthSystem Bartlett, Inc.(b) Tenet HealthSystem GB, Inc.(c) AMC Acquisition Company, L.L.C.(c) AMC Community Physician Practices, L.L.C.(c) Atlanta Medical Billing Center, L.L.C.(c) Sheffield Educational Fund, Inc.(b) Tenet HealthSystem Nacogdoches ASC GP, Inc.(c) NMC Lessor, L.P. — ownership — GP: Tenet HealthSystem Nacogdoches ASC GP, Inc. (1%);LP: TH Healthcare, Ltd. (99%)(c) NMC Surgery Center, L.P.(b) Tenet HealthSystem Nacogdoches ASC LP, Inc.(b) Tenet HealthSystem North Shore, Inc.(c) North Shore Medical Billing Center, L.L.C.(c) North Shore Physician Hospital Organization (50%)(c) North Shore Physician Practice, L.L.C.(b) Tenet HealthSystem Philadelphia, Inc.(c) Tenet HealthSystem Bucks County, LLC(c) Tenet HealthSystem City Avenue, LLC(c) Tenet HealthSystem Elkins Park, LLC(c) Tenet HealthSystem Graduate, LLC(c) Tenet HealthSystem Hahnemann, LLC(c) Tenet HealthSystem Parkview, LLC(c) Tenet HealthSystem Roxborough, LLC(c) Tenet HealthSystem Roxborough MOB, LLC(c) Tenet HealthSystem St. Christopher’s Hospital for Children, L.L.C.(d) SCHC Pediatric Anesthesia Associates, L.L.C.(d) SCHC Pediatric Associates, LLC(d) StChris Care at Northeast Pediatrics, L.L.C.(c) Tenet Home Services, L.L.C.(c) Tenet Medical Equipment Services, LLC(c) The Healthcare Underwriting Company, a Risk Retention Group(c) TPS of PA, L.L.C.(d) TPS II of PA, L.L.C.(d) TPS III of PA, L.L.C.(d) TPS IV of PA, L.L.C.(d) TPS V of PA, L.L.C.(d) TPS VI of PA, L.L.C.(c) MidAtlantic MedEvac, L.L.C. 4Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (b) Tenet HealthSystem SGH, Inc.(b) Tenet HealthSystem SL, Inc.(c) SLUH Anesthesia Physicians, L.L.C.(c) Tenet SLUH Physicians, L.L.C. (f/k/a ER Physicians Group at SLUH, L.L.C. & f/k/a Professional Billing Services Group of SLUH,L.L.C.)(b) Tenet HealthSystem SL-HLC, Inc.(c) Concentra St. Louis, L.L.C. — ownership — Tenet HealthSystem SL-HLC, Inc. (49%)Concentra Health Services, Inc. (51%)(b) Tenet HealthSystem Spalding, Inc.(c) Spalding GI, L.L.C.(c) Spalding Health System, L.L.C. — ownership — (49.836%)(c) Spalding Medical Ventures, L.P.(c) Tenet EMS/Spalding 911, LLC — ownership — (64.1%)(b) Tenet Healthcare-Florida, Inc.(b) Tenet Carolina Internal Medicine, Inc.(b) Tenet Investments, Inc.(b) Tenet Physician Services - Hilton Head, Inc.(b) Tenet St. Mary’s, Inc.(c) The Heart and Vascular Clinic, L.L.C.(b) Tenet South Fulton, Inc.(c) Tenet South Fulton Health Care Centers, Inc.(d) South Fulton Medical Center Practice Plan, L.L.C.(b) Tenet West Palm Real Estate, Inc.(c) G.S. North, Ltd — ownership — (1% GP and 93.03% LP) Tenet HealthSystem Hospitals, Inc.(a) Alvarado Hospital Medical Center, Inc. Tenet HealthSystem HealthCorp(a) OrNda Hospital Corporation(b) AHM Acquisition Co., Inc.(b) Biltmore Surgery Center, Inc.(b) Commonwealth Continental Health Care, Inc.(b) Coral Gables Hospital, Inc.(c) CGH Hospital, Ltd. — ownership — GP: Coral Gables Hospital, Inc. (99.913%)LP: FMC Medical, Inc. (0.087%)(d) Coral Gables Physician Services, L.L.C.(b) Cypress Fairbanks Medical Center, Inc.(c) New Medical Horizons II, Ltd. — ownership — GP: Cypress Fairbanks Medical Center, Inc. (5%)LP: Tenet HealthSystem CFMC, Inc. (95%)(b) FMC Medical, Inc.(b) FOUNTAIN VALLEY REGIONAL HOSPITAL AND MEDICAL CENTER(b) GCPG, Inc.(c) Garland MOB Properties, LLC(b) Gulf Coast Community Hospital, Inc.(c) Gulf Coast Community Health Care Systems, Inc.(b) Houston Northwest Medical Center, Inc.(c) Community Health Providers(c) HNMC, Inc.(d) Houston Northwest Radiotherapy Center, L.L.C. — ownership —HNMC, Inc., managing member (6.79%); Physicians, member (93.21%)(d) Houston Rehabilitation Associates — ownership — GP: HNMC, Inc. (20%)LP: Physicians (80%)(d) HNW GP, Inc.