Tenet Healthcare
Annual Report 2013

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KTENET HEALTHCARE CORP - THCFiled: February 24, 2014 (period: December 31, 2013)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 xx Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2013 OR oo Transition 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) Nevada95-2557091(State of Incorporation)(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 stock, $0.05 par valueNew York Stock Exchange9% Senior Notes due 2014New York Stock Exchange9% 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 Exchange 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 Exchange Act during the preceding 12 months, and(2) has been subject to such filing requirements for the past 90 days. 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 be submitted andposted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. 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 the best of theRegistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in ExchangeAct Rule 12b-2). Large accelerated filer xAccelerated filer o Non-accelerated filer oSmaller reporting company o 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, 2013, the aggregate market value of the shares of common stock held by non-affiliates of the Registrant (treating directors, executive officers who wereSEC reporting persons, and holders of 10% or more of the common stock outstanding as of that date, for this purpose, as affiliates) was approximately $3.9 billion based on theclosing price of the Registrant’s shares on the New York Stock Exchange on Friday, June 28, 2013. As of January 31, 2014, there were 96,989,632 shares of common stock 78 14 78Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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.outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant’s definitive proxy statement for the 2014 annual meeting of shareholders are incorporated by reference into Part III of this Form 10-K. Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Factors23Item 1B.Unresolved Staff Comments32Item 2.Properties32Item 3.Legal Proceedings32Item 4.Mine Safety Disclosures32 PART IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities33Item 6.Selected Financial Data35Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations36Item 7A.Quantitative and Qualitative Disclosures About Market Risk87Item 8.Financial Statements and Supplementary Data88Consolidated Financial Statements91Notes to Consolidated Financial Statements96Supplemental Financial Information130Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure131Item 9A.Controls and Procedures131Item 9B.Other Information131 PART IIIItem 10.Directors, Executive Officers and Corporate Governance132Item 11.Executive Compensation132Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters132Item 13.Certain Relationships and Related Transactions, and Director Independence132Item 14.Principal Accounting Fees and Services132 PART IVItem 15.Exhibits and Financial Statement Schedules133 iSource: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 OVERVIEW Tenet Healthcare Corporation (together with our subsidiaries, referred to herein as “Tenet,” “we” or “us”) is an investor-owned company whosesubsidiaries and affiliates operate regionally focused, integrated health care delivery networks with a significant presence in several large urban and suburbanmarkets. At the core of our networks are acute care and specialty hospitals that, together with our strategically aligned outpatient facilities and relatedbusinesses, allow us to provide a comprehensive range of health care services in the communities we serve. As of December 31, 2013, we primarily operated77 hospitals, 183 outpatient centers, six health plans, six accountable care networks and Conifer Health Solutions, LLC (“Conifer”), which providesbusiness process solutions to more than 700 hospital and other clients nationwide. On October 1, 2013, we completed our previously announced acquisition ofVanguard Health Systems, Inc. (“Vanguard”), an investor-owned hospital company whose operations complemented our existing business. Through thisacquisition, we significantly increased our scale, became more geographically diverse, and expanded the services we offer. With respect to our hospitals and outpatient facilities, we seek to offer superior quality and patient services to meet community needs, to makecapital and other investments in our facilities and technology to remain competitive, to recruit and retain physicians, to expand our outpatient business, and tonegotiate favorable contracts with managed care and other private payers. With respect to business process services, we provide comprehensive operationalmanagement for revenue cycle functions, including patient access, health information management, revenue integrity and patient financial services. We alsooffer communications and engagement solutions to optimize the relationship between providers and patients. In addition, our management services offeringshave expanded to support value-based performance through clinical integration, financial risk management and population health management. For financialreporting purposes, our business lines are classified into two separate reportable business segments — hospital operations and other, and Conifer. Financialand statistical information about our business segments can be found in Item 7, Management’s Discussion and Analysis of Financial Condition and Resultsof Operations, of Part II of this report. 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 Part II of this report. In general, we anticipate the continued acceleration of major industry trends we haveseen emerge over the last several years, and our strategies reflect the belief that: (1) consumers will increasingly select services and providers based on qualityand cost; (2) physicians will seek strategic partners with whom they can align clinically and financially; (3) more procedures will shift from the inpatient tothe outpatient setting; (4) demand will grow as a result of an improved economy, shifting demographics and the expansion of coverage under the PatientProtection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the “Affordable Care Act”); and (5) payerreimbursements will be constrained and further shift to being more closely tied to performance on quality and service metrics. We believe that our strategiesand the acceleration of these trends will allow us to achieve our operational and financial targets. We adjust our strategies as necessary in response to changesin the economic and regulatory climates in which we operate and the results achieved by our various efforts. OPERATIONS HOSPITAL OPERATIONS AND OTHER Hospitals, Outpatient Centers and Related Businesses—At December 31, 2013, our subsidiaries operated 77 hospitals, including four academicmedical centers, two children’s hospitals, three specialty hospitals and a critical access hospital, with a total of 20,293 licensed beds, serving primarily urbanand suburban communities in 14 states. Of those hospitals, 72 were owned by our subsidiaries, and five were owned by third parties and leased by oursubsidiaries. We are also in the process of constructing the new Resolute Health Hospital and Wellness Campus in New Braunfels, Texas, which is expected tobe completed in or around May 2014. In addition, at December 31, 2013, our subsidiaries operated a long-term acute care hospital and owned or leased andoperated a number of medical office buildings, all of which were located on, or nearby, our hospital campuses. Furthermore, our subsidiaries operated 183free-standing and provider-based outpatient centers in 16 states at Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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, 2013, including diagnostic imaging centers, ambulatory surgery centers, urgent care centers and satellite emergency departments, among others.We also owned over 500 physician practices at December 31, 2013. We seek to operate our hospitals, outpatient centers and related businesses in a manner that positions them to compete effectively in an evolvinghealth care environment. From time to time, we build new hospitals and outpatient centers, and make strategic acquisitions of hospitals, outpatient businesses,physician practices, and other health care assets and companies — in each case in markets where we believe our operating strategies can improve performanceand create shareholder value. We believe that growth by strategic acquisitions, when and if opportunities are available, can supplement the growth we believewe can generate organically in our existing markets. Moreover, we continually evaluate collaboration opportunities with outpatient facilities, health careproviders, physician groups and others in our markets to maximize effectiveness, reduce costs and build clinically integrated networks that provide qualityservice across the care continuum. During the year ended December 31, 2013, we acquired 28 hospitals (plus the New Braunfels hospital under construction)and 39 outpatient centers, serving communities in Arizona, California, Illinois, Massachusetts, Michigan and Texas, through our acquisition of Vanguard.We also purchased the following businesses: (1) 11 ambulatory surgery centers (in one of which we had previously held a noncontrolling interest); (2) anurgent care center; (3) a provider network based in Southern California that includes contracted independent physicians, ancillary providers and hospitals;(4) a medical office building; and (5) various physician practice entities. In addition, in May 2013, we entered into a partnership with John Muir Healththrough which we will jointly develop and expand outpatient services and physician relationships to improve the efficiency and coordination of care in the Tri-Valley area and nearby communities in Northern California. Furthermore, we have signed a definitive agreement to acquire Emanuel Medical Center, a 209-bed hospital located in Turlock, California. We also sometimes decide to sell, consolidate or close certain facilities to eliminate duplicate services or excesscapacity or because of changing market conditions or other factors. Our hospitals classified in continuing operations for financial reporting purposes generated in excess of 90% 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, the resultsof 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 in which we operate; (2) the number of uninsured and underinsured individuals in local communities treated at ourhospitals; (3) seasonal cycles of illness; (4) climate and weather conditions; (5) physician recruitment, retention and attrition; (6) advances in technology andtreatments that reduce length of stay; (7) local health care competitors; (8) managed care contract negotiations or terminations; (9) the number of patients withhigh-deductible health insurance plans; (10) any unfavorable publicity about us that impacts our relationships with physicians and patients; (11) changes inhealth care regulations and the participation of individual states in federal programs; and (12) 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. Many of our hospitals also offer tertiary care services such as open-heart surgery, neonatal intensive care and neurosciences. Five of ourhospitals — Good Samaritan Medical Center, Hahnemann University Hospital, Harper University Hospital, North Shore Medical Center and St. LouisUniversity Hospital — offer quaternary care in areas such as heart, liver, kidney and bone marrow transplants. Children’s Hospital of Michigan andSt. Christopher’s Hospital for Children provide tertiary and quaternary pediatric services, including bone marrow and kidney transplants, as well as burnservices. A number of our hospitals also offer advanced treatment options for patients — Good Samaritan Medical Center, North Shore Medical Center, SierraMedical Center and Sierra Providence East Medical Center offer gamma-knife brain surgery; and Brookwood Medical Center, North Shore Medical Center,Saint Vincent Hospital at Worcester Medical Center and St. Louis University Hospital offer cyberknife radiation therapy for tumors and lesions in the brain,lung, neck, spine and elsewhere that may previously have been considered inoperable or inaccessible by traditional radiation therapy. In addition, ourhospitals will continue their efforts to develop and deliver those outpatient services that can be provided on a quality, cost-effective basis and that we believewill meet the needs of the communities served by the facilities. Many of our hospitals also offer a wide range of clinical research studies, giving patients access to innovative care. We are dedicated to helping ourhospitals participate in medical research that is consistent with state and federal regulations and provides good clinical practice guidelines. Clinical researchprograms relate to a wide array of ailments, including cardiovascular disease, pulmonary disease, musculoskeletal disorders, neurological disorders,genitourinary disease and various cancers, as well as medical device studies. By supporting clinical research, our hospitals are actively involved in medicaladvancements that can lead to improvements in patient safety and clinical care. Except as set forth in the table below, each of our acute care hospitals is accredited by The Joint Commission (formerly, The Joint Commission onAccreditation of Healthcare Organizations). With such accreditation, our hospitals are 2Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 deemed to meet the Medicare Conditions of Participation and are eligible to participate in government-sponsored provider programs, such as the Medicare andMedicaid programs. The following table lists, by state, the hospitals owned or leased and operated by our subsidiaries as of December 31, 2013: HospitalLocationLicensedBedsStatusAlabamaBrookwood Medical CenterBirmingham631Owned ArizonaArizona Heart Hospital(1)Phoenix59OwnedArrowhead HospitalGlendale217OwnedMaryvale HospitalPhoenix232OwnedParadise Valley HospitalPhoenix136OwnedPhoenix Baptist HospitalPhoenix221OwnedWest Valley HospitalGoodyear164Owned CaliforniaDesert Regional Medical Center(2)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 Center(3)San 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(4)Palm Beach Gardens199LeasedPalmetto General HospitalHialeah360OwnedSaint Mary’s Medical CenterWest Palm Beach464OwnedWest Boca Medical CenterBoca Raton195Owned GeorgiaAtlanta Medical CenterAtlanta762OwnedAtlanta Medical Center — South Campus(5)East Point—OwnedNorth Fulton Regional Hospital(6)Roswell202LeasedSpalding Regional HospitalGriffin160OwnedSylvan Grove Hospital(7)Jackson25Leased IllinoisLouis A. Weiss Memorial HospitalChicago236OwnedMacNeal HospitalBerwyn373OwnedWest Suburban Medical CenterOak Park234OwnedWestlake Hospital(8)Melrose Park242Owned MassachusettsMetroWest Medical Center — Framingham Union HospitalFramingham147OwnedMetroWest Medical Center — Leonard Morse HospitalNatick122OwnedSaint Vincent Hospital at Worcester Medical CenterWorcester321Owned 3Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 HospitalLocationLicensedBedsStatusMichiganChildren’s Hospital of MichiganDetroit228OwnedDetroit Receiving HospitalDetroit298OwnedHarper University HospitalDetroit567OwnedHuron Valley-Sinai HospitalCommerce Township153OwnedHutzel Women’s Hospital(9)Detroit—OwnedRehabilitation Institute of Michigan(1)Detroit94OwnedSinai-Grace HospitalDetroit404OwnedDMC Surgery Hospital(1)Madison Heights67Owned MissouriDes Peres HospitalSt. Louis143OwnedSt. Louis University HospitalSt. Louis356Owned North CarolinaCentral Carolina HospitalSanford137OwnedFrye Regional Medical Center(10)Hickory355Leased PennsylvaniaHahnemann University HospitalPhiladelphia496OwnedSt. Christopher’s Hospital for ChildrenPhiladelphia189Owned South CarolinaCoastal Carolina HospitalHardeeville41OwnedEast Cooper Medical CenterMount Pleasant140OwnedHilton Head HospitalHilton Head93OwnedPiedmont Medical CenterRock Hill288Owned TennesseeSaint Francis HospitalMemphis519OwnedSaint Francis Hospital — BartlettBartlett196Owned TexasBaptist Medical CenterSan Antonio623OwnedCentennial Medical CenterFrisco118OwnedCypress Fairbanks Medical CenterHouston181OwnedDoctors Hospital at White Rock LakeDallas218OwnedHouston Northwest Medical Center(11)Houston430OwnedLake Pointe Medical Center(12)Rowlett112OwnedMission Trail Baptist HospitalSan Antonio110OwnedNacogdoches Medical CenterNacogdoches153OwnedNorth Central Baptist HospitalSan Antonio340OwnedNortheast Baptist HospitalSan Antonio379OwnedPark Plaza HospitalHouston444OwnedProvidence Memorial HospitalEl Paso508OwnedSierra Medical CenterEl Paso349OwnedSierra Providence East Medical CenterEl Paso110OwnedSt. Luke’s Baptist HospitalSan Antonio282OwnedValley Baptist Medical Center — Brownsville(13)Brownsville280OwnedValley Baptist Medical Center(13)Harlingen586Owned Total Licensed Beds20,293 (1) Specialty hospital.(2) Lease expires in 2027.(3) Owned by a limited liability company formed as part of a joint venture with John Muir Health, a not-for-profit integrated system of doctors, hospitalsand other health care services in the San Francisco Bay area; a Tenet subsidiary owned a 51% interest in the limited liability company at December 31,2013 and is the managing member, and John Muir Health owned a 49% interest.(4) Lease expires in February 2017, but may be renewed through at least February 2037, subject to certain conditions contained in the lease.(5) Licensed beds for Atlanta Medical Center — South Campus are presented on a combined basis with Atlanta Medical Center.(6) Lease expires in February 2020, but may be renewed through at least February 2040, subject to certain conditions contained in the lease. Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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.4Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 (7) 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.(8) Accredited by the American Osteopathic Association.(9) Licensed beds for Hutzel Women’s Hospital are presented on a combined basis with Harper University Hospital.(10) Lease expires in February 2022, but may be renewed through at least February 2042, subject to certain conditions contained in the lease.(11) Owned by a limited liability company in which a Tenet subsidiary owned an 86.69% interest at December 31, 2013 and is the managing member.(12) Owned by a limited liability company in which a Tenet subsidiary owned a 94.674% interest at December 31, 2013 and is the managing member.(13) Indirectly owned by a limited liability company formed as part of a joint venture with VB Medical Holdings (formerly known as Valley BaptistMedical Center — Brownsville), a Texas non-profit corporation; a Tenet subsidiary owned a 51% interest in the limited liability company atDecember 31, 2013 and is the managing member, and VB Medical Holdings owned a 49% interest. 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, 2013, 2012 and 2011: December 31,201320122011Total number of facilities(1)774950Total number of licensed beds(2)20,29313,21613,453 (1) Includes all general and specialty hospitals and our critical access hospital, as well as one facility at December 31, 2011 that is classified indiscontinued operations for financial reporting purposes as of December 31, 2013 and 2012.(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 Part II of this report. As of December 31, 2013, we also owned 183 free-standing and provider-based outpatient centers in 16 states — typically at locationscomplementary to our hospitals — including diagnostic imaging centers, ambulatory surgery centers, urgent care centers and satellite emergency departments,among others. Most of these outpatient centers are in leased facilities, and a number of outpatient facilities are owned and operated by joint ventures in whichwe hold a majority equity interest. The largest concentrations of our outpatient centers were in those states where we had the largest concentrations of licensedhospital beds, as of December 31, 2013, as shown in the table below: % of Outpatient Centers% of Licensed BedsTexas31.7%25.7%Florida16.4%17.1%California16.4%11.5% Strong concentrations of hospital beds and outpatient centers within market areas help us contract more successfully with managed care payers, reducemanagement, marketing and other expenses, and more efficiently utilize resources. However, these concentrations increase the risk that, should any adverseeconomic, regulatory, environmental or other condition occur in these areas, our overall business, financial condition, results of operations or cash flows couldbe materially adversely affected. Health Plans and Accountable Care Networks—During the year ended December 31, 2013, we acquired five health plans with approximately140,000 members through our acquisition of Vanguard: · VHS Phoenix Health Plan, LLC, a Medicaid-managed health plan operating as Phoenix Health Plan (“PHP”) in Arizona; · Phoenix Health Plans, Inc. (formerly known as Abrazo Advantage Health Plan, Inc.), a Medicare and Medicaid dual-eligible managed healthplan operating in Arizona; · Chicago Health System, Inc. (“CHS”), a contracting entity for inpatient and outpatient services provided by MacNeal Hospital, Louis A.WeissMemorial Hospital and participating physicians in the Chicago area; · Harbor Health Plan, Inc. (formerly known as ProCare Health Plan, Inc.), a Medicaid-managed health plan operating in Michigan; and · Valley Baptist Insurance Company (“VBIC”), which is currently in the process of changing its name to Allegian Health Plan, offers healthmaintenance organization (“HMO”), preferred provider organization (“PPO”), and self-funded products to its members in the form of largegroup, small group and individual product offerings in south Texas. As of January 1, 2014, VBIC also offers a Medicare Advantage healthplan. 5Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 also own Golden State Medicare Health Plan, which is an HMO that specializes in the care of seniors in Southern California who are eligible for benefitsunder the Medicare Advantage program. We believe these health plans complement and enhance our market position and provide us with expertise that we expect will be increasinglyimportant as the health care industry evolves. Specifically, PHP provides us with insights into state initiatives to manage the Arizona Medicaid population,which is valuable in light of the expansion of health coverage to currently uninsured patients pursuant to the Affordable Care Act and various other health carereform laws. In addition, through CHS, our Chicago-based preferred provider network, we manage capitated contracts covering inpatient, outpatient andphysician services. We believe our ownership of CHS allows us to gain additional experience with risk-bearing contracts and delivery of care in low-costsettings, including our network of health centers. We also own or control six accountable care networks — in Florida, California, Illinois, Michigan and Texas — and participate in two additionalaccountable care networks through collaborations with other health care providers in our markets in Arizona and Massachusetts. These networks operateusing a range of payment and delivery models that seek to align provider reimbursement in a way that encourages improved quality metrics and efficiencies inthe total cost of care for an assigned population of patients through cooperation of the providers. We believe that our experience operating health plans andaccountable care networks gives us a solid framework upon which to build and expand our population health strategies. CONIFER Our Conifer subsidiary provides a number of services primarily to health care providers to assist them in generating sustainable improvements intheir operating margins, while also enhancing patient, physician and employee satisfaction. At December 31, 2013, Conifer provided one or more of thebusiness process services described below from 20 service centers to more than 700 Tenet and non-Tenet hospital and other clients in over 40 states. Revenue Cycle Management—Conifer provides comprehensive operational management for patient access, health information management, revenueintegrity and patient financial services, including: · centralized insurance and benefit verification, financial clearance, pre-certification, registration and check-in services; · financial counseling services, including reviews of eligibility for government health care programs, for both insured and uninsured patients; · productivity and quality improvement programs, revenue cycle assessments and optimization recommendations, and The Joint Commissionand other preparedness services; · coding and compliance support, billing assistance, auditing, training, and data management services at every step in the revenue cycle process; · accounts receivable management, third-party billing and collections; and · ongoing measurement and monitoring of key revenue cycle metrics. These revenue cycle management solutions assist hospitals and other health care organizations in improving cash flow, increasing revenue, and advancingphysician and patient satisfaction. Patient Communications and Engagement Services—Conifer offers customized communications and engagement solutions to optimize therelationship between providers and patients. Conifer’s trained customer service representatives provide direct, 24-hour, multilingual support for (1) physicianreferrals, calls regarding maternity services and other patient inquiries, (2) community education and outreach, (3) scheduling and appointment reminders,and (4) employee recruitment. Conifer also coordinates and implements mail-based marketing programs to keep patients informed of screenings, seminars andother events and services, as well as conducts patient quality and satisfaction surveys to provide valuable feedback to its clients. In addition, Conifer providesclinical admission reviews that are intended to provide evidence-based support for physician decisions on patient status and reduce staffing costs. 6Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Management Services—Conifer also supports value-based performance through clinical integration, financial risk management and populationhealth management, all of which assist hospitals, physicians, accountable care organizations (“ACOs”), health plans and employers in improving the costand quality of health care delivery, as well as patient outcomes. Conifer helps clients build clinically integrated networks that provide predictive analytics andquality measures across the care continuum. In addition, Conifer assists clients in improving both the cost and quality of care by aligning and managingfinancial incentives among health care stakeholders through risk modeling and management for various payment models. Furthermore, Conifer offers clientstools and analytics to improve quality of care and provide care management support of patients with chronic diseases by identifying high-risk patients andmonitoring clinical outcomes. In May 2012, Conifer entered into a 10-year agreement with Catholic Health Initiatives (“CHI”) to provide revenue cycle services for over 50 of CHI’shospitals. As part of this agreement, CHI received a minority ownership interest in Conifer. In addition, in late 2012, Conifer acquired (i) an informationmanagement and services company with extensive health care data and proprietary technology and (ii) a hospital revenue cycle management business. We began reporting Conifer as a separate business segment for financial reporting purposes in the three months ended June 30, 2012. The loss ofConifer’s key customers, primarily Tenet and CHI, in the future could have a material adverse impact on the segment. Financial and other information aboutour Conifer business segment is provided in the Consolidated Financial Statements included in this report. REAL PROPERTY The locations of our hospitals and the number of licensed beds at each hospital at December 31, 2013 are set forth in the table beginning on page 3.Our subsidiaries also operate a number of medical office buildings, all of which are located on, or nearby, our hospital campuses. We own nearly all of ourmedical office buildings; the remainder are owned by third parties and leased by our subsidiaries. Our corporate headquarters are located in Dallas, Texas. In addition, we maintain administrative and regional offices in markets where we operatehospitals and other businesses, including Conifer. We typically lease our office space under operating lease agreements. We believe that all of our properties aresuitable for their respective uses and are, in general, adequate for our present needs. INTELLECTUAL PROPERTY We rely on a combination of trademark, copyright and trade secret laws, as well as contractual terms and conditions, to protect our rights in ourintellectual property assets. In addition, Conifer has sought patent protection for one of its key innovations. Legal standards relating to the validity,enforceability and scope of protection of patents can be uncertain. We do not know whether Conifer’s patent application will result in the issuance of a patentor whether the examination process will require us to further narrow our claims. Our patent application may not result in the grant of a patent with the scope ofthe claims that we seek, if at all, or the scope of the granted claims may not be sufficiently broad to protect our technology. Any patents that may be granted inthe future from pending or future applications may be opposed, contested, circumvented, designed around by a third party, or found to be invalid orunenforceable. Third parties may develop technologies that are similar or superior to our proprietary technologies, duplicate or otherwise obtain and use ourproprietary technologies, or design around patents owned or licensed by us. Conversely, although we do not believe our technology infringes any patent or otherintellectual property right held by a third party, we could be prevented from providing our service offerings and could be subject to significant damage awardsif it is found to do so. We control access to and the use of our application capabilities through a combination of internal and external controls. We also license some of oursoftware through agreements that impose specific restrictions on customers’ ability to use the software, such as prohibiting reverse engineering and limiting theuse of copies. We incorporate third-party commercial and, on occasion, open source software products into our technology platform. We employ third-partylicensed software in order to simplify our development and maintenance efforts, support our own technology infrastructure or test a new capability. 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 7Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 subject to ultimate oversight by the hospital’s local governing board. Members of the medical staffs of our hospitals also often serve on the medical staffs ofhospitals not owned by us. Members of our medical staffs are free to terminate their affiliation with our hospitals or admit their patients to competing hospitalsat any time. As of December 31, 2013, we owned over 500 physician practices and employed over 1,500 physicians (where permitted by law). However, theoverwhelming majority of the physicians who practice at our hospitals are not our employees. Nurses, therapists, lab technicians, facility maintenanceworkers and the administrative staffs of hospitals normally are our employees. We are subject to federal minimum wage and hour laws and various state laborlaws, 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 on our medical staffs an appropriate number of qualityphysicians in the specialties required to support our services. Although we had a net overall gain in physicians added to the medical staffs of legacy Tenethospitals 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 certainspecialties and the difficulties that physicians can experience in obtaining affordable malpractice insurance or finding insurers willing to provide suchinsurance. Over 40,000 new employees joined Tenet in October 2013 in connection with our acquisition of Vanguard. As of December 31, 2013, we employedover 100,000 employees (of which 27% were part-time employees) in the following categories: Hospital operations(1)92,094Conifer10,145Administrative offices1,472Total103,711 (1) Includes employees whose employment related to the operations of our general hospitals, specialty hospitals, critical access hospital, long-term acute carehospital, outpatient centers, physician practices, health plans, accountable care networks and other health care operations. Union Activity and Labor Relations—As of December 31, 2013, approximately 21% of our employees were represented by various labor unions.These employees — primarily registered nurses and service and maintenance workers — were located at 39 of our hospitals, the majority of which are inCalifornia, Florida and Michigan. We currently have two expired contracts and are negotiating renewals under extension agreements. We are also negotiating aninitial contract at one of our hospitals where employees recently chose union representation. At this time, we are unable to predict the outcome of thenegotiations, but increases in salaries, wages and benefits could result from these agreements. Furthermore, there is a possibility that strikes could occurduring the negotiation process, which could increase our labor costs and have an adverse effect on our patient volumes and net operating revenues. Futureorganizing activities by labor unions could increase our level of union representation in 2014. 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. Although our nurse turnover rates arefavorable overall, like others in the health care industry, we continue to experience a shortage of seasoned nurses in certain key specialties and geographicareas. Most applicants for our nursing positions are newly licensed nurses rather than experienced nurses, which requires us to make greater investments ineducation and training. In addition, state-mandated nurse-staffing ratios in California affect not only our labor costs, but, if we are unable to hire the necessarynumber of experienced nurses to meet the required ratios, they may also cause us to limit patient admissions with a corresponding adverse effect on our netoperating revenues. We continually monitor our nurse-staffing ratios in California in an effort to achieve full compliance with the state-mandated nurse-staffingratios there. Nurse-staffing ratio legislation has been proposed in, but not yet enacted by, Congress and other states besides California in which we operatehospitals, including Florida, Michigan and Pennsylvania. In Texas and Missouri, hospitals are required to adopt, implement and enforce official nursestaffing plans, but are not required to maintain staffing ratios. COMPETITION HEALTH CARE SERVICES Overall, our hospitals, outpatient centers and other health care businesses operate in competitive environments, primarily at the local level. Generally,other hospitals and outpatient centers in the local communities we serve provide services 8Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 similar to those we offer, and, in some cases, competing facilities are more established or newer than ours. Furthermore, competing facilities (1) may offer abroader array of services to patients and physicians than ours, (2) may have larger or more specialized medical staffs to admit and refer patients, (3) mayhave a better reputation in the community, or (4) may be more centrally located with better parking or closer proximity to public transportation. In the future,we expect to encounter increased competition from companies, like ours, that consolidate hospitals and health care companies in specific geographic markets.Continued consolidation in the health care industry will be a leading factor contributing to greater competition in our current markets and markets we mayenter in the future. We also face increased competition from specialty hospitals (some of which are physician-owned) and unaffiliated freestanding outpatient centers formarket share in high-margin services and for quality physicians and personnel. Furthermore, some of the hospitals that compete with our hospitals are ownedby government agencies or not-for-profit organizations. These tax-exempt competitors may have certain financial advantages not available to our facilities, suchas endowments, charitable contributions, tax-exempt financing, and exemptions from sales, property and income taxes. In addition, in certain markets inwhich 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 or outpatient facility is the ability to negotiate contracts with managed care plans.HMOs, PPOs, third-party administrators, and other third-party payers use managed care contracts to encourage patients to use certain hospitals in exchangefor discounts from the hospitals’ established charges. Our future success depends, in part, on our ability to retain and renew our managed care contracts andenter into new managed care contracts on terms favorable to us. Other health care providers may affect our ability to enter into acceptable managed carecontractual arrangements or negotiate increases in our reimbursement and other favorable terms and conditions. For example, some of our competitors maynegotiate exclusivity provisions with managed care plans or otherwise restrict the ability of managed care companies to contract with us. Furthermore, the trendtoward consolidation among non-government payers tends to increase their bargaining power over fee structures. In addition, as various provisions of theAffordable Care Act are implemented, including the establishment of health insurance exchanges, non-government payers may increasingly demand reducedfees or be unwilling to negotiate reimbursement increases. State laws that require findings of need for construction and expansion of health care facilities or services (as described in “Health Care Regulationand Licensing — Certificate of Need Requirements” below) may also have the effect of restricting competition. In addition, in those states that do not havecertificate of need requirements or that do not require review of health care capital expenditure amounts below a relatively high threshold, competition in theform 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 in which physicians prefer to practice. We continue to invest in our Physician Relationship Program, whichis centered on understanding the needs of physicians who admit patients both to our hospitals and to our competitors’ hospitals and responding to those needswith changes and improvements in our hospitals and operations. We have targeted capital spending in order to address specific needs or growth opportunitiesof our hospitals, which is expected to have a positive impact on their volumes. We have also sought to include all of our hospitals and an increased number ofour affiliated physicians in the affected geographic area or nationally when negotiating new managed care contracts, which may result in additional volumes atfacilities that were not previously a part of such managed care networks. In addition, we have completed clinical service line market demand analyses andprofitability assessments to determine which services are highly valued that can be emphasized and marketed to improve our operating results. This TargetedGrowth Initiative (“TGI”) has resulted in some reductions in unprofitable service lines in several locations. However, the de-emphasis or elimination of certainunprofitable service lines as a result of our TGI analyses will allow us to dedicate more resources on services that are in higher demand and are moreprofitable. Moreover, we have increased our focus on operating our outpatient centers with improved accessibility and more convenient service for patients, aswell as increased predictability and efficiency for physicians. We have also made significant investments in the last decade in equipment, technology, education and operational strategies designed to improveclinical quality at our hospitals and outpatient centers. As a result of our efforts, our CMS Hospital Compare Core Measures scores have consistently exceededthe national average since the end of 2005, and major national private payers have also recognized our achievements relative to quality. These designations areexpected to become increasingly important as governmental and private payers move to pay-for-performance models, and the commercial market moves tomore narrow networks and other methods designed to encourage covered individuals to use certain facilities over others. Through our Commitment to Qualityand Performance Excellence Program initiatives, we continually collaborate with physicians to implement the most current evidence-based medicinetechniques to improve the way we provide care, while using 9Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 labor management tools and supply chain initiatives to reduce variable costs. We believe the use of these practices will promote the most effective and efficientutilization of resources and result in shorter lengths of stay, as well as reductions in redundant ancillary services and readmissions for hospitalized patients. Ingeneral, we believe that quality of care improvements may have the effect of reducing costs, increasing payments from Medicare and certain managed carepayers for our services, and increasing physician and patient satisfaction, which may improve our volumes. 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 cycle management market. In addition, theinternal revenue cycle management staff of hospitals and other health care providers, who have historically performed many of the functions addressed by ourservices, in effect compete with us. Moreover, providers who have previously made investments in internally developed solutions sometimes choose tocontinue to rely on their own resources. We also currently compete with several categories of external participants in the revenue cycle market, most of whichfocus on small components of the hospital revenue cycle, including: · software vendors and other technology-supported revenue cycle management business process outsourcing companies; · traditional consultants, either specialized health care consulting firms or health care divisions of large accounting firms; and · large, non-healthcare focused business process and information technology outsourcing firms. We believe that competition for the revenue cycle management and other services Conifer provides is based primarily on: (1) knowledge andunderstanding of the complex public and private health care payment and reimbursement systems; (2) a track record of delivering revenue improvements andefficiency gains for hospitals and other health care providers; (3) the ability to deliver solutions that are fully integrated along each step of the revenue cycle;(4) cost-effectiveness, including the breakdown between up-front costs and pay-for-performance incentive compensation; (5) reliability, simplicity andflexibility of the technology platform; (6) understanding of the health care industry’s regulatory environment; (7) sufficient infrastructure; and (8) financialstability. To be successful, Conifer must respond more quickly and effectively than its competitors to new or changing opportunities, technologies, standards,regulations and customer requirements. Existing or new competitors may introduce technologies or services that render Conifer’s technologies or servicesobsolete or less marketable. Even if Conifer’s technologies and services are more effective than the offerings of its competitors, current or potential customersmight prefer competitive technologies or services to Conifer’s technologies and services. Furthermore, increased competition may result in pricing pressures,which could negatively impact Conifer’s margins, growth rate or market share. HEALTH CARE REGULATION AND LICENSING AFFORDABLE CARE ACT The Affordable Care Act is changing how health care services in the United States are covered, delivered and reimbursed. The primary goal of thiscomprehensive legislation is to extend health coverage to millions of uninsured legal U.S. residents through a combination of private sector health insurancereforms and public program expansion. To fund the expansion of insurance coverage, the legislation contains measures designed to promote quality and costefficiency in health care delivery and to generate budgetary savings in the Medicare and Medicaid programs. In addition, the Affordable Care Act containsprovisions intended to strengthen fraud and abuse enforcement. 10Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Health Insurance Market Reforms—The Affordable Care Act contains provisions requiring most Americans to maintain, and employers toprovide, “minimal essential” health insurance coverage. For individuals who are not exempt from the “individual mandate,” and who do not receive healthinsurance through an employer or government program, the means of satisfying the requirement is to purchase insurance from a private company or a healthinsurance exchange. Health insurance exchanges are government-regulated organizations that provide competitive markets for buying health insurance byoffering individuals and small employers a choice of different health plans, certifying plans that participate, and providing information to help consumersbetter understand their options. Some states operate their own exchanges while others utilize federally facilitated exchanges. The federally run exchanges, andseveral of the state-run exchanges, have faced operational hurdles and challenges in the initial period of their operation, which could reduce the number ofindividuals that obtain coverage through the exchanges in the short term. Beginning in 2014, individuals who are enrolled in a health benefits plan purchasedthrough an exchange may be eligible for a premium credit or cost-sharing subsidy. Also beginning in 2014, those who do not comply with the individualmandate must make a “shared responsibility payment” to the federal government in the form of a tax penalty. The “employer mandate” provision of the Affordable Care Act requires the imposition of penalties on employers having 50 or more employees who donot offer affordable health insurance coverage to those working 30 or more hours per week. These large employer coverage provisions were originally scheduledto go into effect on January 1, 2014, but were subsequently deferred one year. On February 10, 2014, the requirements of the employer mandate were furtherdelayed such that companies with 50 to 99 employees will now have until January 1, 2016 to provide coverage under the Affordable Care Act, and companieswith 100 or more employees must offer insurance to only 70% of full-time workers in 2015, rather than 95%, to avoid fines. Based on the CongressionalBudget Office’s most recent estimates, we do not believe that the delays in the employer mandate will have a discernible effect on insurance coverage. The Affordable Care Act also establishes a number of health insurance market reforms, including bans on lifetime limits and pre-existing conditionexclusions, new benefit mandates, and increased dependent coverage. Specifically, group health plans and health insurance issuers offering group orindividual coverage: · 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 dependent coverage). We anticipate that health care providers will generally benefit over time from insurance coverage provisions of the Affordable Care Act; however, it isnot clear what impact, if any, the increased obligations on managed care and other private payers imposed by the Affordable Care Act will have on commercialmanaged care volumes and payment rates in the near term. Public Program Reforms—Prior to the passage of the Affordable Care Act, the Medicaid program offered federal funding to states to assist onlylimited categories of low-income individuals (including children, pregnant women, the blind and the disabled) in obtaining medical care. The health carereform law expanded eligibility under existing Medicaid programs to virtually all individuals under 65 years old with incomes up to 138% of the federalpoverty level beginning in 2014. The expansion of the Medicaid program (which will be substantially funded by the federal government) in each state requiresstate legislative or regulatory action and the approval by CMS of a state Medicaid plan amendment. There is no deadline for a state to undertake expansion andqualify for the enhanced federal funding available under the Affordable Care Act. We cannot provide any assurances as to whether or when the states in whichwe operate might choose to expand their Medicaid programs or whether those states that do expand their Medicaid programs will continue to offer expandedeligibility in the future. The Affordable Care Act also provides that the federal government will subsidize states that create non-Medicaid plans called “Basic HealthPrograms” for residents whose incomes are greater than 133% but less than 200% of the federal poverty level. Approved state plans will be eligible to receivefederal funding, however, CMS announced in February 2013 that Basic Health Programs would not be operational until 2015. Even though the Affordable Care Act expanded Medicaid eligibility, the law also contains a number of provisions designed to significantly reduceMedicare and Medicaid program spending, including: 11Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 · 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” that began in2011; and · reductions to Medicare disproportionate share hospital (“DSH”) payments, beginning in federal fiscal year (“FFY”) 2014, as the number ofuninsured individuals declines. Medicaid DSH cuts were also initially scheduled to begin in FFY 2014, however, a provision in the BipartisanBudget Act of 2013 delayed these cuts until FFY 2016. The Affordable Care Act also contains a number of provisions intended to improve the quality and efficiency of medical care provided to Medicareand Medicaid beneficiaries. For example, the legislation expands payment penalties based on a hospital’s rates of certain Medicare-designated hospital-acquiredconditions (“HACs”). These HACs, which would normally result in a higher payment for an inpatient hospital discharge, will instead be paid as though theHAC is not present. Effective July 1, 2011, the Affordable Care Act likewise prohibits the use of federal funds under the Medicaid program to reimburseproviders for medical assistance provided to treat HACs. Currently, hospitals with excessive readmissions for certain conditions receive reduced Medicarepayments for all inpatient admissions. Beginning in FFY 2015, hospitals that fall into the top 25% of national risk-adjusted HAC rates for all hospitals in theprevious year will also receive a 1% reduction in Medicare payment rates. Separately, under a Medicare value-based purchasing program that was launched inFFY 2013, hospitals that satisfy certain performance standards receive increased payments for discharges during the following fiscal year. These paymentsare funded by decreases in payments to all hospitals for inpatient services. For discharges occurring during FFY 2014 and after, the performance standardsmust assess hospital efficiency, including Medicare spending per beneficiary. In addition, the Affordable Care Act directed CMS to launch a national pilotprogram to study the use of bundled payments to hospitals, physicians and post-acute care providers relating to a single admission to promote collaborationand alignment on quality and efficiency improvement; implementation of the pilot program is currently ongoing through the Center for Medicare and MedicaidInnovation within CMS, which has the authority to develop and test new payment methodologies designed to improve quality of care and lower costs. Furthermore, the Affordable Care Act contains provisions relating to recovery audit contractors (“RACs”), which are third-party organizations undercontract with CMS that identify underpayments and overpayments under the Medicare program and recoup any overpayments on behalf of the government.The Affordable Care Act expanded the RAC program’s scope to include Medicaid claims and required all states to enter into contracts with RACs. Other Provisions—The Affordable Care Act contains a number of other additional provisions, including provisions relating to the Medicare andMedicaid anti-kickback and anti-fraud and abuse amendments, Section 1877 of the Social Security Act (commonly referred to as the “Stark” law), and quitam 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. The Impact of Health Reform on Us—The expansion of health insurance coverage under the Affordable Care Act may result in a material increasein the number of patients using our facilities who have either private or public program coverage. Further, the health reform law provides for a value-basedpurchasing program, the establishment of ACOs and bundled payment pilot programs, which will create possible sources of additional revenue. However, it isdifficult to predict the full impact of the Affordable Care Act on our future revenues and operations at this time due to uncertainty regarding a number ofmaterial factors, including: · how many states will ultimately implement the Medicaid expansion provisions and under what terms (a number of states in which we operate,including Florida and Texas, have chosen not to expand their Medicaid programs at this time); · how many currently uninsured individuals will obtain coverage (either private health insurance or Medicaid) as a result of the Affordable CareAct; 12Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 · what percentage of the newly insured patients will be covered under the Medicaid program and what percentage will be covered by private healthinsurers; · the extent to which states will enroll new Medicaid participants in managed care programs; · the pace at which insurance coverage expands, including the pace of different types of coverage expansion; · the change, if any, in the volume of inpatient and outpatient hospital services that are sought by and provided to previously uninsuredindividuals; · the rate paid to hospitals by private payers for newly covered individuals, including those covered through the newly created exchanges andthose who might be covered under the Medicaid program under contracts with the state; · the rate paid by state governments under the Medicaid program for newly covered individuals; · the percentage of individuals in the exchanges who select the high-deductible plans, considering that health insurers offering those kinds ofproducts have traditionally sought to pay lower rates to hospitals; · the extent to which the provisions of the Affordable Care Act will put pressure on the profitability of health insurers, which in turn might causethem to seek to reduce payments to hospitals with respect to both newly insured individuals and their existing business; and · the possibility that the Affordable Care Act or components of it will be delayed, revised or eliminated as a result of court challenges or actionsby Congress. Furthermore, the Affordable Care Act provides for