(e) Houston Northwest Partners, Ltd — ownership — GP: HNW GP, Inc. (1%)LP: HNW LP, Inc. (99%) 5Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (f) Houston Northwest Operating Company, L.L.C. — ownership —Houston Northwest Partners, Ltd. (86.1789%)Non-Tenet (13.8211%)(g) Houston Northwest Concessions, L.L.C.(f) Northwest Surgery Center, Ltd — ownership —Houston Northwest Partners, Ltd. (51%)Non-Tenet (49%)(d) HNW LP, Inc.(c) Northwest Community Health Network(c) Northwest Houston Providers Alliance, Inc.(b) Newhope Imaging Center, Inc.(b) NWSC, L.L.C.(b) Republic Health Corporation of Rockwall County(c) Lake Pointe GP, Inc.(d) Lake Pointe Partners, Ltd. — ownership — GP: Lake Pointe GP, Inc. (1%);LP: Lake Pointe Investments, Inc. (99%)(e) Lake Pointe Operating Company, L.L.C. — ownership —Lake Pointe Partners, Ltd. (94.59%)Non-Tenet (5.41%)(f) Billing Center Lake Pointe Medical, L.L.C.(c) Lake Pointe ASC GP, Inc.(c) Lake Pointe Investments, Inc.(d) Lake Pointe Rockwall ASC, LP — ownership — GP: Lake Pointe Rockwall ASC GP, Inc. (1%);LP: Lake Pointe Investments, Inc. (99%)(b) RHC Parkway, Inc.(c) North Miami Medical Center, Ltd. — ownership — RHC Parkway, Inc. (85.91%)Commonwealth Continental Health Care, Inc. (14.09%)(b) Saint Vincent Healthcare System, Inc.(c) OHM Services, Inc.(c) Saint Vincent Hospital, Inc.(d) Saint Vincent Hospital, L.L.C. (b) SHL/O Corp.(b) Tenet HealthSystem CFMC, Inc.(b) Tenet HealthSystem CM, Inc.(a) Tenet HealthSystem MW, Inc.(b) MW Hospitals, LP, Inc.(b) Tenet MetroWest Healthcare System, Limited Partnership — ownership — GP: Tenet HealthSystem MW,Inc. (79.9%); LP: MW Hospitals LP, Inc. (20.01%) Tenet HealthSystem International, Inc.(a) N.M.E. International (Cayman) Limited(b) HUG Services, Inc. — ownership — N.M.E. International (Cayman) Limited (67%); Tenet Healthcare Corporation (30%); TenetHealthSystem Medical, Inc. (3%)(c) Captive Insurance Services, Inc.(c) Hospital Underwriting Group, Inc.(d) Professional Liability Insurance Company(a) The Healthcare Insurance Corporation Tenet Hospitals, Inc.(a) National ASC, Inc.(a) Tenet Alabama, Inc.(b) Brookwood Primary Network Care, Inc.(c) Alabama Cardiovascular Associates, L.L.C.(c) Brookwood – Maternal Fetal Medicine, L.L.C.(c) Brookwood Occupational Health Clinic, L.L.C. 6Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c) Brookwood Primary Care Cahaba Heights, L.L.C.(c) Brookwood Primary Care Hoover, L.L.C.(c) Brookwood Primary Care Network – Homewood, L.L.C.(c) Brookwood Primary Care – Oak Mountain, L.L.C.(c) Brookwood Primary Care – Red Mountain, L.L.C.(c) Brookwood Primary Care The Narrows, L.L.C.(c) Brookwood Primary Care – Trussville, L.L.C.(c) Brookwood Primary Care – Vestavia, L.L.C.(c) Brookwood Urgent Care, L.L.C.(c) Brookwood Women’s Care, L.L.C.(c) Cardiovascular Associates of the Southwest, L.L.C.(c) Greystone Internal Medicine – Brookwood, L.L.C.(c) Norwood Clinic of Alabama, L.L.C.(a) Tenet California, Inc.(b) Anaheim MRI Holding, Inc. (f/k/a USC University Hospital, Inc. & f/k/a Tenet 1500 San Pablo, Inc.)(b) California Physicians and Practice Medical Foundation(b) Community Hospital of Los Gatos, Inc.(c) Los Gatos Multi-Specialty Group, Inc.(b) Doctors Hospital of Manteca, Inc.(b) Doctors Medical Center of Modesto, Inc.(c) Modesto On-Call Services, L.L.C.(c) Modesto Radiology Imaging, Inc.(c) Yosemite Medical Clinic, Inc.(b) JFK Memorial Hospital, Inc.(c) SSC Holdings, L.L.C. — ownership —JFK Memorial Hospital, Inc. (80.4%); Non-Tenet (19.6%)(d) Sedona Surgery Center, L.L.C.