significant reductions in the growth of Medicare spending, reductions in Medicare and MedicaidDSH payments, and the establishment of programs where reimbursement is tied to quality and integration. Any reductions to our reimbursement under theMedicare and Medicaid programs by the Affordable Care Act could adversely affect our business and results of operations to the extent such reductions are notoffset by increased revenues from providing care to previously uninsured individuals. It is difficult to predict the effect on our revenues resulting fromreductions to Medicare and Medicaid spending because of uncertainty regarding a number of material factors, including the following: · the amount of overall revenues we will generate from the Medicare and Medicaid programs when the reductions are implemented; · whether future reductions required by the Affordable Care Act will be changed by statute prior to becoming effective; · the size of the law’s annual productivity adjustment to the market basket; · the amount of the Medicare DSH reductions that will be made commencing in FFY 2014; · the allocation to our hospitals of the Medicaid DSH reductions commencing in FFY 2016; · what the losses in revenues, if any, will be from the law’s quality initiatives; · how successful accountable care networks in which we participate will be at coordinating care and reducing costs or whether they will decreasereimbursement; · the scope and nature of potential changes to Medicare reimbursement methods, such as an emphasis on bundling payments or coordination ofcare programs; and · reductions to Medicare payments CMS may impose for “excessive readmissions.” In addition, we may continue to experience a high level of bad debt expense and have to provide uninsured discounts and charity care for undocumented alienswho will not be permitted to enroll in a health insurance exchange or government health care program. Because of the many variables involved, we are unable to predict the ultimate net effect on us of the expected decreases in uninsured individualsusing our facilities, the reductions in Medicare spending and Medicare and Medicaid DSH funding, and 13Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 numerous other provisions in the Affordable Care Act that may affect us. Moreover, we are unable to predict the future course of federal, state and local healthcare regulation or legislation, including Medicare and Medicaid statutes and regulations. Further changes in the regulatory framework affecting health careproviders could have a material adverse effect on our business, financial condition, results of operations or cash flows. ANTI-KICKBACK AND SELF-REFERRAL REGULATIONS Anti-Kickback Statute—Medicare and Medicaid anti-kickback and anti-fraud and abuse amendments codified under Section 1128B(b) of theSocial Security Act (the “Anti-kickback Statute”) prohibit certain business practices and relationships that might affect the provision and cost of health careservices payable under the Medicare and Medicaid programs and other government programs, including the payment or receipt of remuneration for the referralof patients whose care will be paid for by such programs. Specifically, the law prohibits any person or entity from offering, paying, soliciting or receivinganything of value, directly or indirectly, for the referral of patients covered by Medicare, Medicaid and other federal health care programs or the leasing,purchasing, ordering or arranging for or recommending the lease, purchase or order of any item, good, facility or service covered by these programs. Inaddition to addressing other matters, as discussed below, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) also amended 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 under such health plansare made pursuant to a federal program. Moreover, the Affordable Care Act amended the Anti-kickback Statute to provide that knowledge of the law or theintent to violate the law is 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”).Furthermore, it is a violation of the federal Civil Monetary Penalties Law to offer or transfer anything of value to Medicare or Medicaid beneficiaries that islikely to influence their decision to obtain covered goods or services from one provider or service over another. Many states have statutes similar to the federalAnti-kickback Statute, except that the state statutes usually apply to referrals for services reimbursed by all third-party payers, not just federal programs. 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. Currently, there are safe harbors for various activities, including thefollowing: investment interests; space rental; equipment rental; practitioner recruitment; personal services and management contracts; sales of practices;referral services; warranties; discounts; employees; group purchasing organizations; waivers of beneficiary coinsurance and deductible amounts; managedcare arrangements; obstetrical malpractice insurance subsidies; investments in group practices; ambulatory surgery centers; and referral agreements forspecialty services. The fact that certain conduct or a given business arrangement does not meet a Safe Harbor does not necessarily render the conduct orbusiness arrangement illegal under the Anti-kickback Statute. Rather, such conduct and business arrangements may be subject to increased scrutiny bygovernment enforcement authorities and should be reviewed on a case-by-case basis. Stark Law—The Stark law generally restricts referrals by physicians of Medicare or Medicaid patients to entities with which the physician or animmediate family member has a financial relationship, unless one of several exceptions applies. The referral prohibition applies to a number of statutorilydefined “designated health services,” such as clinical laboratory, physical therapy, radiology, and inpatient and outpatient hospital services. The exceptions tothe referral prohibition cover a broad range of common financial relationships. These statutory, and the subsequent regulatory, exceptions are available toprotect certain 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. 14Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 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 percentage and, with certain narrow exceptions for hospitals with a high percentage of Medicaid patients, prohibit expansion of the number ofoperating rooms, procedure rooms or beds. The legislation also subjects a physician-owned hospital to reporting requirements and extensive disclosurerequirements on the hospital’s website and in any public advertisements. As of December 31, 2013, two of our hospitals are owned by joint ventures thatinclude some physician owners and are subject to the limitations and requirements in the Affordable Care Act on physician-owned hospitals. Implications of Fraud and Abuse Laws—Our operations could be adversely affected by the failure of our arrangements to comply with the Anti-Kickback Statute, the Stark Law, billing laws and regulations, current state laws, or other legislation or regulations in these areas adopted in the future. Weare unable to predict whether other legislation or regulations at the federal or state level in any of these areas will be adopted, what form such legislation orregulations may take or how they may impact our operations. We are continuing to enter into new financial arrangements with physicians and other providersin a manner structured to comply in all material respects with these laws. We cannot assure you, however, that governmental officials responsible forenforcing these laws will not assert that we are in violation of them or that such statutes or regulations ultimately will be interpreted by the courts in a mannerconsistent with our interpretation. We have a variety of financial relationships with physicians who refer patients to our hospitals, and we may sell ownership interests in certain of ourother facilities to physicians and other qualified investors in the future. We also have contracts with physicians providing for a variety of financialarrangements, including employment contracts, leases and professional service agreements. We have provided financial incentives to recruit physicians torelocate to communities served by our hospitals, including income and collection guarantees and reimbursement of relocation costs, and will continue toprovide recruitment packages in the future. Furthermore, new payment structures, such as ACOs and other arrangements involving combinations ofhospitals, physicians and other providers who share payment savings, could potentially be seen as implicating anti-kickback and self-referral provisions. 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. On the one hand, we may be less willing thansome of our competitors to take actions or enter into business arrangements that do not clearly satisfy the safe harbors and exceptions to the fraud and abuselaws described above; as a result, this unwillingness may put us at a competitive disadvantage. On the other hand, we cannot assure you that the regulatoryauthorities that enforce these laws will not determine that some of our arrangements violate the Anti-Kickback Statute, the Stark law or other applicableregulations. An adverse determination could subject us to liabilities under the Social Security Act, including criminal penalties, civil monetary penalties andexclusion from participation in Medicare, Medicaid or other federal health care programs, any of which could have a material adverse effect on our business,financial condition or results of operations. In addition, any determination by a federal or state agency or court that we have violated any of these laws couldgive Conifer’s customers the right to terminate our services agreements with them. Moreover, any violations by and resulting penalties or exclusions imposedupon Conifer’s customers could adversely affect their financial condition and, in turn, have a material adverse effect on Conifer’s business and results ofoperations. 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. 15Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 To receive reimbursement from CMS for electronic claims, health care providers and health plans must use HIPAA’s electronic data transmission(transaction and code set) standards when transmitting certain health care information electronically. Our electronic data transmissions are compliant withcurrent standards. In January 2009, CMS published a final rule changing the formats used for certain electronic transactions and requiring the use of updatedstandard code sets for certain diagnoses and procedures known as ICD-10 code sets. At this time, use of the ICD-10 code sets is not mandatory untilOctober 1, 2014. We are continuing to modify our payment systems and processes to prepare for ICD-10 implementation. Although use of the ICD-10 code setswill require significant administrative changes, we believe that the cost of compliance with these regulations has not had and is not expected to have a materialadverse effect on our business, financial condition, results of operations or revenues. However, we may experience a short-term adverse impact on our cashflows due to claims processing delays related to payer implementation of the new code sets. Furthermore, the Affordable Care Act requires the U.S. Departmentof Health and Human Services (“HHS”) to adopt standards for additional electronic transactions and to establish operating rules to promote uniformity in theimplementation of each standardized electronic transaction. Under HIPAA, covered entities must establish administrative, physical and technical safeguards to protect the confidentiality, integrity andavailability of electronic PHI maintained or transmitted by them or by others on their behalf. The covered entities we operate are in material compliance with theprivacy, security and National Provider Identifier requirements of HIPAA. In addition, most of Conifer’s customers are covered entities, and Conifer is abusiness associate to many of those customers under HIPAA as a result of its contractual obligations to perform certain functions on behalf of and providecertain services to those customers. As a business associate, Conifer’s use and disclosure of PHI is restricted by HIPAA and the business associate agreementsConifer is required to enter into with its covered entity customers. In 2009, HIPAA was amended by the Health Information Technology for Economic and Clinical Health (“HITECH”) Act to impose certain of theHIPAA privacy and security requirements directly upon business associates of covered entities and significantly increase the monetary penalties for violationsof HIPAA. Regulations that took effect in late 2009 also require business associates such as Conifer to notify covered entities, who in turn must notify affectedindividuals and government authorities, of data security breaches involving unsecured PHI. Since the passage of the HITECH Act, enforcement of HIPAAviolations has increased. A knowing breach of the HIPAA privacy and security requirements made applicable to business associates by the HITECH Actcould expose Conifer to criminal liability, and a breach of safeguards and processes that is not due to reasonable cause or involves willful neglect could exposeConifer to significant civil penalties and the possibility of civil litigation under HIPAA and applicable state law. In May 2011, the Office for Civil Rights of HHS proposed new regulations to implement changes to the HIPAA requirements set forth in theHITECH Act that state that covered entities and business associates must account for disclosures of PHI to carry out treatment, payment and health careoperations if such disclosures are through an electronic health record. The proposed regulations seek to expand the scope of the requirements under theHITECH 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 aboutthe individual contained in any electronic designated record set. Because our hospitals currently utilize multiple, independent modules that may meet thedefinition of “electronic designated record set,” our ability to produce an access report that satisfies the proposed regulatory requirements would likely requirenew technology solutions to map across those multiple record sets. It is our understanding that many providers have expressed significant concerns to CMSregarding the access report requirement created by the proposed rule. On January 17, 2013, HHS issued final regulations modifying the requirements set forthin the HITECH Act. While we were in material compliance with the new regulations as of the compliance date of September 23, 2013, the new regulations didnot address the proposed “access report” requirement. Because we cannot predict the requirements of any future final rule regarding access reports, we areunable to estimate the costs of compliance, if any, at this time. 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. HEALTH PLAN REGULATORY MATTERS Our health plans are subject to state and federal laws and regulations. CMS has the right to audit our Medicare Advantage and dual-eligible healthplans to determine the plans’ compliance with CMS regulations and guidelines. In addition, each plan must submit periodic filings to and respond to inquiriesand audits by its respective state insurance regulators. 16Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Furthermore, our health plans are typically required to file periodic reports with their respective state Medicaid agencies, meet certain financial viabilitystandards, provide their members with certain mandated benefits, and meet certain quality assurance and improvement requirements. Our health plans mustalso comply with the standardized formats for electronic transmissions and the privacy and security standards of HIPAA. We believe our health plans haveimplemented the necessary policies and procedures to comply with the final federal regulations on these matters and were in compliance with them by theirdeadlines. As described above, the Anti-kickback Statute prohibits the payment, solicitation, offering or receipt of any form of remuneration in return for thereferral of federal health program patients or any item or service that is reimbursed, in whole or in part, by any federal health care program. The Safe Harborregulations that specifically relate to managed care include: · waivers by HMOs of Medicare and Medicaid beneficiaries’ obligations to pay cost-sharing amounts or to provide other incentives in order toattract Medicare and Medicaid enrollees; · certain discounts offered to prepaid health plans by contracting providers; · certain price reductions offered to eligible managed care organizations; and · certain price reductions offered by contractors with substantial financial risk to managed care providers. We believe that our health plans’ arrangements comply in all material respects with the federal Anti-kickback Statute and similar state statutes, and we furtherbelieve that the incentives offered by our health plans to their members and the discounts they receive contracting with health care providers satisfy therequirements of the Safe Harbor regulations. 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 withhealth insurance exchanges if those payments include any federal funds. Qui tam actions can also be filed under certain state false claims laws if the fraudinvolves Medicaid funds or funding from state and local agencies. Like other companies in the health care industry, we are subject to qui tam actions fromtime to time. We are unable to predict the future impact of such actions on our business, financial condition, results of operations or cash flows. 17Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 HEALTH CARE FACILITY LICENSING REQUIREMENTS The operation of health care facilities is subject to federal, state and local regulations relating to personnel, operating policies and procedures, fireprevention, rate-setting, the adequacy of medical care, and compliance with building codes and environmental protection laws. Various licenses and permitsalso are required in order to dispense narcotics, operate pharmacies, handle radioactive materials and operate certain equipment. Our facilities are subject toperiodic inspection by governmental and other authorities to assure continued compliance with the various standards necessary for licensing and accreditation.We believe that all of 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 program through a network of QIOs that workwith consumers, physicians, hospitals and other caregivers to refine care delivery systems to ensure patients receive the appropriate care at the appropriatetime, particularly among underserved populations. The QIO program also safeguards the integrity of the Medicare trust fund by reviewing Medicare patientadmissions, treatments and discharges, and ensuring payment is made only for medically necessary services, and investigates beneficiary complaints aboutquality of care. The QIOs have the authority to deny payment for services provided and recommend to HHS that a provider that is in substantialnoncompliance with certain standards be excluded from participating in the Medicare program. There has been recent increased scrutiny of hospitals’ Medicare observation rates from outside auditors, government enforcement agencies andindustry observers. The term “Medicare observation rate” is defined as total unique observation claims divided by the sum of total unique observation claimsand total inpatient short-stay acute care hospital claims. A low rate may raise suspicions that a hospital is inappropriately admitting patients that could becared for in an observation setting. In our affiliated hospitals, we use the independent, evidence-based clinical criteria developed by McKesson Corporation,commonly known as InterQual Criteria, to determine whether a patient qualifies for inpatient admission. The industry anticipates increased scrutiny andlitigation risk, including government investigations and qui tam suits, related to inpatient admission decisions and the Medicare observation rate. In addition,effective October 1, 2013, CMS established a new concept, referred to as the “two-midnight rule,” to guide practitioners admitting patients and contractorsconducting payment reviews on when it is appropriate to admit individuals as hospital inpatients. Under the two-midnight rule, CMS has indicated that aMedicare patient should generally be admitted on an inpatient basis only when there is a reasonable expectation that the patient’s care will cross two midnights,and, if not, then the patient generally should be treated as an outpatient. Our hospitals have undertaken extensive efforts to implement the two-midnight rule inlight of existing guidance. CMS is currently conducting a “probe and educate” program regarding the two-midnight rule, the purpose of which is to assesshospitals’ compliance with the rule and also to provide follow-up education. The probe and educate period is currently scheduled to end September 30, 2014and, unless extended, full implementation and enforcement of the two-midnight rule will begin on October 1, 2014. Because of the newness of the two-midnightrule, and the fact that the probe and educate program is ongoing, it is unclear what impact, if any, the two-midnight rule will have on inpatient admission ratesat our hospitals. 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, acquisition and closure of health care facilities, including findings of need for additional orexpanded health care facilities or services. Certificates or determinations of need, which are issued by 18Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 governmental agencies with jurisdiction over health care facilities, are at times required for capital expenditures exceeding a prescribed amount, changes in bedcapacity or services, and certain other matters. As of December 31, 2013, we operated hospitals in 10 states that require a form of state approval undercertificate of need programs applicable to those hospitals. Failure to obtain necessary state approval can result in the inability to expand facilities, add services,acquire a facility or change ownership. Further, violation of such laws may result in the imposition of civil sanctions or the revocation of a facility’s license.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 affecting thecommunities in which our facilities are located. At this time, based on current climate conditions and our assessment of existing and pending environmentalrules and regulations, as well as treaties and international accords relating to climate change, we do not believe that the costs of complying with environmentallaws and regulations, including regulations relating to climate change issues, will have a material adverse effect on our future capital expenditures, results ofoperations 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 2013, wepublished our third annual sustainability report, using the industry-standard Global Reporting Initiative framework. In addition, we are a sponsor of theHealthier Hospitals Initiative and continue to work with each of our hospitals in adopting components of the initiative’s agenda, which focuses onimprovements in (1) sustainability governance, (2) the provision of healthier foods, (3) energy consumption, (4) waste generation, (5) the use of saferchemicals and (6) purchasing decisions. We are committed to report the results of our sustainability efforts on an annual basis. ANTITRUST LAWS The federal government and most states have enacted antitrust laws that prohibit specific types of anti-competitive conduct, including price fixing,wage fixing, concerted refusals to deal, price discrimination and tying arrangements, as well as monopolization and acquisitions of competitors that have, ormay have, a substantial adverse effect on competition. Violations of federal or state antitrust laws can result in various sanctions, including criminal and civilpenalties. Antitrust enforcement in the health care industry is currently a priority of the U.S. Federal Trade Commission (“FTC”). In recent years, the FTChas filed multiple administrative complaints challenging hospital transactions in several states. The FTC has focused its enforcement efforts on preventinghospital mergers that may, in the government’s view, leave insufficient local options for inpatient services. In addition to hospital merger enforcement, the FTChas given increased attention to the effect of combinations involving other health care providers, including physician practices. The FTC has also entered intonumerous consent decrees in the past several years settling allegations of price-fixing among providers. We believe we are in compliance with federal and state antitrust laws, but there can be no assurance that a review of our practices by courts orregulatory authorities would not result in a determination that could adversely affect our operations. REGULATIONS AFFECTING CONIFER DEBT COLLECTION ACTIVITIES The federal Fair Debt Collection Practices Act (“FDCPA”) regulates persons who regularly collect or attempt to collect, directly or indirectly,consumer debts owed or asserted to be owed to another person. Certain of the accounts receivable 19Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 handled by Conifer’s debt collection agency subsidiary, Syndicated Office Systems, LLC (“SOS”), are subject to the FDCPA, which establishes specificguidelines and procedures that debt collectors must follow in communicating with consumer debtors, including the time, place and manner of suchcommunications. Further, the FDCPA prohibits harassment or abuse by debt collectors, including the threat of violence or criminal prosecution, obscenelanguage or repeated telephone calls made with the intent to abuse or harass. The FDCPA also places restrictions on communications with individuals otherthan consumer debtors in connection with the collection of any consumer debt and sets forth specific procedures to be followed when communicating withsuch third parties for purposes of obtaining location information about the consumer. In addition, the FDCPA contains various notice and disclosurerequirements and prohibits unfair or misleading representations by debt collectors. Finally, the FDCPA imposes certain limitations on lawsuits to collect debtsagainst consumers. Debt collection activities are also regulated at the state level. Most states have laws regulating debt collection activities in ways that aresimilar to, and in some cases more stringent than, the FDCPA. In certain situations, the activities of SOS are also subject to the Fair Credit Reporting Act (“FCRA”), which regulates consumer credit reporting andwhich may impose liability on us to the extent that adverse credit information reported on a consumer to a credit bureau is false or inaccurate. State law, to theextent it is not preempted by the FCRA, may also impose restrictions or liability on us with respect to reporting adverse credit information that is false orinaccurate. The U.S. Consumer Financial Protection Bureau (“CFPB”) and the FTC have the authority to investigate consumer complaints relating to theFDCPA and the FCRA, and to initiate enforcement actions, including actions to seek restitution and monetary penalties. State officials typically have authorityto enforce corresponding state laws. In addition, affected consumers may bring suits, including class action suits, to seek monetary remedies (includingstatutory damages) for violations of the federal and state provisions discussed above. The CFPB was formed within the U.S. Federal Reserve pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) to promote transparency, simplicity, fairness, accountability and equal access in the market for consumer financial products or services,including debt collection services. The Dodd-Frank Act gives significant discretion to the CFPB in establishing regulatory requirements and enforcementpriorities. In 2013, the CFPB issued examination procedures for, and began conducting examinations of, a number of companies with respect to their debtcollection practices. The CFPB’s examination authority permits agency examiners to inspect the books and records of companies engaged in debt collectionactivities, such as SOS, and ask questions about their payment processing activities, collections, accounts in default, consumer reporting and third-partyrelationships, as well as compliance programs. We believe that the potential exists that non-bank providers of consumer credit that are examined by the CFPBcould, depending upon the circumstances, be required, as a result of any CFPB examination, to change their practices or procedures. In August 2013, Coniferreceived a civil investigative demand from the CFPB that requires Conifer to provide to the CFPB a broad range of information regarding its debt collectionactivities, including its internal compliance procedures. To date, the CFPB has not indicated that it has targeted any particular issue or concern underlying theissuance of the civil investigative demand. Conifer is cooperating with the CFPB in providing the requested information. CREDIT CARD ACTIVITIES Conifer accepts credit card payments from patients of its facilities. Various federal and state laws and regulations impose privacy and informationsecurity standards with respect to the acceptance of credit cards as a form of payment. If Conifer fails to comply with these laws and regulations or experiencesa credit card security breach, its reputation could be damaged, possibly resulting in lost business, and it could be subjected to additional legal or financialrisk as a result of non-compliance. 