(b) Lakewood Regional Medical Center, Inc.(b) Los Alamitos Medical Center, Inc.(c) Reagan Street Surgery Center, L.L.C. — ownership — Los Alamitos Medical Center, Inc (51%);Non-Tenet (49%)(b) National Medical Ventures, Inc.(c) McHenry Surgery Center Partners, LP — ownership — National Medical Ventures, Inc. (99%); Tenet California, Inc. (1%)(b) Network Management Associates, Inc.(b) Placentia-Linda Hospital, Inc.(c) Anaheim Hills Medical Imaging, L.L.C.(b) San Ramon Regional Medical Center, Inc.(c) Pleasanton Diagnostic Imaging, Inc.(c) San Ramon Surgery Center, L.L.C.(b) San Ramon ASC, L.P.(b) Tenet California Nurse Resources, Inc.(b) Tenet California Medical Ventures I, Inc.(b) Tenet El Mirador Surgical Center, Inc.(b) Tenet HealthSystem Desert, Inc(b) Tenet HealthSystem KNC, Inc. (f/k/a Tenet HealthSystem Norris, Inc.)(b) Twin Cities Community Hospital, Inc.(c) Templeton Imaging, Inc.(a) Tenet Florida, Inc.(b) Advantage Health Network, Inc.(b) Delray Medical Center, Inc.(b) Florida Regional Medical Center, Inc.(b) Hollywood Medical Center, Inc.(b) National Medical Services II, Inc.(b) National Urgent Care, Inc.(b) Tenet Florida Physician Services, L.L.C. 7Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c) Sunrise Medical Group I, L.L.C.(c) Sunrise Medical Group II, L.L.C.(c) Sunrise Medical Group III, L.L.C.(c) Sunrise Medical Group IV, L.L.C.(c) Sunrise Medical Group V, L.L.C.(c) Sunrise Medical Group VI, L.L.C.(b) Tenet Hialeah HealthSystem, Inc.(c) Hialeah Real Properties, Inc.(c) Tenet Hialeah (ASC) HealthSystem, Inc.(d) Hialeah Ambulatory Care Center J.V. — ownership — (66.67%)(d) Hialeah Ambulatory Care Center, Inc. — ownership — (66.67%)(b) Tenet Network Management, Inc.(b) West Boca Medical Center, Inc.(a) Tenet Georgia, Inc.(b) AMC Neurosurgical Associates, L.L.C.(b) Atlanta Medical Center Neurosurgical & Spine Specialists, L.L.C.(b) Buckhead Orthopedic Surgery Center, L.L.C.(b) Gastric Health Institute, L.L.C.(b) Georgia Gifts From Grace, L.L.C.(b) Georgia North Fulton Healthcare Associates, L.L.C.(b) Georgia Spectrum Neurosurgical Specialists, L.L.C.(b) Jackson Medical Center, L.L.C.(b) North Fulton Hospitalist Group, L.L.C.(b) North Fulton Primary Care Associates, L.L.C.(b) North Fulton Primary Care – Windward Parkway, L.L.C.(b) North Fulton Primary Care – Woodstock Road, L.L.C.(b) North Fulton Regional Medical Center Pro Fee Billing, L.L.C.(b) North Fulton Women’s Consultants, L.L.C.(b) Rock Bridge Surgical Institute, L.L.C.(b) Rheumatology Associates of Atlanta Medical Center, L.L.C.(b) Spalding Regional Ambulatory Surgery Center, L.L.C.(b) Spalding Regional OB/GYN, L.L.C.(b) Spalding Regional Physician Services, L.L.C.(b) Spalding Regional Urgent Care Center at Heron Bay, L.L.C.(b) SouthCare Physicians Group Neurology, L.L.C.(b) SouthCare Physicians Group Obstetrics & Gynecology, L.L.C.(b) SouthCare Physicians Group Primary Care, L.L.C.(b) SouthCare Physicians Group Surgical Specialists, L.L.C.(b) South Fulton Regional Medical Center Pro Fee Billing, L.L.C.(b) Surgical & Bariatric Associates of Atlanta Medical Center, L.L.C.(a) Total Health PPO, Inc. — ownership — Tenet Hospitals, Inc (49%); HealthScope (51%)(a) Tenet Louisiana, Inc.(b) Diagnostic Imaging Services, Inc.(b) Meadowcrest Hospital, LLC(b) Meadowcrest Multi-Specialty Clinic, L.L.C.(b) Tenet 100 Medical Center Slidell, L.L.C.(b) Tenet HealthSystem Memorial Medical Center, Inc.(c) Tenet Mid-City Medical, LLC(b) New Orleans Regional Physician Hospital Organization, Inc. (50% member interest)(a) Tenet Missouri, Inc.(b) Cedar Hill Primary Care, L.L.C.(b) Premier Emergency Physicians, L.L.C.