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, health plan offices and physician practices meet or exceed applicablestandards established by federal and state laws and regulations, as well as industry practice, and (2) monitor and raise awareness of ethical issues amongemployees and others, and stress the importance of understanding and complying with our Standards of Conduct. The ethics and compliance departmentoperates with independence — it has its own operating budget; it has the authority to hire outside counsel, access any Tenet document and interview any of ourpersonnel; and our chief compliance officer reports directly to the quality, compliance and ethics committee of our board of directors. 20Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Program Charter—In September 2011, the quality, compliance and ethics committee of our board of directors approved an updated Quality,Compliance and Ethics Program Charter intended to: · 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 and, as applicable, contractors and agents; (3) developing, providing and tracking job-specific training to those who work inclinical quality, coding, billing, cost reporting and referral source arrangements; (4) developing, providing and tracking annual training on ethics and clinicalquality oversight to the members of each hospital governing board; (5) creating and disseminating the company’s Standards of Conduct and obtainingcertifications of adherence to the Standards of Conduct as a condition of employment; (6) maintaining and promoting Tenet’s Ethics Action Line, whichallows confidential reporting of issues on an anonymous basis and emphasizes Tenet’s no retaliation policy; (7) responding to and resolving all compliance-related issues that arise from the Ethics Action Line and compliance reports received from our facilities, hospital compliance officers or any other source;(8) ensuring that appropriate corrective and disciplinary actions are taken when non-compliant conduct or improper contractual relationships are identified;(9) monitoring and measuring adherence to all applicable Tenet policies and legal and regulatory requirements related to federal health care programs;(10) directing an annual screening of individuals for exclusion from federal health care program participation as required by federal regulations; (11)maintaining a database of all arrangements involving the payment of anything of value between Tenet and any physician or other actual or potential source ofhealth care business or referrals to or from Tenet; and (12) overseeing annual audits of clinical quality, referral source arrangements, outliers, charging,coding, billing and other compliance 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. 21Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 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 are on an occurrence basis. 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. We also owntwo captive insurance companies that write professional liability insurance for a small number of physicians, including employed physicians, who are on themedical staffs of certain of our hospitals. Claims in excess of our self-insurance retentions are insured with commercial insurance companies. If the aggregate limit of any of our professionaland general liability policies is exhausted, in whole or in part, it could deplete or reduce the limits available to pay any other material claims applicable to thatpolicy period. Any losses not covered by or in excess of the amounts maintained under insurance policies 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. 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, intend, assume, believe, budget, predict, forecast, project, estimate or anticipate (andother similar expressions) will, should or may occur in the future are forward-looking statements. These forward-looking statements represent management’scurrent belief, based on currently available information, as to the outcome and timing of future events. They involve known and unknown risks, uncertaintiesand other factors — many of which we are unable to predict or control — that may cause our actual results, performance or achievements, or health careindustry results, to be materially different from those expressed or implied by forward-looking statements. Such factors include, but are not limited to, thefollowing: · The impact of the Affordable Care Act on our business and the enactment of, or changes in, laws and regulations affecting the health careindustry generally; · The effect that adverse economic conditions have on our volumes and our ability to collect outstanding receivables on a timely basis, amongother things; 22Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 · Adverse litigation or regulatory developments; · Our ability to enter into managed care provider arrangements on acceptable terms; · Cuts to Medicare and Medicaid payment rates or changes in reimbursement practices; · Competition; · Our success in implementing our business development plans; · Our ability to hire and retain qualified personnel, especially health care professionals; · The availability and terms of capital to fund the expansion of our business, including the acquisition of additional facilities; · Our success in marketing Conifer’s revenue cycle management, health care information management, management services, and patientcommunications and engagement services to third-party hospitals and other healthcare-related entities; · Our ability to realize fully or at all the anticipated benefits of our acquisition of Vanguard and to successfully integrate the operations of ourbusiness and Vanguard’s business; · Our ability to identify and execute on measures designed to save or control costs or streamline operations; · The impact of our significant indebtedness; and · Other factors and risks referenced in this report and our other public filings. Also included among the foregoing factors are the positive and negative effects of health reform legislation on reimbursement and utilization, as well as thefuture design of provider networks and insurance plans, including pricing, provider participation, coverage, and co-pays and deductibles. 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 in this report occur, or should underlying assumptions prove incorrect, our actual results and plans coulddiffer materially from those expressed in any forward-looking statements. We specifically disclaim any obligation to update any information contained in aforward-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. We cannot predict with certainty the ultimate net effect that the Affordable Care Act may have on our business, financial condition,results of operations or cash flows. The Affordable Care Act is changing how health care services in the United States are covered, delivered and reimbursed. The expansion of healthinsurance coverage under the law may result in a material increase in the number of patients using our facilities who have either private or public programcoverage. However, it is difficult to predict the full impact of the Affordable Care Act on our future revenues and operations at this time due to uncertaintyregarding a number of material factors, including: 23Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 · how many states will ultimately implement the Medicaid expansion provisions and under what terms (a number of states in which we operate,including Florida and Texas, have chosen not to expand their Medicaid programs at this time); · how many currently uninsured individuals will obtain coverage (either private health insurance or Medicaid) as a result of the Affordable CareAct; · what percentage of the newly insured patients will be covered under the Medicaid program and what percentage will be covered by private healthinsurers; · the extent to which states will enroll new Medicaid participants in managed care programs; · the pace at which insurance coverage expands, including the pace of different types of coverage expansion; · the change, if any, in the volume of inpatient and outpatient hospital services that are sought by and provided to previously uninsuredindividuals; · the rate paid to hospitals by private payers for newly covered individuals, including those covered through the newly created exchanges andthose who might be covered under the Medicaid program under contracts with the state; · the rate paid by state governments under the Medicaid program for newly covered individuals; · the percentage of individuals in the exchanges who select the high-deductible plans, considering that health insurers offering those kinds ofproducts have traditionally sought to pay lower rates to hospitals; · the extent to which the provisions of the Affordable Care Act will put pressure on the profitability of health insurers, which in turn might causethem to seek to reduce payments to hospitals with respect to both newly insured individuals and their existing business; and · the possibility that the Affordable Care Act or components of it will be delayed, revised or eliminated as a result of court challenges or actionsby Congress. Furthermore, the Affordable Care Act provides for significant reductions in the growth of Medicare spending, reductions in Medicare and MedicaidDSH payments, and the establishment of programs where reimbursement is tied to quality and integration. A substantial portion of both our patient volumesand, as result, our revenues is derived from government health care programs, principally Medicare and Medicaid. Any reductions to our reimbursementunder the Medicare and Medicaid programs by the Affordable Care Act could adversely affect our business and results of operations to the extent suchreductions are not offset by increased revenues from providing care to previously uninsured individuals. It is difficult to predict the effect on our revenuesresulting from reductions to Medicare and Medicaid spending because of uncertainty regarding a number of material factors, including the following: · the amount of overall revenues we will generate from the Medicare and Medicaid programs when the reductions are implemented; · whether future reductions required by the Affordable Care Act will be changed by statute prior to becoming effective; · the size of the law’s annual productivity adjustment to the market basket; · the amount of the Medicare DSH reductions that will be made commencing in FFY 2014; · the allocation to our hospitals of the Medicaid DSH reductions commencing in FFY 2016; · what the losses in revenues, if any, will be from the law’s quality initiatives; · how successful accountable care networks in which we participate will be at coordinating care and reducing costs or whether they will decreasereimbursement; · the scope and nature of potential changes to Medicare reimbursement methods, such as an emphasis on bundling payments or coordination ofcare programs; and 24Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Medicare payments CMS may impose for “excessive readmissions.” In addition, the federally run exchanges, and several of the state-run exchanges, have faced operational hurdles and challenges in the initial period of theiroperation, which could reduce the number of individuals that obtain coverage through the exchanges in the short term. Further, we may continue to experience ahigh level of bad debt expense and have to provide uninsured discounts and charity care for undocumented aliens who will not be permitted to enroll in ahealth insurance exchange or government health care program. 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 design of provider networks and insurance plans (including pricing, provider participation, coverage, co-pays and deductibles), andthe multiple models that attempt to predict those effects may differ materially from our expectations. Because of the many variables involved, we are unable topredict the ultimate net effect on us of the expected decreases in uninsured individuals using our facilities, the reductions in Medicare spending and Medicareand Medicaid DSH funding, and numerous other provisions in the Affordable Care Act that may affect us. Moreover, we are unable to predict the futurecourse of federal, state and local health care regulation or legislation, including Medicare and Medicaid statutes and regulations. Further changes in theregulatory framework affecting health care providers could have a material adverse effect on our business, financial condition, results of operations or cashflows. 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 HMOs and PPOs. The amount of our managed care net patient revenues duringthe year ended December 31, 2013 was $6.3 billion, which represented approximately 58% of our total net patient revenues before provision for doubtfulaccounts. Approximately 59% of our managed care net patient revenues for the year ended December 31, 2013 was derived from our top ten managed carepayers. In the year ended December 31, 2013, our commercial managed care net inpatient revenue per admission from our acute care hospitals wasapproximately 76% higher than our aggregate yield on a per admission basis from government payers, including managed Medicare and Medicaid insuranceplans. In addition, at December 31, 2013, approximately 58% of our net accounts receivable related to continuing operations were due from managed carepayers. Our ability to negotiate favorable contracts with HMOs, insurers offering preferred provider arrangements and other managed care plans significantlyaffects the revenues and operating results of our hospitals. In addition, private payers are increasingly attempting to control health care costs through directcontracting with hospitals to provide services on a discounted basis, increased utilization reviews and greater enrollment in managed care programs, such asHMOs and PPOs. The trend toward consolidation among private managed care payers tends to increase their bargaining power over prices and fee structures.It is not clear what impact, if any, the increased obligations on private payers imposed by the health care reform law will have on our ability to negotiatereimbursement increases. However, as various provisions of the Affordable Care Act are implemented, including the establishment of the exchanges, non-government payers may increasingly demand reduced fees. In most cases, we negotiate our managed care contracts annually as they come up for renewal atvarious times during the year. Our future success will depend, in part, on our ability to renew existing managed care contracts and enter into new managed carecontracts on terms favorable to us. Other health care companies, including some with greater financial resources, greater geographic coverage or a wider rangeof services, may compete with us for these opportunities. For example, some of our competitors may negotiate exclusivity provisions with managed care plansor otherwise restrict the ability of managed care companies to contract with us. Any material reductions in the contracted rates we receive for our services,coupled with any difficulties in collecting receivables from managed care payers, could have a material adverse effect on our financial condition, results ofoperations or cash flows. Any material adverse effects resulting from future reductions in payments from private payers could be exacerbated if we are not ableto manage our operating costs effectively. 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, 2013, approximately 22% of our net patient revenues before provision for doubtful accounts for our generalhospitals were related to the Medicare program, and approximately 9% of our net patient revenues before provision for doubtful accounts for our generalhospitals were related to various state Medicaid programs, in each case excluding Medicare and Medicaid managed care programs. In addition to the changesaffected by the Affordable Care Act, the Medicare and Medicaid programs are subject to: other statutory and regulatory changes, administrative rulings,interpretations 25Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 and determinations concerning patient eligibility requirements, funding levels and the method of calculating payments or reimbursements, among other things;requirements for utilization review; and federal and state funding restrictions, all of which could materially increase or decrease payments from thesegovernment programs in the future, as well as affect the cost of providing services to our patients and the timing of payments to our facilities, which could inturn adversely affect our overall business, financial condition, results of operations or cash flows. Any material adverse effects resulting from futurereductions in payments from government programs could be exacerbated if we are not able to manage our operating costs effectively. Several states in which we operate continue to face budgetary challenges due to the economic downturn and other factors that have resulted, andlikely will continue to result, in reduced Medicaid funding levels to hospitals and other providers. Because most states must operate with balanced budgets,and the Medicaid program is generally a significant portion of a state’s budget, states can be expected to adopt or consider adopting future legislation designedto reduce their Medicaid expenditures. In addition, some states are implementing delays in issuing Medicaid payments to providers. As an alternative means offunding provider payments, most of the states in which we operate have adopted broad-based provider taxes to fund the non-federal share of Medicaidprograms. Continuing pressure on state budgets and other factors could result in future reductions to Medicaid payments, payment delays or additional taxeson hospitals. 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. The industry trend toward value-based purchasing may negatively impact our revenues. We believe that value-based purchasing initiatives of both governmental and private payers tying financial incentives to quality and efficiency of carewill increasingly affect the results of operations of our hospitals and other health care facilities and may negatively impact our revenues if we are unable to meetexpected quality standards. The Affordable Care Act contains a number of provisions intended to promote value-based purchasing in federal health careprograms. Medicare now requires providers to report certain quality measures in order to receive full reimbursement increases for inpatient and outpatientprocedures that were previously awarded automatically. In addition, hospitals that meet or exceed certain quality performance standards will receive increasedreimbursement payments, and hospitals that have “excess readmissions” for specified conditions will receive reduced reimbursement. Furthermore, Medicareno longer pays hospitals additional amounts for the treatment of certain hospital-acquired conditions, also known as HACs, unless the conditions were presentat admission. Beginning in FFY 2015, hospitals that rank in the worst 25% of all hospitals nationally for HACs in the previous year will receive reducedMedicare reimbursements. The Affordable Care Act also prohibits the use of federal funds under the Medicaid program to reimburse providers for treatingcertain provider-preventable conditions. There is a trend among private payers toward value-based purchasing of health care services, as well. Many large commercial payers requirehospitals to report quality data, and several of these payers will not reimburse hospitals for certain preventable adverse events. We expect value-basedpurchasing programs, including programs that condition reimbursement on patient outcome measures, to become more common and to involve a higherpercentage of reimbursement amounts. We are unable at this time to predict how this trend will affect our results of operations, but it could negatively impactour revenues if we are unable to meet quality standards established by both governmental and private payers. 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-pays and deductibles due to changes in their health care plans. As a result, we continue to experience a high level ofuncollectible accounts, and, unless our business mix shifts toward a greater number of insured patients as a result of the Affordable Care Act or otherwise, thetrend of higher co-pays and deductibles reverses, or the economy improves and unemployment rates decline, we anticipate this high level of uncollectibleaccounts to continue or increase. In addition, even after implementation of the Affordable Care Act, we may continue to experience significant levels of bad debtexpense and have to provide uninsured discounts and charity care for undocumented aliens who are not permitted to enroll in a health insurance exchange orgovernment health 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 26Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 volumes are due, in part, to the related effects of higher unemployment and reductions in commercial managed care enrollment. In addition, we believe thatthe growth in high-deductible health plans has adversely impacted commercial managed care volumes. Our hospitals, outpatient centers and other health care businesses operate in competitive environments, and competition is one reasonincreases in patient volumes have been constrained. The health care business is highly competitive, and competition among hospitals and other health care providers for patients has intensified in recentyears. Generally, other hospitals and outpatient centers in the local communities we serve provide services similar to those we offer, and, in some cases,competing facilities (1) are more established or newer than ours, (2) may offer a broader array of services to patients and physicians than ours, and (3) mayhave larger or more specialized medical staffs to admit and refer patients, among other things. Furthermore, health care consumers are now able to accesshospital performance data on quality measures and patient satisfaction, as well as standard charges for services, to compare competing providers; if any ofour hospitals achieve poor results (or results that are lower than our competitors) on quality measures or patient satisfaction surveys, or if our standardcharges are higher than our competitors, we may attract fewer patients. Additional quality measures and future trends toward clinical transparency may havean unanticipated impact on our competitive position and patient volumes. Continued consolidation in the health care industry will be a leading factor contributing to greater competition in our current markets and markets wemay enter in the future. We also face increased competition from specialty hospitals (some of which are physician-owned) and unaffiliated freestandingoutpatient centers for market share in high margin services and for quality physicians and personnel. Furthermore, some of the hospitals that compete withour hospitals are owned by government agencies or not-for-profit organizations supported by endowments and charitable contributions and can finance capitalexpenditures and operations on a tax-exempt basis. As is the case with our hospitals, some of our health plan competitors are owned by governmental agenciesor non-profit corporations that have greater financial resources than we do. If our competitors are better able to attract patients, recruit physicians, expandservices or obtain favorable managed care contracts at their facilities than we are, we may experience an overall decline in patient volumes 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. 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 physician practices and,where permitted by law, employ physicians, physicians are often not employees of the hospitals at which they practice and, in many of the markets we serve,most physicians have admitting privileges at other hospitals in addition to our hospitals. Such physicians may terminate their affiliation with our hospitals oradmit their patients to competing hospitals at any time. In some of our markets, physician recruitment and retention are affected by a shortage of physicians incertain specialties and the difficulties that physicians can experience in obtaining affordable malpractice insurance or finding insurers willing to provide suchinsurance. If we are unable to attract and retain sufficient numbers of quality physicians by providing adequate support personnel, technologically advancedequipment and hospital facilities that meet the 27Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 needs of those physicians and their patients, physicians may be discouraged from referring patients to our facilities, admissions may decrease and ouroperating performance may decline. Our labor costs could be adversely affected by competition for staffing, the shortage of experienced nurses and labor union activity. Our hospital operations depend on the efforts, abilities and experience of our management and medical support personnel, including nurses,pharmacists and lab technicians, as well as our employed physicians. We compete with other health care providers in recruiting and retaining physicians andqualified management responsible for the daily operations of our hospitals. In addition, like others in the health care industry, we continue to experience ashortage of seasoned nurses in certain key specialties and geographic areas. As a result, from time to time, we may be required to enhance wages and benefitsto recruit and retain experienced nurses, make greater investments in education and training for newly licensed nurses, or hire more expensive temporary orcontract personnel. Furthermore, state-mandated nurse-staffing ratios in California affect not only our labor costs, but, if we are unable to hire the necessarynumber of experienced nurses to meet the required ratios, they may also cause us to limit patient admissions with a corresponding adverse effect on our netoperating revenues. In general, our failure to recruit and retain qualified management, experienced nurses and other medical support personnel, or to controllabor 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, 2013, approximately 21% of ouremployees were represented by various labor unions. These employees — primarily registered nurses and service and maintenance workers — were located at39 of our hospitals, the majority of which are in California, Florida and Michigan. We currently have two expired contracts and are negotiating renewals underextension agreements. We are also negotiating an initial contract at one of our hospitals where employees recently chose union representation. At this time, we areunable to predict the outcome of the negotiations, but increases in salaries, wages and benefits could result from these agreements. Furthermore, there is apossibility that strikes could occur during the negotiation process, which could increase our labor costs and have an adverse effect on our patient volumes andnet operating revenues. Future organizing activities by labor unions could increase our level of union representation in 2014; to the extent a greater portion of ouremployee base unionizes, it is possible our labor costs could increase materially. Conifer’s future success also depends in part on our ability to attract, hire, integrate and retain key personnel. Competition for the caliber andnumber of employees we require at Conifer is intense. We may face difficulty identifying and hiring qualified personnel at compensation levels consistent withour existing compensation and salary structure. In addition, we invest significant time and expense in training Conifer’s employees, which increases theirvalue to competitors who may seek to recruit them. If we fail to retain our Conifer employees, we could incur significant expenses in hiring, integrating andtraining their replacements, and the quality of Conifer’s services and its ability to serve its customers could diminish, resulting in a material adverse effect onthat segment of our business. 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. In addition, Conifer’s failure to comply with the laws and regulations applicable to it could result inreduced demand for its services, invalidate all or portions of some of Conifer’s services agreements with its customers, or give customers the right to terminateConifer’s services agreements with them, among other things, any of which could have an adverse effect on Conifer’s business. Even a public announcementthat we are being investigated for possible violations of law could have a material adverse effect on the value of our common stock and our business reputationcould 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 the future course of federal, state and local regulation or legislation, including Medicare and Medicaid statutes and regulations. Furtherchanges in the regulatory framework negatively 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. 28Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Conifer operates in a highly competitive industry, and its current or future competitors may be able to compete more effectively thanConifer does, which could have a material adverse effect on Conifer’s business, revenue, growth rate and market share. We intend to continue expanding Conifer’s revenue cycle management, patient communications and engagement services, and management servicesbusinesses by marketing these services to non-Tenet hospitals and other healthcare-related entities. However, the market for Conifer’s solutions is highlycompetitive, and we expect competition may intensify in the future. Conifer 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 outsourcing firms), as well as from the internal staffs of hospitals and other health care providers who, as described above,handle these processes internally. To be successful, Conifer must respond more quickly and effectively than its competitors to new or changing opportunities,technologies, standards, regulations and customer requirements. Moreover, existing or new competitors may introduce technologies or services that renderConifer’s technologies or services obsolete or less marketable. Even if Conifer’s technologies and services are more effective than the offerings of itscompetitors, current or potential customers might prefer competitive technologies or services to Conifer’s technologies and services. Furthermore, increasedcompetition may result in pricing pressures, which could negatively impact Conifer’s margins, growth rate or market share. The failure to comply with debt collection and consumer credit reporting regulations could subject Conifer’s SOS subsidiary to fines andother liabilities, which could harm Conifer’s reputation and business, and could make it more difficult for Conifer to retain existing customers orattract new customers. The Fair Debt Collection Practices Act regulates persons who regularly collect or attempt to collect, directly or indirectly, consumer debts owed orasserted to be owed to another person. Certain of the accounts receivable handled by SOS, Conifer’s debt collection agency subsidiary, are subject to theFDCPA. Many states impose additional requirements on debt collection communications, and some of those requirements may be more stringent than thefederal requirements. Moreover, regulations governing debt collection are subject to changing interpretations that may be inconsistent among differentjurisdictions. SOS could be subject to fines or other penalties if it is determined to have violated the FDCPA, the Fair Credit Reporting Act or analogous statelaws, which could make it more difficult to retain existing customers or attract new customers and could otherwise harm Conifer’s business. Our business could be negatively affected 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, other protected health information, and financial, payment and other personal data ofpatients, as well as to store our proprietary and confidential business performance data. We utilize a diversified data and voice network, along with technologysystems for billing, supply chain, clinical information systems and labor management. Although we have redundancies and other measures designed toprotect the security and availability of the data we process, transmit and store, our information technology and infrastructure is vulnerable to computerviruses, attacks by hackers, or breaches due to employee error or malfeasance. Furthermore, our networks and technology systems are subject to disruptiondue to events such as a major earthquake, fire, telecommunications failure, terrorist attack or other catastrophic event. Any such breach or system interruptioncould result in the unauthorized disclosure, misuse or loss of confidential, sensitive or proprietary information, could negatively impact our ability to conductnormal business operations (including the collection of revenues), and could result in potential liability and damage to our reputation, any of which could havea material adverse effect on our business, financial position, results of operations or cash flows. Economic downturns and other economic factors have affected, and may continue to impact, our business, financial condition andresults 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 debtexpense. We believe factors associated with the recent economic downturn — including higher levels of unemployment, reductions in commercial managed careenrollment, and patient decisions to postpone or cancel elective and non-emergency health care procedures — have affected our volumes and our ability tocollect outstanding receivables. The U.S. economy remains volatile. Instability in consumer spending and high unemployment rates continue to pressure manyindustries. 29Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 If industry trends or general economic conditions worsen, we may not be able to sustain future profitability, and our liquidity and ability to repay ouroutstanding 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 operating results in our hospitals, which arebased on programs and initiatives being implemented that are designed to achieve the hospitals’ most recent projections. If these projections are not met, ornegative trends occur that impact our future outlook, future 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, 2013, we had approximately $10.8 billion of total long-term debt, as well as approximately $189 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 market, bank credit and other financing activities depending on our needsand financing alternatives available at that time. Our substantial indebtedness could have important consequences, including the following: · Our credit agreement and 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. Under these conditions, we are not certain whether we wouldhave, or be able to obtain, sufficient funds to make accelerated payments. · 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 are required to dedicate a substantial portion of our cash flow to the payment of principal and interest on our indebtedness, which reducesthe amount of funds available for our operations, capital expenditures and acquisitions. · Our substantial indebtedness could limit our ability to obtain additional financing to fund future capital expenditures, working capital,acquisitions or other needs. 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. 30Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 may be unable to successfully integrate Vanguard’s business with our business to realize the anticipated benefitsof the acquisition or do so within the intended timeframe. The success of our acquisition of Vanguard will depend, in part, on our ability to integrate Vanguard’s business and operations with our businessand fully realize the anticipated benefits and synergies from combining our business with Vanguard’s business. On October 1, 2013 (the effective date of theacquisition), we acquired 28 hospitals (plus one more under construction), 39 outpatient centers and five health plans with approximately 140,000 members.As such, we are devoting significant management attention and resources to integrating the business practices and operations of Vanguard with ours. Potentialdifficulties we may encounter as part of the integration process include the following: · The costs of integration and compliance and the possibility that the full benefits anticipated to result from the acquisition will not be realized; · Delays in the integration of strategies, operations and services; · Diversion of the attention of our management as a result of the acquisition; · Differences in business backgrounds, corporate cultures and management philosophies that may delay successful integration; · Retaining key executives and other employees; · Challenges associated with creating and enforcing uniform standards, controls, procedures and policies; · Complexities associated with managing Vanguard as a subsidiary of Tenet, including the challenge of integrating complex systems, technology,networks and other assets of Vanguard into those of Tenet in a manner that minimizes any adverse impact on patients, suppliers, employees andother constituencies; · Potential unknown liabilities and unforeseen increased expenses or delays associated with the acquisition, including one-time cash costs tointegrate Vanguard beyond current estimates; and · The disruption of, or the loss of momentum in, our ongoing businesses. If we are unable to successfully overcome the potential difficulties associated with the integration process and achieve our objectives following the acquisition,the anticipated benefits and synergies of the acquisition may not be realized fully, or at all, or may take longer to realize than expected. Any failure to timelyrealize these anticipated benefits could have a material adverse effect on our business, financial condition, results of operations or cash flows. The utilization of our tax losses could be substantially limited if we experience an ownership change as defined in the Internal RevenueCode. At December 31, 2013, we had federal net operating loss (“NOL”) carryforwards of approximately $1.7 billion pretax available to offset futuretaxable income. These NOL carryforwards will expire in the years 2024 to 2033. Section 382 of the Internal Revenue Code imposes an annual limitation on theamount of a company’s taxable income if it experiences an “ownership change” as defined in Section 382 of the Code. An ownership change occurs when acompany’s “five-percent shareholders” (as defined in Section 382 of the Code) collectively increase their ownership in the company by more than50 percentage points (by value) over a rolling three-year period. (This is different from a change in beneficial ownership under applicable securities laws.)These ownership changes include purchases of common stock under share repurchase programs, a company’s offering of its stock, the purchase or sale ofcompany stock by five-percent shareholders, or the issuance or exercise of rights to acquire company stock. While we expect to be able to realize our total NOLcarryforwards prior to their expiration, if an ownership change occurs, our ability to use the NOL carryforwards to offset future taxable income will be subjectto an annual limitation and will depend on the amount of taxable income we generate in future periods. There is no assurance that we will be able to fully utilizethe NOL carryforwards. Furthermore, we could be required to record a valuation allowance related to the amount of the NOL carryforwards that may not berealized, which could impact our results of operations. 31Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 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. 32Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 OF EQUITYSECURITIES Common Stock. Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “THC.” On October 11, 2012, ourcommon stock began trading on the NYSE on a split-adjusted basis following a one-for-four reverse stock split we announced on October 1, 2012. Every fourshares of our issued and outstanding common stock were exchanged for one issued and outstanding share of common stock, without any change in the parvalue per share, and our authorized shares of common stock were proportionately decreased from 1,050,000,000 shares to 262,500,000 shares. No fractionalshares were issued in connection with the stock split. The following table sets forth, for the periods indicated, the high and low sales prices per share of ourcommon stock on the NYSE, as adjusted to reflect the reverse stock split: HighLowYear Ended December 31, 2013First Quarter$48.25$33.00Second Quarter49.4738.17Third Quarter47.0836.87Fourth Quarter48.4838.71Year Ended December 31, 2012First Quarter$24.20$18.36Second Quarter22.5617.32Third Quarter25.7617.24Fourth Quarter33.8622.86 On February 14, 2014, the last reported sales price of our common stock on the NYSE composite tape was $46.56 per share. As of that date, therewere 4,356 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. We currentlyintend to retain future earnings, if any, for the operation and development of our business and, accordingly, do not currently intend to pay any cash dividendson our common stock. Our board of directors will evaluate our future earnings, results of operations, financial condition and capital requirements indetermining whether to pay any cash dividends in the future. Our senior secured revolving credit agreement contains provisions that limit the payment of cashdividends on our common stock if we do not meet certain financial ratios. Equity Compensation. Refer to Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, ofPart III of this 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 55 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). 33Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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, 2008 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 12/0812/0912/1012/1112/1212/13Tenet Healthcare Corporation$100.00$468.70$581.74$446.09$705.87$915.65S&P 500$100.00$126.46$145.51$148.59$172.37$228.19S&P Health Care$100.00$119.70$123.17$138.85$163.69$231.55Peer Group$100.00$256.65$319.12$232.26$332.07$481.22 Repurchase of Common Stock. In October 2012, we announced that our board of directors had authorized the repurchase of up to $500 million ofour common stock through a share repurchase program that expired in December 2013. Under the program, shares could be purchased in the open market orthrough privately negotiated transactions in a manner consistent with applicable securities laws and regulations, including pursuant to a Rule 10b5-1 plan wemaintained. Shares were repurchased at times and in amounts based on market conditions and other factors. Purchases during the year ended December 31,2013 are shown in the table in Note 2 to our Consolidated Financial Statements, which table is incorporated by reference. 34Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 consolidated financial data for Tenet Healthcare Corporation and its wholly owned and majority-ownedsubsidiaries for the years ended December 31, 2009 through 2013. Because we acquired Vanguard Health Systems, Inc. (“Vanguard”) on October 1, 2013, the2013 columns in the tables below include results of operations for Vanguard and its consolidated subsidiaries for the three months ended December 31, 2013only. The tables should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, andour Consolidated Financial Statements and notes thereto included in this report. Years Ended December 31,20132012201120102009(In Millions, Except Per-Share Amounts)Net operating revenues:Net operating revenues before provision for doubtful accounts$12,074$9,904$9,371$8,992$8,785Less: Provision for doubtful accounts972785717727684Net operating revenues11,1029,1198,6548,2658,101Operating expenses:Salaries, wages and benefits5,3714,2574,0153,8303,781Supplies1,7841,5521,5481,5421,534Other operating expenses, net2,7012,1472,0201,8571,831Electronic health record incentives(96)(40)(55)——Depreciation and amortization545430398380373Impairment and restructuring charges, and acquisition-relatedcosts10319201027Litigation and investigation costs, net of insurance recoveries315551231Operating income663749653634524Interest expense(474)(412)(375)(424)(445)Gain (loss) from early extinguishment of debt(348)(4)(117)(57)97Investment earnings1135—Net gain on sales of investments————15Income (loss) from continuing operations, before income taxes(158)334164158191Income tax benefit (expense)65(125)(61)97723Income (loss) from continuing operations, before discontinuedoperations and cumulative effect of change in accountingprinciple$(93)$209$103$1,135$214Basic earnings (loss) per share attributable to TenetHealthcare Corporation common shareholders fromcontinuing operations$(1.21)$1.77$0.58$9.09$1.67Diluted earnings (loss) per share attributable to TenetHealthcare Corporation common shareholders fromcontinuing operations$(1.21)$1.70$0.56$8.03$1.63 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 reportsettlements and valuation allowances; managed care contract negotiations, settlements or terminations and payer consolidations; changes in Medicare andMedicaid regulations; Medicaid funding levels set by the states in which we operate; the timing of approval by the Centers for Medicare and Medicaid Services(“CMS”) of Medicaid provider fee revenue programs; trends in patient accounts receivable collectability and associated provisions for doubtful accounts;fluctuations in interest rates; levels of malpractice insurance expense and settlement trends; the timing of when we meet the criteria to recognize electronic healthrecord incentives; impairment of long-lived assets and goodwill; restructuring charges; acquisition-related costs; losses, costs and insurance recoveries relatedto natural disasters; litigation and investigation costs; acquisitions and dispositions of facilities and other assets; income tax rates and deferred tax assetvaluation 35Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 allowance activity; changes in estimates of accruals for annual incentive compensation; the timing and amounts of stock option and restricted stock unitgrants to employees and directors; gains or losses from early extinguishment of debt; and changes in occupancy levels and patient volumes. Factors that affectpatient volumes and, thereby, the results of operations at our hospitals and related health care facilities include, but are not limited to: the businessenvironment, economic conditions and demographics of local communities in which we operate; the number of uninsured and underinsured individuals inlocal communities treated at our hospitals; seasonal cycles of illness; climate and weather conditions; physician recruitment, retention and attrition; advancesin technology and treatments that reduce length of stay; local health care competitors; managed care contract negotiations or terminations; the number ofpatients with high-deductible health insurance plans; any unfavorable publicity about us that impacts our relationships with physicians and patients; changesin health care regulations and the participation of individual states in federal programs; and the timing of elective procedures. BALANCE SHEET DATA December 31,20132012201120102009(In Millions)Working capital (current assets minus currentliabilities)$782$918$542$586$689Total assets16,1309,0448,4628,5007,953Long-term debt, net of current portion10,6905,1584,2943,9974,272Total equity8781,2181,4921,819697 CASH FLOW DATA Years Ended December 31,20132012201120102009(In Millions)Net cash provided by operating activities$589$593$497$472$425Net cash used in investing activities(2,164)(662)(503)(420)(125)Net cash provided by (used in) financing activities1,324320(286)(337)(117) 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. Our core business is Hospital Operations and other, which is focused on owning and operating acutecare hospitals and outpatient facilities. We also operate revenue cycle management, patient communications and engagement services, and management servicesbusinesses under our Conifer Health Solutions, LLC (“Conifer”) subsidiary, which is a separate reportable business segment. MD&A, which should be readin 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 Unless otherwise indicated, all financial and statistical information included in MD&A relates to our continuing operations, with dollar amountsexpressed in millions (except per share, per admission, per adjusted admission, per patient day, per adjusted patient day and per visit amounts). Continuingoperations information includes the results of (i) our same-hospital operations, as described below, and (ii) Vanguard and its consolidated subsidiaries, whichwe acquired effective October 1, 2013, but only for the period from the date of acquisition through December 31, 2013. Continuing operations 36Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 information excludes the results of our hospitals and other businesses that have previously been classified as discontinued operations for accounting purposes.Same-hospital information includes the results of our operations for all periods presented, including the same 49 hospitals operated during the years endedDecember 31, 2013, 2012 and 2011 (and any interim periods in those years), but excludes the results of legacy Vanguard operations, as well as our hospitalsand other businesses that have previously been classified as discontinued operations for accounting purposes. We present same-hospital data because webelieve it provides investors with useful information regarding the performance of our hospitals and other operations that are comparable for the periodspresented. All amounts related to shares, share prices and earnings per share for periods ending prior to October 11, 2012 have been restated to giveretrospective presentation for the reverse stock split described in Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities, of this report. Furthermore, certain prior-year amounts have been reclassified to conform to the current-year presentation. MANAGEMENT OVERVIEW STRATEGIES 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. Core Business Strategy—We are focused on providing high quality care to patients through our hospitals and outpatient centers, and offering anarray of business process solutions primarily to health care providers through Conifer. With respect to our hospitals and outpatient business, we seek to offersuperior quality and patient services to meet community needs, to make capital and other investments in our facilities and technology to remain competitive, torecruit and retain physicians, to increase the number of outpatient centers we own, and to negotiate favorable contracts with managed care and other privatepayers. With respect to business process services, we provide comprehensive operational management for revenue cycle functions, including patient access,health information management, revenue integrity and patient financial services. We also offer communication and engagement solutions to optimize therelationship between providers and patients. In addition, our management services offerings have expanded to support value-based performance throughclinical integration, financial risk management and population health management. Commitment to Quality—We have made significant investments in the last decade in equipment, technology, education and operational strategiesdesigned to improve clinical quality at our hospitals and outpatient centers. As a result of our efforts, our CMS Hospital Compare Core Measures scores haveconsistently exceeded the national average since the end of 2005, and major national private payers have also recognized our achievements relative to quality.These designations are expected to become increasingly important as governmental and private payers move to pay-for-performance models, and thecommercial market moves to more narrow networks and other methods designed to encourage covered individuals to use certain facilities over others. Throughour Commitment to Quality and Performance Excellence Program initiatives, we continually collaborate with physicians to implement the most currentevidence-based medicine techniques to improve the way we provide care, while using labor management tools and supply chain initiatives to reduce variablecosts. We believe the use of these practices will promote the most effective and efficient utilization of resources and result in shorter lengths of stay, as well asreductions in redundant ancillary services and readmissions for hospitalized patients. In general, we believe that quality of care improvements may have theeffect of reducing costs, increasing payments from Medicare and certain managed care payers for our services, and increasing physician and patientsatisfaction, which may improve our volumes. Development Strategies—We remain focused on opportunities to increase our hospital and outpatient revenues through organic growth andacquisitions, and to expand our Conifer business. From time to time, we build new facilities, make strategic acquisitions of health care assets and companies, and enter into joint venture arrangementsor affiliations with health care businesses — in each case in markets where we believe our operating strategies can improve performance and create shareholdervalue. On October 