(b) Premier Medical Specialists, L.L.C.(b) St. Louis University Hospital Ambulatory Surgery Center, L.L.C.(b) Tenet HealthSystem DI, Inc.(c) Alliance for Community Health, LLC (68% member interest) 8Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c) Bridgeton Imaging, L.L.C.(c) Mid County MRI, LLC (50% member interest)(c) St. Louis I Investors, Ltd. (49% LP interest)(c) U.S. Center for Sports Medicine, L.L.C.(a) Tenet Nebraska, Inc.(b) Professional Services of Creighton University Medical Center, L.L.C.(a) Tenet North Carolina, Inc.(b) Adult Internal Medicine – Tenet North Carolina, L.L.C.(b) Cardiology Physicians Associates, L.L.C.(b) Cardiology Physicians Corporation, L.L.C.(b) Central Carolina Hospital Pro Fee Billing, L.L.C.(b) FryeCare Physicians, L.L.C.(b) FryeCare Urgent Care, P.L.L.C.(b) FryeCare Women’s Services, L.L.C.(b) Graystone Family Healthcare – Tenet North Carolina, L.L.C.(b) Hallmark Family Physicians – Tenet North Carolina, L.L.C.(b) Healthpoint of North Carolina, L.L.C.(b) Hickory Family Practice Associates – Tenet North Carolina, L.L.C.(b) North Carolina Community Family Medicine, L.L.C.(b) Parkway Internal Medicine – Tenet North Carolina, L.L.C.(b) Southern States Physician Operations, Inc.(b) Tenet Claremont Family Medicine, L.L.C.(b) Tenet Unifour Urgent Care Center, L.L.C.(b) Valdese Family Practice – Tenet North Carolina, L.L.C.(b) Viewmont Internal Medicine – Tenet North Carolina, L.L.C.(a) Tenet Physicians, Inc.(a) Tenet South Carolina, Inc.(b) East Cooper Coastal Family Physicians, L.L.C.(b) Hilton Head Hospital Pro Fee Billing, L.L.C.(b) Hilton Head Regional Healthcare, L.L.C.(b) South Carolina East Cooper Surgical Specialists, L.L.C.(b) South Carolina SeWee Family Medicine, L.L.C.(b) Southern Orthopedics and Sports Medicine, L.L.C.(b) Tenet Fort Mill, Inc.(b) Tenet SC East Cooper Hospitalists, L.L.C. (f/k/a/ East Cooper Coastal Internal Medicine Associates, L.L.C.)(b) Tenet South Carolina Gastrointestinal Surgical Specialists, L.L.C.(b) Tenet South Carolina Island Medical, L.L.C.(b) Tenet South Carolina Mt. Pleasant OB/GYN, L.L.C.(a) Tenet Tennessee, Inc.(b) Saint Francis Cardiology Associates, L.L.C.(b) Saint Francis Cardiovascular Surgery, L.L.C.(b) Saint Francis Center for Surgical Weight Loss, L.L.C.(b) Saint Francis Hospital Inpatient Physicians, L.L.C.(b) Saint Francis Hospital Pro Fee Billing, L.L.C.(b) Saint Francis Medical Partners, East, L.L.C.(a) Tenet Texas, Inc.(b) Eastside ASC GP, Inc.(c) Eastside Surgery, L.P.(b) EPHC, Inc.(b) Greater Dallas Healthcare Enterprises(b) Greater Northwest Houston Enterprises (f/k/a: Greater El Paso Healthcare Enterprises)(b) Houston Sunrise Investors, Inc.(b) Practice Partners Management, L.P. — Ownership — Tenet Texas, Inc. (1%); LP: Tenetsub Texas, Inc. (99%)(b) Sierra Providence Healthcare Enterprises, Inc.(b) Sierra Providence Health Network, Inc.(b) Tenet El Paso, Ltd. — ownership — GP: Tenet Texas, Inc. (1%); LP: Tenetsub Texas, Inc. (99%) 9Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (b) Tenet HealthSystem Hospitals Dallas, Inc.(b) TENET HOSPITALS LIMITED — ownership — GP: Tenet Texas, Inc. (1%); LP: Tenetsub Texas, Inc. (99%)(c) Billing Center Doctors Hospital at White Rock Lake, L.L.C.(c) PDN, L.L.C.(c) Tenet Sun View Imaging, L.L.C.(b) Tenet Relocation Services, L.L.C.(b) Tenetsub Texas, Inc.(c) Tenet Frisco, Ltd. — ownership — GP: Tenet HealthSystem Hospitals, Inc. (1%); LP: Tenetsub Texas, Inc. (99%) T.I. Edu, Inc.(a) DigitalMed, Inc. T.I. GPO, Inc. Wilshire Rental Corp.