1, 2013, we acquired 28 hospitals (plus one more under construction), 39 outpatient centers and five health plans with approximately140,000 members, serving communities in Arizona, California, Illinois, Massachusetts, Michigan and Texas, through our acquisition of Vanguard. During2013, we also purchased: (1) 11 ambulatory surgery centers (in one of which we had previously held a noncontrolling interest); (2) an urgent care center; (3) aprovider network based in Southern California that includes contracted independent physicians, ancillary providers and hospitals; (4) a medical officebuilding; and (5) various physician practice entities. In addition, we entered into a partnership with John Muir Health, a not-for-profit integrated system ofdoctors, hospitals and other health care services in the San Francisco Bay area, through which we will jointly develop and expand outpatient services andphysician 37Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 relationships to improve the efficiency and coordination of care in the Tri-Valley area and nearby communities in Northern California. Furthermore, we havesigned a definitive agreement to acquire Emmanuel Medical Center, a 209-bed hospital located in Turlock, California. Historically, our outpatient services have generated significantly higher margins for us than inpatient services. During the year endedDecember 31, 2013, we derived approximately 36% of our net patient revenues from outpatient services. By expanding our outpatient business, we expect toincrease our profitability over time. We believe that growth by strategic acquisitions, when and if opportunities are available, can supplement the growth webelieve we can generate organically in our existing markets. We continually evaluate collaboration opportunities with outpatient facilities, health care providers,physician groups and others in our markets to maximize effectiveness, reduce costs and build clinically integrated networks that provide quality serviceacross the care continuum. We intend to continue expanding Conifer’s revenue cycle management, patient communications and engagement services, and management servicesbusinesses by marketing these services to non-Tenet hospitals and other healthcare-related entities. Conifer provides services to more than 700 Tenet and non-Tenet hospital and other clients nationwide. We believe this business has the potential over time to generate high margins and improve our results of operations.Conifer’s service offerings have also expanded to support value-based performance through clinical integration, financial risk management and populationhealth management, which are integral parts of the health care industry’s movement toward accountable care organizations (“ACOs”) and similar risk-basedor capitated contract models. In addition to hospitals, clients for these services include health plans, self-insured employees and other entities. Realizing HIT Incentive Payments and Other Benefits—Beginning in the year ended December 31, 2011, we achieved compliance with certain ofthe health information technology (“HIT”) requirements under the American Recovery and Reinvestment Act of 2009 (“ARRA”). In 2013, we recognizedapproximately $96 million of Medicare electronic health record (“EHR”) and Medicaid ARRA HIT incentives in our Consolidated Statement of Operations.These incentives partially offset the operating expenses we have incurred and continue to incur to invest in HIT systems. We expect to recognize additionalincentives in the future. Furthermore, we believe that the operational benefits of HIT, including improved clinical outcomes and increased operatingefficiencies, will contribute to our long-term ability to grow 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, patient volumes and payer mix. However, as the economy recovers, we expect to experience improvements in thesemetrics relative to current levels. Improving Operating Leverage—We believe targeted capital spending on critical growth opportunities for our hospitals, emphasis on higherdemand clinical service lines (including outpatient lines), focus on expanding our outpatient business, implementation of new payer contracting strategies, andimproved quality metrics at our hospitals will improve our patient volumes. Increases in patient volumes have been constrained by the slow pace of the currenteconomic recovery, increased competition, utilization pressure by managed care organizations, the effects of higher patient co-pays and deductibles, anddemographic trends. We continue to pursue integrated contracting models that maximize our system-wide skills and capabilities in conjunction with our strongmarket positions to accommodate new payment models. In several markets, we have formed clinical integration organizations, which are collaborations withindependent physicians and hospitals to develop ongoing clinical initiatives designed to control costs and improve the quality of care delivered to patients.Most recently, in February 2014, we announced that our Abrazo Health network of hospitals in the Phoenix, Arizona area had signed an agreement enablinginvestment in the funding and expansion of Arizona Care Network. Under the terms of the agreement, Abrazo Health will have a 50% ownership interest in theArizona Care Network, a clinically integrated network and ACO. Arrangements like these provide a foundation for negotiating with plans under an ACOstructure or other risk-sharing model. Impact of Affordable Care Act—We anticipate that we will benefit over time from the provisions of the Patient Protection and Affordable Care Act,as amended by the Health Care and Education Reconciliation Act of 2010 (“Affordable Care Act” or “ACA”) that will extend insurance coverage throughMedicaid or private insurance to a broader segment of the U.S. population. Although we are unable to predict the ultimate net effect of the Affordable Care Acton our future results of operations, and while there have been and will continue to be some reductions in reimbursement rates by government payers, weanticipate that we will begin to receive reimbursement for caring for previously uninsured and underinsured patients as early as this year. Throughcollaborative efforts with local community organizations, we have launched a campaign under the banner “Path to Health” to assist our hospitals in educatingand enrolling uninsured patients in insurance plans. 38Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 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. In addition, it is critical that we continue to make steady and measurable progress in 2014 in successfully integratingVanguard’s business and operations into our business processes. The benefits that come from our larger scale and combined expertise will be fully realizedonly when we are operating as one efficient and cohesive organization. For information about risks and uncertainties that could affect our results of operations,see the Forward-Looking Statements and Risk Factors sections in Part I of this report. RESULTS OF OPERATIONS—OVERVIEW Selected Operating Statistics for All Continuing Operations Hospitals—The following table shows certain selected operating statistics for ourcontinuing operations on a total hospital basis, which includes the statistics from the hospitals included in the Vanguard acquisition only for the three monthsended December 31, 2013. We believe this information is useful to investors because it reflects the significant increase to the scale of our operations as a resultof our acquisition of Vanguard. Total HospitalContinuing OperationsThree Months Ended December 31,20132012Increase(Decrease)Total admissions190,506125,29052.1%Adjusted patient admissions(1)325,410199,19163.4%Surgeries – inpatient53,11934,51153.9%Surgeries – outpatient115,61163,53482.0%Total surgeries168,73098,04572.1%Patient days – total880,737580,42651.7%Adjusted patient days(1)1,481,291915,23161.8%Average length of stay (days)4.624.63(0.2)%Average licensed beds20,29413,21653.6%Utilization of licensed beds(2)47.2%47.7%(0.5)%(3)Total outpatient visits1,875,6841,053,49978.0%Net inpatient revenues$2,372$1,54453.6%Net outpatient revenues$1,357$82165.3%Net inpatient revenue per admission$12,451$12,3231.0%Net inpatient revenue per patient day$2,693$2,6601.2%Net outpatient revenue per visit$723$779(7.2)%Net patient revenue per adjusted admission$11,459$11,873(3.5)% (1) Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services by multiplying actual patientadmissions/days by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues.(2) Utilization of licensed beds represents patient days divided by number of days in the period divided by average licensed beds.(3) The change is the difference between the amounts shown for the three months ended December 31, 2013 compared to the three months endedDecember 31, 2012. Operating Statistics on a Same-Hospital Basis—Our results of operations have been and continue to be influenced by industry-wide andcompany-specific challenges, including constrained volume growth and high levels of bad debt, that have affected our revenue growth and operating expenses.We believe our results of operations for our most recent fiscal quarter best reflect recent trends we are experiencing with respect to volumes, revenues andexpenses; therefore, we have provided below information about these metrics for the three months ended December 31, 2013 and 2012 on a same-hospitalbasis, where noted, excluding the results of the 28 hospitals we acquired from Vanguard on October 1, 2013. 39 Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Same-HospitalContinuing OperationsThree Months Ended December 31,Admissions, Patient Days and Surgeries20132012Increase(Decrease)Total admissions122,404125,290(2.3)%Adjusted patient admissions(1)198,129199,191(0.5)%Paying admissions (excludes charity and uninsured)113,573116,611(2.6)%Charity and uninsured admissions8,8318,6791.8%Admissions through emergency department76,87277,465(0.8)%Paying admissions as a percentage of total admissions92.8%93.1%(0.3)%(2)Charity and uninsured admissions as a percentage of total admissions7.2%6.9%0.3%(2)Emergency department admissions as a percentage of total admissions62.8%61.8%1.0%(2)Surgeries – inpatient34,19834,511(0.9)%Surgeries – outpatient84,87863,53433.6%Total surgeries119,07698,04521.5%Patient days – total574,796580,426(1.0)%Adjusted patient days(1)920,975915,2310.6%Average length of stay (days)4.704.631.5%Average licensed beds13,17913,216(0.3)%Utilization of licensed beds(3)47.4%47.7%(0.3)%(2) (1) Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services by multiplying actual patientadmissions/days by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues.(2) The change is the difference between the amounts shown for the three months ended December 31, 2013 compared to the three months endedDecember 31, 2012.(3) Utilization of licensed beds represents patient days divided by number of days in the period divided by average licensed beds. Total same-hospital admissions decreased by 2,886, or 2.3%, in the three months ended December 31, 2013 compared to the three months endedDecember 31, 2012. Total surgeries increased by 21.5% in the three months ended December 31, 2013 compared to the same period in 2012, comprised of a33.6% increase in outpatient surgeries partially offset by a 0.9% decrease in inpatient surgeries. Our emergency department admissions decreased 0.8% in thethree months ended December 31, 2013 compared to the same period in the prior year. We believe the current economic conditions continue to have an adverseimpact on the level of elective procedures performed at our hospitals, which contributed to the decrease in our total admissions. Charity and uninsuredadmissions increased 1.8% in the three months ended December 31, 2013 compared to the three months ended December 31, 2012, while paying admissionsdecreased 2.6%. Same-HospitalContinuing OperationsThree Months Ended December 31,Outpatient Visits20132012Increase(Decrease)Total visits1,088,1941,053,4993.3%Paying visits (excludes charity and uninsured)974,396941,6583.5%Charity and uninsured visits113,798111,8411.7%Emergency department visits404,950399,7111.3%Surgery visits84,87863,53433.6%Paying visits as a percentage of total visits89.5%89.4%0.1%(1)Charity and uninsured visits as a percentage of total visits10.5%10.6%(0.1)%(1) (1) The change is the difference between the amounts shown for the three months ended December 31, 2013 compared to the three months endedDecember 31, 2012. Total same-hospital outpatient visits increased 34,695, or 3.3%, in the three months ended December 31, 2013 compared to the three months endedDecember 31, 2012. All four of our same-hospital regions and our Philadelphia market reported increased outpatient visits in the three months endedDecember 31, 2013, with the strongest growth occurring in our California and Florida regions. Approximately 39% of the growth in outpatient visits wasorganic. 40Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Outpatient surgery visits increased by 33.6% in the three months ended December 31, 2013 compared to the same period in 2012. Charity anduninsured outpatient visits increased by 1.7% in the three months ended December 31, 2013 compared to the three months ended December 31, 2012. Same-HospitalContinuing OperationsThree Months Ended December 31,Revenues20132012Increase(Decrease)Net operating revenues$2,471$2,3316.0%Revenues from the uninsured$169$1652.4%Net inpatient revenues(1)$1,521$1,544(1.5)%Net outpatient revenues(1)$864$8215.2% (1) Net inpatient revenues and net outpatient revenues are components of net operating revenues. Net inpatient revenues include self-pay revenues of$72 million and $71 million for the three months ended December 31, 2013 and 2012, respectively. Net outpatient revenues include self-pay revenues of$97 million and $94 million for the three months ended December 31, 2013 and 2012, respectively. Net operating revenues increased by $140 million, or 6.0%, on a same-hospital basis in the three months ended December 31, 2013 compared to thesame period in 2012, primarily due to an increase in outpatient volumes, improved managed care pricing, and increased revenues from services provided byour Conifer subsidiary to third parties, partially offset by a decrease in inpatient volumes. Net operating revenues in the three months ended December 31,2013 included $71 million of Medicaid disproportionate share hospital (“DSH”) and other state-funded subsidy revenues compared to $72 million in the sameperiod in 2012 on a same-hospital basis, which amounts included net revenues related to the California provider fee program of $19 million and $12 million,respectively. Net patient revenues increased by 0.8% in the three months ended December 31, 2013 compared to the same period in 2012. Same-HospitalContinuing OperationsThree Months Ended December 31,Revenues on a Per Admission, Per Patient Day and Per Visit Basis20132012Increase(Decrease)Net inpatient revenue per admission$12,426$12,3230.8%Net inpatient revenue per patient day$2,646$2,660(0.5)%Net outpatient revenue per visit$794$7791.9%Net patient revenue per adjusted patient admission(1)$12,038$11,8731.4%Net patient revenue per adjusted patient day(1)$2,590$2,5840.2% (1) Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services by multiplying actual patientadmissions/days by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues. Net inpatient revenue per admission increased 0.8% in the three months ended December 31, 2013 compared to the same period in 2012. The increaseprimarily reflects improved terms in our contracts with commercial managed care payers, partially offset by an adverse shift in payer mix. The 1.9% increasein net outpatient revenue per visit was primarily due to the improved terms of our managed care contracts. Same-HospitalContinuing OperationsThree Months Ended December 31,Provision for Doubtful Accounts20132012Increase(Decrease)Provision for doubtful accounts$205$2002.5%Provision for doubtful accounts as a percentage of net operating revenuesbefore provision for doubtful accounts7.7%7.9%(0.2)%(1)Collection rate on self-pay accounts(2)28.7%28.9%(0.2)%(1)Collection rate on commercial managed care accounts98.3%98.0%0.3%(1) (1) The change is the difference between the amounts shown for the three months ended December 31, 2013 compared to the three months endedDecember 31, 2012.(2) Self-pay accounts receivable are comprised of both uninsured and balance after insurance receivables. 41Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Provision for doubtful accounts increased by $5 million, or 2.5%, in the three months ended December 31, 2013 compared to the same period in2012. The increase in the absolute amount of provision for doubtful accounts primarily related to an increase in uninsured patient revenues and higher patientco-pays and deductibles in the three months ended December 31, 2013 compared to the three months ended December 31, 2012. Our self-pay collection rate,which is the blended collection rate for uninsured and balance after insurance accounts receivable, was approximately 28.7% at December 31, 2013 and28.9% at December 31, 2012. Same-HospitalContinuing OperationsThree Months Ended December 31,Selected Operating Expenses20132012Increase(Decrease)Hospital Operations and otherSalaries, wages and benefits$1,050$1,0104.0%Supplies3973882.3%Other operating expenses5355065.7%Total$1,982$1,9044.1%ConiferSalaries, wages and benefits$169$81108.6%Other operating expenses593759.5%Total$228$11893.2%TotalSalaries, wages and benefits$1,219$1,09111.7%Supplies3973882.3%Other operating expenses5945439.4%Total$2,210$2,0229.3%Rent/lease expense(1)Hospital Operations and other$35$39(10.3)%Conifer4333.3%Total$39$42(7.1)%Hospital Operations and other(2)Salaries, wages and benefits per adjusted patient day$1,138$1,1033.2%Supplies per adjusted patient day4314241.7%Other operating expenses per adjusted patient day5625531.6%Total per adjusted patient day$2,131$2,0802.5%Salaries, wages and benefits per adjusted patient admission$5,289$5,0714.3%Supplies per adjusted patient admission2,0041,9482.9%Other operating expenses per adjusted patient admission2,6152,5403.0%Total per adjusted patient admission$9,908$9,5593.7% (1) Included in other operating expenses.(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. These metricsexclude the expenses related to the provider network based in Southern California that includes contracted independent physicians, ancillary providers andhospitals, which we acquired during the three months ended September 30, 2013. Total selected operating expenses, which is defined as salaries, wages and benefits, supplies and other operating expenses, increased by 2.5% and3.7% on a per adjusted patient day and per adjusted patient admission basis, respectively, in the three months ended December 31, 2013 compared to the threemonths ended December 31, 2012. Salaries, wages and benefits per adjusted patient admission increased by approximately 4.3% in the three months ended December 31, 2013compared to the same period in 2012. This increase is primarily due to an increase in the number of physicians we employ, annual merit increases for certainof our employees and increased contract labor expense in the three months ended December 31, 2013 compared to the three months ended December 31, 2012. Supplies expense per adjusted patient admission increased by 2.9% in the three months ended December 31, 2013 compared to the three monthsended December 31, 2012. The increase in supplies expense was primarily attributable to increased costs of pharmaceuticals and volume growth in oursupply-intensive surgical services. 42Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 operating expenses per adjusted patient admission increased by 3.0% in the three months ended December 31, 2013 compared to the sameperiod in 2012. This change is primarily due to increased medical fees related to employed physicians and increased malpractice expense, partially offset bydecreases in legal and consulting costs. Malpractice expense in the 2013 period included a favorable adjustment of approximately $3 million due to a 43 basispoint increase in the interest rate used to estimate the discounted present value of projected future malpractice liabilities compared to an favorable adjustment of$1 million as a result of a 14 basis point increase in the interest rate in the 2012 period. Salaries, wages and benefits expense for Conifer increased by $88 million in the three months ended December 31, 2013 compared to the threemonths ended December 31, 2012 due to an increase in employee headcount as a result of the growth in Conifer’s business primarily attributable to the newCHI partnership, the Vanguard acquisition and Conifer’s two acquisitions in the three months ended December 31, 2012. Other operating expenses for Conifer increased by $22 million in the three months ended December 31, 2013 compared to the three months endedDecember 30, 2012 primarily due to additional operating expenses related to the new CHI partnership, the Vanguard acquisition and Conifer’s two acquisitionsin the three months ended December 31, 2012. The table below shows the pre-tax and after-tax impact on continuing operations for the three months and years ended December 31, 2013 and 2012of the following items: Three Months EndedDecember 31,Years EndedDecember 31,2013201220132012(Expense) IncomeImpairment and restructuring charges, and acquisition-related costs$(58)$(7)$(103)$(19)Litigation and investigation costs(28)(2)(31)(5)Loss from early extinguishment of debt—(4)(348)(4)Pre-tax impact$(86)$(13)$(482)$(28)Total after-tax impact$(60)$(8)$(315)$(18)Diluted per-share impact of above items$(0.60)$(0.08)$(3.06)$(0.17)Diluted earnings (loss) per share, including above items$(0.17)$0.52$(1.21)$1.70 LIQUIDITY AND CAPITAL RESOURCES OVERVIEW Cash and cash equivalents were $113 million at December 31, 2013, an increase of $31 million from $82 million at September 30, 2013. Significant cash flow items in the three months ended December 31, 2013 included: · Capital expenditures of $293 million; · Interest payments of $131 million; · Payments on reserves for restructuring charges, acquisition-related costs, and litigation costs and settlements of $78 million; · $195 million of net proceeds from borrowings under our revolving credit facility; · $1.373 billion of payments to acquire Vanguard and various outpatient, physician practice and other healthcare-related businesses, net of cashacquired; · $100 million of payments to repurchase common stock; · $3.125 billion of payments to retire Vanguard long-term debt; and · $4.600 billion of proceeds from the issuance of our 6% senior secured notes due 2020 ($1.800 billion) and 8/% senior notes due 2020 ($2.800billion). 4318Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 provided by operating activities was $589 million in the year ended December 31, 2013 compared to $593 million in the year endedDecember 31, 2012. Key negative and positive factors contributing to the change between the 2013 and 2012 periods include the following: · Increased income from continuing operations before income taxes of $139 million, excluding net gain on sales of investments, investmentearnings (loss), gain (loss) from early extinguishment of debt, interest expense, litigation and investigation costs, impairment and restructuringcharges, acquisition-related costs, and depreciation and amortization in the year ended December 31, 2013 compared to the year endedDecember 31, 2012; · The unfavorable impact of increased DSH receivables of $30 million primarily related to the Texas uncompensated care 1115 waiver program; · $20 million less cash used in operating activities from discontinued operations; · An increase of $51 million in payments on reserves for restructuring charges, acquisition-related costs, and litigation costs and settlements; · $50 million of additional interest payments primarily due to $37 million of interest payments related to the Vanguard debt refinanced inconnection with the acquisition on October 1, 2013; and · Income tax payments of $6 million in the year ended December 31, 2013 compared to $13 million in the year ended December 31, 2012. 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:201320122011Medicare21.8%23.4%23.1%Medicaid9.0%8.4%9.0%Managed care58.1%57.4%57.2%Indemnity, self-pay and other11.1%10.8%10.7% 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:201320122011Medicare28.0%28.9%29.6%Medicaid11.7%12.2%12.8%Managed care50.0%48.8%47.9%Indemnity, self-pay and other10.3%10.1%9.7% 44Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 PROGRAMS The Medicare program, the nation’s largest health insurance program, is administered by the Centers for Medicare and Medicaid Services of theU.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. The Affordable Care Act is changing how health care services in the United States are covered, delivered and reimbursed. One key provision of theAffordable Care Act is the individual mandate, which requires most Americans to maintain “minimum essential” health insurance coverage. For individualswho are not exempt from the individual mandate, and who do not receive health insurance through an employer or government program, the means ofsatisfying the requirement is to purchase insurance from a private company or a health insurance exchange. Beginning in 2014, individuals who are enrolledin a health benefits plan purchased through an exchange may be eligible for a premium credit or cost-sharing subsidy. Also beginning in 2014, those who donot comply with the individual mandate must make a “shared responsibility payment” to the federal government in the form of a tax penalty. The “employermandate” provision of the Affordable Care Act requires the imposition of penalties on employers having 50 or more employees who do not offer affordablehealth insurance coverage to those working 30 or more hours per week. On July 2, 2013, the U.S. Treasury Department announced a one-year delay (toJanuary 1, 2015) in the imposition of penalties and the reporting requirements of the employer mandate. On February 10, 2014, the requirements of theemployer mandate were further delayed until January 1, 2016. Based on the Congressional Budget Office’s most recent estimates, we do not believe that thedelays in the employer mandate will have a discernible effect on insurance coverage. Another key provision of the Affordable Care Act is the expansion ofMedicaid coverage. Prior to the passage of the ACA, the Medicaid program offered federal funding to states to assist only limited categories of low-incomeindividuals (including children, pregnant women, the blind and the disabled) in obtaining medical care. The ACA expanded eligibility under existing Medicaidprograms to virtually all individuals under 65 years old with incomes up to 138% of the federal poverty level beginning in 2014. The expansion of theMedicaid program (which will be substantially funded by the federal government) in each state will require state legislative or regulatory action and theapproval by CMS of a state Medicaid plan amendment. As of December 31, 2013, 25 states and the District of Columbia have taken action to expandMedicaid and four others are considering action. We currently operate hospitals in five of the states that are expanding and two of the states that are consideringexpansion. We cannot provide any assurances as to whether or when the other states in which we operate might choose to expand their Medicaid programs. Weanticipate that health care providers will generally benefit over time from insurance coverage provisions of the Affordable Care Act; however, the ACA alsocontains a number of provisions designed to significantly reduce Medicare and Medicaid program spending, including: (1) negative adjustments to the annualmarket basket updates for Medicare inpatient, outpatient, long-term acute and inpatient rehabilitation prospective payment systems, which began in 2010, aswell as additional “productivity adjustments” that began in 2011; and (2) reductions to Medicare and Medicaid DSH payments beginning, with respect toMedicare payments, in federal fiscal year (“FFY”) 2014 and, with respect to Medicaid payments, in FFY 2016, as the number of uninsured individualsdeclines. We are unable to predict the ultimate net effect of the Affordable Care Act on our future revenues and operations at this time due to uncertaintyregarding the ultimate number of uninsured patients who will obtain insurance coverage, uncertainty regarding future negotiations with payers, uncertaintyregarding Medicaid expansion, and gradual and, in some cases, delayed implementation. Furthermore, we are unable to predict what action, if any, Congressmight take with respect to the Affordable Care Act or the actions individual states might take with respect to expanding Medicaid coverage. The Medicare and Medicaid programs are also subject to statutory and regulatory changes, administrative and judicial rulings, interpretations anddeterminations, requirements for utilization review, and federal and state funding restrictions, all of which could materially increase or decrease paymentsfrom these government programs in the future, as well as affect the cost of providing services to our patients and the timing of payments to our facilities. Weare unable to predict the effect of future government health care funding policy changes on our operations. 