(a) Hitchcock State Street Real Estate, Inc. 10Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 23 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statement Nos. 33-55285, 33-57801, 333-21867, 333-24955, 333-26621, and 333-160674 onForm S-3 and Registration Statement Nos. 33-57375, 333-00709, 333-01183, 333-38299, 333-41903, 333-41476, 333-41478, 333-48482, 333-74216, 333-151884, 333-151887, 333-166767 and 333-166768 on Form S-8 of our reports dated February 27, 2012, relating to the consolidated financial statementsand financial statement schedule of Tenet Healthcare Corporation and subsidiaries, and the effectiveness of Tenet Healthcare Corporation’s internal controlover financial reporting, appearing in this Annual Report on Form 10-K of Tenet Healthcare Corporation for the year ended December 31, 2011. /s/ DELOITTE & TOUCHE LLPDallas, TXFebruary 27, 2012 Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 31(a) Rule 13a-14(a)/15d-14(a) Certification I, Trevor Fetter, certify that: 1. I have reviewed this annual report on Form 10-K of Tenet Healthcare Corporation (the “Registrant”); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; 4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recentfiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the Registrant’s internal control over financial reporting; and 5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theRegistrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controlover financial reporting. Date: February 27, 2012 /s/ TREVOR FETTERTrevor FetterPresident and Chief Executive Officer Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 31(b) Rule 13a-14(a)/15d-14(a) Certification I, Biggs C. Porter, certify that: 1. I have reviewed this annual report on Form 10-K of Tenet Healthcare Corporation (the “Registrant”); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; 4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recentfiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the Registrant’s internal control over financial reporting; and 5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theRegistrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controlover financial reporting. Date: February 27, 2012 /s/ BIGGS C. PORTERBiggs C. PorterChief Financial Officer Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 32 Certifications Pursuant to Section 1350 of Chapter 63of Title 18 of the United States Code We, the undersigned Trevor Fetter and Biggs C. Porter, being, respectively, the President and Chief Executive Officer and the Chief Financial Officerof Tenet Healthcare Corporation (the “Registrant”), do each hereby certify that (i) the Registrant’s Annual Report on Form 10-K for the year endedDecember 31, 2011 (the “Form 10-K”), to be filed with the Securities and Exchange Commission on February 28, 2012, fully complies with the requirementsof Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-K fairly presents, in all material respects,the financial condition and results of operations of the Registrant and its subsidiaries. Date: February 27, 2012/S/ TREVOR FETTERTrevor FetterPresident and Chief Executive Officer Date: February 27, 2012/S/ BIGGS C. PORTERBiggs C. PorterChief Financial Officer The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350; it is not being filed for purposes of Section 18 of the SecuritiesExchange Act, and is not to be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any generalincorporation language in such filing. Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Source: TENET HEALTHCARE CORP, 10-K, February 28, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
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