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 of our subsidiaries’ hospitals are excluded from participation in theMedicare or Medicaid program or any other government health care program, there could be a material adverse effect on our business, financial condition,results of operations or cash flows. Medicare Medicare offers its beneficiaries different ways to obtain their medical benefits. One option, the Original Medicare Plan (which includes “Part A” and“Part B”), is a fee-for-service payment system. The other option, called Medicare Advantage 45Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 (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 major components of our net patient revenues, including our generalhospitals and other operations, for services provided to patients enrolled in the Original Medicare Plan for the years ended December 31, 2013, 2012, and 2011are set forth in the following table: Years Ended December 31,Revenue Descriptions201320122011Medicare severity-adjusted diagnosis-related group – operating$1,201$1,109$1,126Medicare severity-adjusted diagnosis-related group – capital10798100Outliers535144Outpatient632522462Disproportionate share250217214Direct Graduate and Indirect Medical Education(1)1389697Other(2)426670Adjustments for prior-year cost reports and related valuation allowances32109—Total Medicare net patient revenues$2,455$2,268$2,113 (1) Includes Indirect Medical Education revenue earned by our children’s hospitals 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 inpatient psychiatric units, inpatient rehabilitation units, one long-term acute care hospital, 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 systems (“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. 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 46Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 payments by the sum of MS-DRG and outlier payments. CMS annually adjusts the fixed threshold to bring projected outlier payments within the mandatedlimit. A change to the fixed threshold affects total outlier payments by changing: (1) the number of cases that qualify for outlier payments; and (2) the dollaramount hospitals receive for those cases that still qualify for outlier payments. 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. Prior to October 1, 2013, DSH payments were determinedannually based on certain statistical information defined by CMS and calculated as a percentage add-on to the MS-DRG payments. Section 3133 of theAffordable Care Act revises the Medicare DSH adjustment effective for discharges occurring on or after October 1, 2014. Under the revised methodology,hospitals will receive 25% of the amount they previously would have received under the pre-ACA formula. This amount is referred to as the “EmpiricallyJustified Amount.” Hospitals qualifying for the Empirically Justified Amount of DSH payments are also eligible to receive an additional payment for uncompensatedcare (the “UC DSH Amount”). The UC DSH Amount is a hospital’s share of a pool of funds that equal 75% of what otherwise would have been paid asMedicare DSH, adjusted for changes in the percentage of individuals that are uninsured. For FFY 2014, each Medicare DSH hospital’s share of the UC DSHAmount pool is based on its share of insured low income days reported by all Medicare DSH hospitals. During 2013, 68 of our hospitals in continuing operations qualified for DSH payments. One of the variables used in the pre-ACA DSH formula isthe number Medicare inpatient days attributable to patients receiving Supplemental Security Income (“SSI”) who are also eligible for Medicare Part A benefitsdivided by total Medicare inpatient days (the “SSI Ratio”). In an earlier rulemaking, CMS established a policy of including not only days attributable toMedicare Traditional patients, but also Medicare Advantage patients in the SSI ratio. During the three months ended March 31, 2012, CMS released revisedSSI ratios for FFYs 2006 and 2007, and SSI ratios for FFYs 2008 and 2009, which, according to CMS, include the Medicare Advantage days; the SSI ratiosfor subsequent periods also include the Medicare Advantage days. Beginning in 2009, we established reserves for the estimated impact of including theMedicare Advantage days in the SSI ratio, and during 2013, cost report settlements for substantially all of the periods for which we established reserves weresettled. The Medicare DSH statutes and regulations have been the subject of various administrative appeals and lawsuits, and our hospitals have beenparticipating in these appeals, including challenges to the inclusion of Medicare Advantage days in the SSI ratios. These types of appeals generally take severalyears to resolve, particularly for multi-hospital organizations, because of CMS’ administrative appeal rules. During the three months ended December 31,2012, the federal district court in the District of Columbia ruled in Allina Health Services v. Sebelius (“Allina”) that the Secretary of HHS failed to followthe Administrative Procedures Act when promulgating the regulation requiring the inclusion of the Medicare Advantage days in the SSI ratios. The courtremanded the matter to the Secretary and vacated the regulation it found to be improperly promulgated. Subsequently, the Secretary appealed the district court’sorder. Oral arguments in Allina were heard at the U.S. Court of Appeals for the D.C. Circuit Court in February 2014. Our DSH SSI appeals are pending;however, the outcome of the aforementioned case could influence the disposition of our appeals. We cannot predict the timing or outcome of our DSH appeals;however, a favorable outcome of our appeals could have a material impact on our future revenues and cash flows. We are also not able to predict whatadditional action the Secretary might take with respect to the regulation vacated by the district court. 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 2013, 29 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. 47 Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. The IRF-PPS uses federal prospective payment rates across distinct case-mix groups established by a patient classification system. 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 of 13 diagnosis categories or have qualifying conditions designated in the Medicare regulations governingIRFs. As of December 31, 2013, 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. Because of budget neutrality requirements, these payment updates have largely been funded bypayment reductions to other providers, including hospitals. 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. 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%,8.4% and 9.0% of net patient revenues before provision for doubtful accounts at our continuing general hospitals for the years ended December 31, 2013, 2012and 2011, respectively. We also receive DSH payments under various state Medicaid programs. For the years ended December 31, 2013, 2012 and 2011, ourrevenues attributable to DSH payments and other state-funded subsidy payments were approximately $428 million, $283 million 48Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 and $255 million, respectively. The 2013 amount includes three months of revenues related to the 28 hospitals we acquired from Vanguard on October 1,2013. Several states in which we operate continue to face budgetary challenges due to the economic downturn and other factors that have resulted, andlikely will continue to result, in reduced Medicaid funding levels to hospitals and other providers. Because most states must operate with balanced budgets,and the Medicaid program is generally a significant portion of a state’s budget, states can be expected to adopt or consider adopting future legislation designedto reduce their Medicaid expenditures. In addition, some states are implementing delays in issuing Medicaid payments to providers. As an alternative means offunding provider payments, many of the states in which we operate have adopted broad-based provider taxes to fund the non-federal share of Medicaidprograms. Continuing pressure on state budgets and other factors could result in future reductions to Medicaid payments, payment delays or additional taxeson hospitals. During the year ended December 31, 2013, we recorded net revenues of $115 million related to California Hospital Quality Assurance Fee (“HQAF”)program. The Governor of California signed the HQAF renewal bill into law in October 2013, extending California’s provider fee program for three years (witha framework to renew the program for at least three additional years beyond 2016) and reversing Medi-Cal cuts for some hospital skilled-nursing facilities,among other things. Based on the most recent estimates from the California Hospital Association, the extension of the HQAF program authorized by thelegislation will result in additional revenues for our hospitals, net of provider fees and other expenses, of approximately $475 million over the three-year periodending December 31, 2016. During the three months ended December 31, 2012, certain of our Texas hospitals began to participate in the Texas 1115 demonstration waiverapproved by CMS in December 2011 to replace the state’s Upper Payment Limit program. The waiver term covers state fiscal years September 1, 2012through August 31, 2016, is funded by intergovernmental transfer payments from local government entities, and includes two funding pools —Uncompensated Care and Delivery System Reform Payment. We recognized $15 million of revenues associated with this 1115 waiver program during thethree months ended December 31, 2012. Separately, during the same period we incurred $13 million of expenses related to funding indigent care services bycertain of our Texas hospitals. In 2013, we recognized $94 million of revenues from the Texas 1115 waiver programs, and we incurred $55 million ofexpense related to funding indigent care services by certain of our Texas hospitals. We cannot provide any assurances as to the ultimate amount of revenuesthat our hospitals may receive from this program in 2014. 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, 2013, 2012 and 2011 are set forth in the table below: Years Ended December 31,201320122011Hospital LocationMedicaidManagedMedicaidMedicaidManagedMedicaidMedicaidManagedMedicaidCalifornia$242$164$198$148$221$127Florida178651786118460Texas1511516712364114Georgia773585388840Pennsylvania742007220991195Michigan6496————Missouri646705525North Carolina34540—23—Illinois336————South Carolina222534254022Alabama13—31—29—Arizona921————Massachusetts98————Tennessee6278291030$976$809$783$638$802$593 49Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 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 Systems Under Medicare law, CMS is required to annually update certain rules governing the IPPS. The updates generally become effective October 1, thebeginning of the federal fiscal year. On August 2, 2013, CMS issued Changes to the Hospital Inpatient Prospective Payment Systems for Acute Care Hospitalsand Fiscal Year 2014 Rates (“Final IPPS Rule”). The Final IPPS Rule includes the following payment and policy changes: · A market basket increase of 2.5% for MS-DRG operating payments for hospitals reporting specified quality measure data (hospitals that do notreport specified quality measure data would receive an increase of 0.5%); CMS is also making certain adjustments to the 2.5% market basketincrease that result in a net market basket update of 0.7%, including: · Market basket index and multifactor productivity reductions required by the Affordable Care Act of 0.3% and 0.5%, respectively; · A documentation and coding recoupment reduction of 0.8% as part of the recoupment required by the American Taxpayer Relief Act of2012; and · A 0.2% reduction to offset the cost of a policy on admission and medical review criteria; · A methodology to implement Medicare DSH reductions required by the Affordable Care Act; · A 0.9% net increase in the capital federal MS-DRG rate; and · A decrease in the cost outlier threshold from $21,821 to $21,748. The aforementioned admission and medical review criteria for which CMS imposed a 0.2% reduction to the market basket establishes a new policy(referred to as “the two-midnight rule”) with respect to how short hospital stays will be paid. Generally, under the two-midnight rule, claims for inpatientadmissions spanning two or more midnights may continue to be billed as inpatient care under the IPPS. The new policy requires, with a few limitedexceptions, hospital stays that are shorter than “two midnights” to be categorized as outpatient care and billed under the OPPS. In September 2013, CMSinstructed its contractors to delay enforcement of the two-midnight rule for 90 days; CMS subsequently extended the enforcement delay through September 30,2014. Our hospitals, along with many other hospitals nationally, are participating in a challenge to CMS’s calculation of the 0.2% reduction to the IPPSmarket basket associated with the two-midnight rule. CMS projects that the combined impact of the payment and policy changes in the Final IPPS Rule will yield an average 1.0% increase in paymentsfor hospitals in large urban areas (populations over one million). Using the impact percentages in the Final IPPS Rule as applied to our IPPS payments for the12 months ended September 30, 2013, the estimated annual impact for all changes in the Final IPPS Rule on our hospitals is an increase in our Medicareinpatient revenues of approximately $23 million. Because of the uncertainty associated with the other factors that may influence our future IPPS payments byindividual hospital, including legislative action, regulatory and policy changes, admission volumes, length of stay, case mix, the redistributive effects of theMedicare DSH reductions and the two-midnight rule, we cannot provide any assurances regarding our estimate. Payment Changes to the Medicare Inpatient Psychiatric Facility Prospective Payment System On July 29, 2013, CMS issued a notice updating the prospective payment rates for the Medicare inpatient psychiatric facility (“IPF”) prospectivepayment system (“IPF-PPS”) for FFY 2014 (“IPF-PPS Notice”). The IPF-PPS Notice includes the following payment and policy changes: · A net payment increase for IPFs of 2.0%, which reflects a market basket index increase of 2.6%, reduced by a productivity adjustment of 0.5%and an additional 0.1%, both as required by the Affordable Care Act, as well as other adjustments, including a budget neutrality reduction; and 50Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 decrease in the outlier threshold from $11,600 to $10,245, which CMS estimates will yield an additional 0.3% increase total IPF-PPSpayments. At December 31, 2013, 18 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 Notice will yield an average 2.3% increase in payments for all IPFs (includingpsychiatric units in acute care hospitals) and an average 2.5% increase in payments for psychiatric units of acute care hospitals located in urban areas forFFY 2014. Using the urban psychiatric unit impact percentage as applied to our IPF-PPS payments for the 12 months ended September 30, 2013, the annualimpact of all payment and policy changes in the IPF-PPS Notice on our IPF-PPS psychiatric units may result in an estimated increase in our Medicarerevenues of approximately $1 million. Because of the uncertainty associated with various factors that may influence our future IPF-PPS payments, includinglegislative action, admission volumes, length of stay and case mix, we cannot provide any assurances regarding our estimate of the impact of theaforementioned changes. Payment and Policy Changes to the Medicare Inpatient Rehabilitation Facility Prospective Payment System On July 31, 2013, CMS issued final changes to the Medicare inpatient rehabilitation facility (“IRF”) prospective payment system (“IRF-PPS”) forFFY 2014 (“IRF-PPS Final Rule”). The IRF-PPS Final Rule includes the following payment and policy changes: · A net update to IRF-PPS payments equal to 1.8% resulting from the estimated market basket of 2.6%, minus an estimated productivityadjustment of 0.5% and a market basket reduction of 0.3%, both of which are required under certain provisions of the Affordable Care Act; and · A reduction in the number of diagnosis codes from the list used to determine an IRF’s presumptive compliance with the “60 percent rule.” At December 31, 2013, 16 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 2.3%. This estimated increase includes an average 2.8% increase forrehabilitation units in hospitals located in urban areas for FFY 2014. Using the urban rehabilitation unit impact percentage as applied to our Medicare IRFpayments for the 12 months ended September 30, 2013, the annual impact of the payment and policy changes in the IRF-PPS Final Rule on the inpatientrehabilitation units we operated on that date may result in an estimated increase in our Medicare revenues of less than $1 million. Because of the uncertaintyassociated with various factors that may influence our future IRF payments, including legislative action, admission volumes, length of stay and case mix, andthe impact of compliance with admission criteria, we cannot provide any assurances regarding our estimate of the impact of these changes. Payment and Policy Changes to the Medicare Outpatient Prospective Payment System On November 27, 2013, CMS released the Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems finalrules for the calendar year 2014 (“Final OPPS Rule”). The Final OPPS Rule includes the following payment and policy changes: · A net update to OPPS payments equal to 1.7% resulting from the estimated market basket of 2.5%, minus an estimated productivityadjustment of 0.5% and a market basket reduction of 0.3%, both of which are required under certain provisions of the Affordable Care Act; · The discontinuation of multiple codes for hospital clinic departments and conversion to single codes for those services; and · An increase in the number of items and services that are packaged into the OPPS Ambulatory Payment Classification payments. 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 the hospitals we owned on December 31, 2013 is an $27 millionincrease in Medicare outpatient revenues. Because of the uncertainty associated with the proposals, and other factors that may influence our future 51Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 OPPS payments by individual hospital, including legislative action, patient volumes and case mix, we cannot provide any assurances regarding this estimate. Payment and Policy Changes to the Medicare Physician Fee Schedule On November 27, 2013, CMS released the final update to the Medicare Physician Fee Schedule (“MPFS”) for calendar year 2014. The MPFS is theschedule of rates Medicare pays for physician and other professional services and is updated annually. The MPFS update is determined by the “sustainablegrowth rate” (“SGR”) formula in accordance with the Balanced Budget Act of 1997. CMS estimates that the calendar year 2014 update to the MPFS wouldresult in a reduction to payments of approximately 20.1%. For the past 10 years, negative adjustments to the MPFS resulting from the SGR formula have beenoverridden by Congress. Because of budget neutrality requirements, these overrides have been funded in part with reductions to hospital and other providerpayments. On December 26, 2013, the President signed into law House Joint Resolution 59, also known as the Bipartisan Budget Act of 2013 and thePathway for SGR Reform Act of 2013. The resolution averts the 20.1% reduction and replaces it with a 0.5% increase to the conversion factor for the MPFSthrough March 31, 2014. Although the historical pattern suggests that Congress will override the SGR formula reduction for the remainder of 2014, we cannot provide anyassurances in that regard. Because a temporary or permanent change to the SGR formula would likely involve payment reductions to other providers(including hospitals), we cannot predict what impact such changes would have on our future net revenues or cash flows. Medicare Claims Reviews HHS estimates that approximately 10.1% of all Medicare Fee-For-Service (“FFS”) claim payments in FFY 2013 were improper. The ImproperPayments Information Act of 2002, amended by the Improper Payments Elimination and Recovery Act of 2010, requires the heads of federal agencies,including HHS, to annually review programs it administers to: · Identify programs that may be susceptible to significant improper payments; · Estimate the amount of improper payments in those programs; · Submit those estimates to Congress; and · Describe the actions the agency is taking to reduce improper payments in those programs. CMS has identified the FFS program as a program at risk for significant erroneous payments. One of CMS’ stated key goals is to pay claimsproperly the first time. This means paying the right amount, to legitimate providers, for covered, reasonable and necessary services provided to eligiblebeneficiaries. According to CMS, paying correctly the first time saves resources required to recover improper payments and ensures the proper expenditure ofMedicare Trust Fund dollars. As a result, in addition to the Recovery Audit Contractor (“RAC”) program, which currently performs post-payment claimsreviews, CMS has recently established initiatives to prevent improper payments before a claim is processed. These initiatives include a significant increase inthe number of prepayment claims reviews performed by MACs. Claims selected for prepayment review are not subject to the normal Medicare FFS payment timeframe. Furthermore, prepayment claims denials aresubject to administrative and judicial review. We have established robust protocols to respond to claims reviews and payment denials. Payment recoveriesresulting from MAC reviews can be appealed through administrative and judicial processes, and we intend to pursue the reversal of adverse determinationswhere appropriate. In addition to overpayments that are not reversed on appeal, we will incur additional costs to respond to requests for records and pursue thereversal of payment denials. The degree to which our Medicare FFS claims are subjected to prepayment reviews, the extent to which payments are denied, andour success in overturning denials could have a material adverse effect on our cash flows and results of operations. Affordable Care Act The ACA is changing how health care services in the United States are covered, delivered and reimbursed through expanded coverage of uninsuredindividuals, reduced growth and other reductions in Medicare program spending, and the establishment of programs where reimbursement is tied to qualityand integration. In addition, the law reforms certain aspects of 52Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 health insurance, expands existing efforts to tie Medicare and Medicaid payments to performance and quality, and contains provisions intended to strengthenfraud and abuse enforcement. The expansion of health insurance coverage under the ACA may result in a material increase in the number of patients using ourfacilities who have either private or public program coverage. On the other hand, the ACA provides for significant reductions in Medicare market basketupdates and decreases in Medicare and Medicaid DSH payments. Given that approximately 31% of our net patient revenues before provision for doubtfulaccounts in 2013 were from Medicare and Medicaid, reductions to these programs may significantly impact us and could offset any positive effects of theACA. In addition to increasing funding for the CMS Medicaid Integrity Program, which employs Medicaid Integrity Contractors to audit Medicaid claims,the ACA expanded the RAC program’s scope to include Medicare Advantage plans and Medicaid claims beginning in 2012. We cannot predict with certaintythe impact of these programs on our future results of operations or cash flows. As described in greater detail under Item 1, Business — Health Care Regulation and Licensing, of Part I of this report, there is significantuncertainty with respect to the positive and negative effects the ACA may have on reimbursement, utilization and the future design of provider networks andinsurance plans (including pricing, provider participation, coverage, co-pays and deductibles), and the multiple models that attempt to predict those effectsmay differ materially from our expectations. Because of the many variables involved, we are unable to predict the ultimate net effect on our future revenues andoperations of the expected decreases in uninsured individuals using our facilities, the reductions in Medicare spending and Medicare and Medicaid DSHfunding, and numerous other provisions in the Affordable Care Act that may affect us. The American Recovery and Reinvestment Act of 2009 The ARRA was enacted to stimulate the U.S. economy. One provision of ARRA provides financial incentives to hospitals and physicians to become“meaningful users” of electronic health records. The Medicare incentive payments to individual hospitals are made over a four-year, front-weighted transitionperiod. The Medicaid incentive payments, which are administered by the states, are subject to more flexible payment and compliance standards than Medicareincentive payments; hospitals that achieve compliance between 2014 and 2015 will receive reduced incentive payments during the transition period. We anticipate that we will incur selected operating expenses related to our overall HIT program of approximately $145 million in 2014 compared toapproximately $105 million of Medicare and Medicaid EHR incentive payments we expect to recognize. In addition to the expenditures we incur to qualify forthese incentive payments, our operating expenses have increased and we anticipate will increase in the future as a result of these information systeminvestments. Hospitals that fail to become meaningful users of EHRs or fail to submit quality data by 2015 will be subject to penalties in the form of areduction to Medicare payments. This reduction, which will be based on the market basket update, will be phased in over three years and will continue until ahospital achieves compliance. Should all of our hospitals, including those acquired as part of the Vanguard acquisition, fail to become meaningful users ofEHRs and fail to submit quality data, the penalties would result in reductions to our annual Medicare traditional inpatient net revenues of approximately$15 million, $35 million and $55 million in 2015, 2016, and 2017 and subsequent years, respectively. During the year ended December 31, 2013, we recognized approximately $96 million of EHR incentives related to the Medicare and Medicaid EHRincentive programs as a result of 54 of our hospitals and certain of our employed physicians demonstrating meaningful use of certified EHR technology. Theseincentives partially offset approximately $117 million of selected operating expenses we incurred in 2013 related to our overall HIT program. The finalMedicare EHR incentive payments are determined when the cost report that begins in the federal fiscal year during which the hospital achieved meaningful useis settled. Medicare and Medicaid incentive payment amounts to which a provider is entitled are subject to 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. 53Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 American Taxpayer Relief Act of 2012 The American Taxpayer Relief Act of 2012 delayed by two months the effective date of the automatic reductions (referred to as “sequestration”) infederal spending, including a 2% reduction in Medicare payments, mandated by the Budget Control Act of 2011 that was originally scheduled to take effect onFebruary 1, 2013. On March 1, 2013, the President signed an order to begin the sequestration. Effective April 1, 2013, all Medicare payments to providersbegan to be reduced by 2% and will continue to be paid at the reduced rate as long as the sequestration is in effect. As of December 31, 2013, Congress had nottaken any action to reduce or eliminate the sequestration adjustment. Any such action would likely require other payments reductions in order to maintainbudget neutrality. We cannot predict how long the sequestration will be in effect, nor can we predict what Medicare payment, eligibility and coverage changes,if any, will be enacted in lieu of the sequestration. The Continuing Appropriations and Consolidated Appropriations Acts of 2014 On October 17, 2013, the President signed the Continuing Appropriations Act, 2014 into law, which provided FFY 2014 appropriations for projectsand activities of the federal government at sequestration levels through January 15, 2014 and extended the U.S. debt limit through February 7, 2014. The lawalso included provisions intended to strengthen eligibility verification of those who apply for insurance subsidies under the Affordable Care Act. OnJanuary 17, 2014, the President signed the Consolidated Appropriations Act of 2014 into law, which continues appropriations for FFY 2014, but does notprovide any new funding for the ACA. We cannot predict what further actions Congress or the President may take with respect to appropriations or the debtlimit or the effect, if any, of such actions on our net revenues or cash flows. The Bipartisan Budget Act of 2013 As described above, the Bipartisan Budget Act of 2013 averted a 20.1% reduction to payments under the MPFS and replaced it with a 0.5% increasefor the period January 1, 2014 through March 31, 2014. Other significant Medicare and Medicaid provisions of the Bipartisan Budget Act included: · A delay in the reductions to Medicaid DSH allotments to states required under the ACA until FFY 2016 (the reductions were originallyscheduled to begin in FFY 2014); · A continuation of the Medicare sequestration reductions through the remainder of FFY 2014; and · An extension of the sequestration for mandatory programs, including Medicare, for another two years through 2023. MedPAC FFY 2014 Recommendations Each year, the Medicare Payment Advisory Commission (“MedPAC”), an independent agency that advises Congress on issues affecting Medicare,makes payment policy recommendations to Congress for a variety of Medicare payment systems. Generally, the MedPAC opposes sequestration as a way toreduce payments, particularly below the base rate, because the MedPAC favors a more targeted approach to achieve savings. In January 2014, the MedPACvoted in favor of three recommendations for hospital inpatient and outpatient services, two of which affect acute care hospitals. Specifically, the MedPACvoted that Congress should direct HHS to: · Reduce or eliminate the differences in payment rates between outpatient departments and physicians’ offices for selected APCs; and · Increase payment rates for the IPPS and OPPS in FFY 2015 by 3.25%. We expect these recommendations to be included in the forthcoming MedPAC Annual Report to Congress. Congress is not obligated to adopt theMedPAC recommendations and, based on outcomes in previous years, there can be no assurance Congress will adopt such recommendations in a given year.We cannot predict what actions, if any, Congress, HHS or CMS will take with respect to the MedPAC recommendations or the effect, if any, of such actionson our net revenues or cash flows. 54Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Extension of Medicare Sequestration In February 2014, the President signed into law legislation that includes the restoration of certain military pension benefits and extension of theMedicare sequestration payment reductions for an additional year through FFY 2014. 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-pays, co-insurance or deductibles. As employers and employees have demanded morechoice, managed care plans have developed hybrid products that combine elements of both HMO and PPO plans, including high-deductible health care plansthat 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, 2013, 2012 and 2011 was $6.3 billion, $5.4 billion and$5.1 billion, respectively. Approximately 59% of our managed care net patient revenues for the year ended December 31, 2013 was derived from our top tenmanaged care payers. Approximately 44% of the total net managed care revenues of our same-hospitals owned for at least one year was generated from nationalpayers. The remainder comes from regional or local payers. At December 31, 2013 and 2012 approximately 58% and 52%, respectively, of our net accountsreceivable related to continuing operations were due from managed care payers. 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, which can takeseveral years before they are completely resolved. The payers are billed for patient services on an individual patient basis. An individual patient’s bill issubject to adjustment on a patient-by-patient basis in the ordinary course of business by the payers following their review and adjudication of each particularbill. We estimate the discounts for contractual allowances at the individual hospital level utilizing billing data on an individual patient basis. At the end of eachmonth, on an individual hospital basis, we estimate our expected reimbursement for patients of managed care plans based on the applicable contract terms. Webelieve it is reasonably likely for there to be an approximately 3% increase or decrease in the estimated contractual allowances related to managed care plans.Based on reserves as of December 31, 2013, a 3% increase or decrease in the estimated contractual allowance would impact the estimated reserves byapproximately $13 million. Some of the factors that can contribute to changes in the contractual allowance estimates include: (1) changes in reimbursementlevels for procedures, supplies and drugs when threshold levels 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 to physician orders subsequent to initial diagnosis or testing; (4) final coding of in-house and discharged-not-final-billed patients that change reimbursement levels; (5) secondary benefits determined after primary insurance payments; and (6) reclassification ofpatients among insurance plans with different coverage levels. Contractual allowance estimates are periodically reviewed for accuracy by taking intoconsideration known contract terms, as well as payment history. Although we do not separately accumulate and disclose the aggregate amount of adjustmentsto the estimated reimbursement for every patient bill, we believe our estimation and review process enables us to identify instances on a timely basis wheresuch estimates need to be revised. We do not believe there were any adjustments to estimates of patient bills that were material to our operating income. Inaddition, on a corporate-wide basis, we do not record any general provision 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 improved year-over-year managed care pricing, we expect some moderation in the pricingpercentage increases in future years. It is not clear what impact, if any, the increased obligations on managed care and other payers imposed by the AffordableCare 55Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Act will have on our commercial managed care volumes and payment rates. In the year ended December 31, 2013, our commercial managed care net inpatientrevenue per admission from our acute care hospitals was approximately 76% higher than our aggregate yield on a per admission basis from governmentpayers, 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-pays and deductibles to be made by patients instead of insurers. Self-pay accounts pose significant collectability problems. At both December 31, 2013 and 2012, 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-pays and deductibles owed to us by patients with insurance. We provide revenue cycle management services through our Conifersubsidiary, which has performed systematic analyses to focus our attention on the drivers of bad debt for each hospital. While emergency department use isthe primary contributor to our provision for doubtful accounts in the aggregate, this is not the case at all hospitals. As a result, we have been increasing ourfocus on targeted initiatives that concentrate on non-emergency department patients as well. These initiatives are intended to promote process efficiencies incollecting self-pay accounts, as well as co-pay and deductible amounts owed to us by patients with insurance, that we deem highly collectible. We arededicated to modifying and refining our processes as needed, enhancing our technology and improving staff training throughout the revenue cycle process inan effort to increase collections and reduce 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. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), a new Consumer Financial Protection Bureau(“CFPB”) was formed within the U.S. Federal Reserve to promote transparency, simplicity, fairness, accountability and equal access in the market forconsumer financial products or services, including debt collection services. The Dodd-Frank Act gives significant discretion to the CFPB in establishingregulatory requirements and enforcement priorities. We believe that the CFPB regulatory and enforcement processes will have a significant impact on Conifer’soperations. For additional information, see Item 1, Business — Regulations Affecting Conifer, of Part I of this report. 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, 2013, 2012 and 2011 were approximately $545 million, $430 million and $379 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, 2013, 2012 56Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 and 2011 were approximately $428 million, $283 million and $255 million, respectively. These payments are intended to mitigate our cost of uncompensatedcare, as well as reduced Medicaid funding levels. Our estimated costs (based on the selected operating expenses described above) of caring for charity carepatients for the years ended December 31, 2013, 2012 and 2011 were $158 million, $136 million and $113 million, respectively. Generally, our method ofmeasuring the estimated costs uses adjusted self-pay/charity patient days multiplied by selected operating 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 bygross 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 health insurance exchange or government health care insurance program coverage. However, because of the many variables involved,we are unable to predict with certainty the net impact on us of the expected increase in revenues and expected decrease in bad debt expense from providing careto previously uninsured and underinsured individuals, and numerous other provisions in the law that may affect us. In addition, even after implementation ofthe Affordable Care Act, we may continue to experience a high level of bad debt expense and have to provide uninsured discounts and charity care due to thefailure of states to expand Medicaid coverage under the Affordable Care Act and for undocumented aliens who will not be permitted to enroll in a healthinsurance exchange or government health care insurance program. RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2013 COMPARED TO THE YEAR ENDED DECEMBER 31, 2012 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, 2013 and 2012: Years Ended December 31,20132012Increase(Decrease)Net operating revenues:General hospitals$10,888$9,436$1,452Other operations1,186468718Net operating revenues before provision for doubtful accounts12,0749,9042,170Less provision for doubtful accounts972785187Net operating revenues11,1029,1191,983Operating expenses:Salaries, wages and benefits5,3714,2571,114Supplies1,7841,552232Other operating expenses, net2,7012,147554Electronic health record incentives(96)(40)(56)Depreciation and amortization545430115Impairment of long-lived assets and goodwill, and restructuring charges1031984Litigation and investigation costs31526Operating income$663$749$(86) 57Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 31,20132012Increase(Decrease)Net operating revenues100.0%100.0%—%Operating expenses:Salaries, wages and benefits48.4%46.7%1.7%Supplies16.1%17.0%(0.9)%Other operating expenses, net24.3%23.5%0.8%Electronic health record incentives(0.9)%(0.4)%(0.5)%Depreciation and amortization4.9%4.7%0.2%Impairment of long-lived assets and goodwill, and restructuring charges0.9%0.2%0.7%Litigation and investigation costs0.3%0.1%0.2%Operating income6.0%8.2%(2.2)% Net operating revenues of our general hospitals include inpatient and outpatient revenues, as well as nonpatient revenues (rental income, management feerevenue, and income from services such as cafeterias, gift shops and parking) and other miscellaneous revenue. Net operating revenues of other operationsprimarily consist of revenues from (1) physician practices, (2) a long-term acute care hospital, (3) services provided by our Conifer subsidiary to third partiesand (4) our recently acquired health plans. Revenues from our general hospitals represented approximately 90% and 95% of our total net operating revenuesbefore provision for doubtful accounts for the years ended December 31, 2013 and 2012, respectively. Net operating revenues from our other operations were $1.186 billion and $468 million in the years ended December 31, 2013 and 2012,respectively. The increase in net operating revenues from other operations during 2013 primarily relates to revenue cycle services provided by our Conifersubsidiary, as well as revenues from our recently acquired health plans and additional physician practices. Equity earnings for unconsolidated affiliatesincluded in our net operating revenues from other operations were $15 million and $8 million for each of the years ended December 31, 2013 and 2012,respectively. Included in 2013 equity earnings of unconsolidated affiliates is $10 million of earnings associated with stepping up our basis in a previously heldinvestment in an ambulatory surgery center in which we acquired a controlling interest and are now consolidating. Selected Operating Statistics for All Continuing Operations Hospitals—The following table shows certain selected operating statistics for ourcontinuing operations on a total hospital basis, which includes the statistics from the 28 hospitals we acquired from Vanguard on October 1, 2013. Total HospitalContinuing OperationsYears Ended December 31,20132012Increase(Decrease)Total admissions558,726506,48510.3%Adjusted patient admissions(1)915,276796,52014.9%Surgeries – inpatient155,634141,2889.9%Surgeries – outpatient334,233239,66739.5%Total surgeries489,867380,95528.6%Patient days – total2,621,2452,368,91610.7%Adjusted patient days(1)4,243,3343,693,21814.9%Average length of stay (days)4.694.680.2%Average licensed beds14,96313,18713.5%Utilization of licensed beds(3)48.0%49.1%(1.1)%(2)Total outpatient visits5,074,6064,167,11421.8%Net inpatient revenues$6,952$6,20012.1%Net outpatient revenues$3,859$3,16721.9%Net inpatient revenue per admission$12,443$12,2411.7%Net inpatient revenue per patient day$2,652$2,6171.3%Net outpatient revenue per visit$760$760—%Net patient revenue per adjusted admission$11,812$11,7600.4% 58Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 on a same-hospital basis, where noted, and excludethe results of our acquisition of Vanguard effective October 1, 2013 because it has not been owned for more than one calendar year. Same-HospitalContinuing OperationsYears Ended December 31,Admissions, Patient Days and Surgeries20132012Increase(Decrease)Total admissions490,624506,485(3.1)%Adjusted patient admissions(1)787,995796,520(1.1)%Paying admissions (excludes charity and uninsured)455,550470,756(3.2)%Charity and uninsured admissions35,07435,729(1.8)%Admissions through emergency department308,200312,902(1.5)%Paying admissions as a percentage of total admissions92.9%92.9%—%(2)Charity and uninsured admissions as a percentage of total admissions7.1%7.1%—%(2)Emergency department admissions as a percentage of total admissions62.8%61.8%1.0%(2)Surgeries – inpatient136,713141,288(3.2)%Surgeries – outpatient303,500239,66726.6%Total surgeries440,213380,95515.6%Patient days – total2,315,3042,368,916(2.3)%Adjusted patient days(1)3,683,0183,693,218(0.3)%Average length of stay (days)4.724.680.9%Number of hospitals (at end of period)4949—(2)Licensed beds (at end of period)13,17813,216(0.3)%Average licensed beds13,18013,187(0.1)%Utilization of licensed beds(3)48.1%49.1%(1.0)%(2) (1) Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services by multiplying actual patientadmissions/days by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues.(2) The change is the difference between the 2013 and 2012 amounts shown.(3) Utilization of licensed beds represents patient days divided by number of days in the period divided by average licensed beds. Same-HospitalContinuing OperationsYears Ended December 31,Outpatient Visits20132012Increase(Decrease)Total visits4,287,1164,167,1142.9%Paying visits (excludes charity and uninsured)3,834,1953,728,4022.8%Charity and uninsured visits452,921438,7123.2%Emergency department visits1,607,0751,555,1023.3%Surgery visits303,500239,66726.6%Paying visits as a percentage of total visits89.4%89.5%(0.1)%(1)Charity and uninsured visits as a percentage of total visits10.6%10.5%0.1%(1) (1) The change is the difference between the 2013 and 2012 amounts shown. Same-HospitalContinuing OperationsYears Ended December 31,Revenues20132012Increase(Decrease)Net operating revenues$9,688$9,1196.2%Revenues from the uninsured$671$6365.5%Net inpatient revenues(1)$6,101$6,200(1.6)%Net outpatient revenues(1)$3,366$3,1676.3% (1) Net inpatient revenues and net outpatient revenues are components of net operating revenues. Net inpatient revenues include self-pay revenues of$279 million and $269 million for the years ended December 31, 2013 and 2012, respectively. Net outpatient revenues include self-pay revenues of$392 million and $367 million for the years ended December 31, 2013 and 2012, respectively. 59Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Same-HospitalContinuing OperationsYears Ended December 31,Revenues on a Per Admission, Per Patient Day and Per Visit Basis20132012Increase(Decrease)Net inpatient revenue per admission$12,435$12,2411.6%Net inpatient revenue per patient day$2,635$2,6170.7%Net outpatient revenue per visit$785$7603.3%Net patient revenue per adjusted patient admission(1)$12,014$11,7602.2%Net patient revenue per adjusted patient day(1)$2,570$2,5361.3% (1) Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services by multiplying actual patientadmissions/days by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues. Same-HospitalContinuing OperationsYears Ended December 31,Provision for Doubtful Accounts20132012Increase(Decrease)Provision for doubtful accounts$829$7855.6%Provision for doubtful accounts as a percentage of net operating revenues beforeprovision for doubtful accounts7.9%7.9%—%(1)Collection rate on self-pay accounts(2)28.7%28.9%(0.2)%(1)Collection rate on commercial managed care accounts98.3%98.0%0.3%(1) (1) The change is the difference between the 2013 and 2012 amounts shown.(2) Self-pay accounts receivable are comprised of both uninsured and balance after insurance receivables. 60Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Same-HospitalContinuing OperationsYears Ended December 31,Selected Operating Expenses20132012Increase(Decrease)Hospital Operations and otherSalaries, wages and benefits$4,142$3,9834.0%Supplies1,5551,5520.2%Other operating expenses2,0932,0402.6%Total$7,790$7,5752.8%ConiferSalaries, wages and benefits$576$274110.2%Other operating expenses21110797.2%Total$787$381106.6%TotalSalaries, wages and benefits$4,718$4,25710.8%Supplies1,5551,5520.2%Other operating expenses2,3042,1477.3%Total$8,577$7,9567.8%Rent/lease expense(1)Hospital Operations and other$153$1446.3%Conifer141216.7%Total$167$1567.1%Hospital Operations and other(2)Salaries, wages and benefits per adjusted patient day$1,124$1,0784.3%Supplies per adjusted patient day4224200.5%Other operating expenses per adjusted patient day5615531.4%Total per adjusted patient day$2,107$2,0512.7%Salaries, wages and benefits per adjusted patient admission$5,253$5,0015.0%Supplies per adjusted patient admission1,9731,9481.3%Other operating expenses per adjusted patient admission2,6222,5612.4%Total per adjusted patient admission$9,848$9,5103.6% (1) Included in other operating expenses.(2) Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services by multiplying actual patientadmissions/days by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues. These metricsexclude the expenses related to the provider network based in Southern California that includes contracted independent physicians, ancillary providersand hospitals, which we acquired during the three months ended September 30, 2013. REVENUES During the year ended December 31, 2013, same-hospital net operating revenues before provision for doubtful accounts increased 6.2%, compared tothe year ended December 31, 2012, primarily due to improved terms of our managed care contracts, an increase in outpatient volumes and an increase in ourother operations revenues, partially offset by a decrease in inpatient volumes and the impact of a $81 million favorable adjustment in the 2012 period from theindustry-wide settlement (the “Medicare Budget Neutrality settlement”) that corrected Medicare payments made to providers for inpatient hospital services for anumber of prior periods. Our same-hospital net outpatient revenues and total outpatient visits increased 6.3% and 2.9%, respectively, during the year ended December,31 2013 compared to the year ended December 31, 2012. Outpatient revenues and volume growth was primarily driven by improved terms of our managedcare contracts, increased outpatient volume levels and our outpatient acquisition program. Net outpatient revenue per visit increased 3.3% primarily due to theimproved terms of our managed care contracts. Our Conifer subsidiary generated net operating revenues of $919 million and $488 million for the year ended December 31, 2013 and 2012,respectively, a portion of which was eliminated in consolidation as described in Note 20 to the Consolidated Financial Statements. The increase in the portionthat was not eliminated in consolidation is primarily due to the 10-year CHI agreement entered into in May 2012, expanded service offerings and twoacquisitions in the three months ended December 31, 2012. 61Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Same-hospital patient days decreased by 2.3% during the year ended December 31, 2013 compared to the year ended December 31, 2012. We believethe following factors contributed to the changes in our inpatient volume levels: (1) the current weak economic conditions, which we believe have adverselyimpacted the level of elective procedures performed at our hospitals; (2) loss of patients to competing health care providers; (3) an increase in patients withhigh-deductible health insurance plans; and (4) industry trends reflecting the shift of certain clinical procedures being performed in an outpatient setting ratherthan in an inpatient setting. PROVISION FOR DOUBTFUL ACCOUNTS The provision for doubtful accounts as a percentage of net operating revenues before provision for doubtful accounts was 8.1% for the year endedDecember 31, 2013 compared to 7.9% for the year ended December 31, 2012. The 5.6% increase in the absolute amount of provision for doubtful accounts inthe 2013 period compared to the 2012 period was primarily due to a 5.5% increase in uninsured patient revenues, as well as higher patient co-pays anddeductibles for our same-hospitals. The table below shows the net accounts receivable and allowance for doubtful accounts by payer at December 31, 2013and December 31, 2012: December 31, 2013December 31, 2012AccountsReceivableBeforeAllowancefor DoubtfulAccountsAllowancefor DoubtfulAccountsNetAccountsReceivableBeforeAllowancefor DoubtfulAccountsAllowancefor DoubtfulAccountsNetMedicare$309$—$309$172$—$172Medicaid141—141116—116Net cost report settlements payableand valuation allowances(4)—(4)(24)—(24)Managed care1,240691,17176972697Self-pay uninsured3442905420417826Self-pay balance after insurance224141831437865Estimated future recoveries fromaccounts assigned to our Conifersubsidiary91—9188—88Other payers2798919026468196Total continuing operations2,6245892,0351,7323961,336Total discontinued operations3—31459$2,627$589$2,038$1,746$401$1,345 We provide revenue cycle management and patient communications services, among others, through our Conifer subsidiary, which has performedsystematic analyses to focus our attention on the drivers of bad debt for each hospital. While emergency department use is the primary contributor to ourprovision for doubtful accounts in the aggregate, this is not the case at all hospitals. As a result, we have increased our focus on targeted initiatives thatconcentrate on non-emergency department patients as well. These initiatives are intended to promote process efficiencies in collecting self-pay accounts, as wellas co-pay and deductible amounts owed to us by patients with insurance, that we deem highly collectible. We are dedicated to modifying and refining ourprocesses as needed, enhancing our technology, and improving staff training throughout the revenue cycle process in an effort to increase collections andreduce accounts receivable. A significant portion of our provision for doubtful accounts relates to self-pay patients, as well as co-pays and deductibles owed to us by patientswith 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, 2013, our same-hospital collection rate on self-pay accounts was approximately 28.7%. Our recent same-hospital self-pay collection rates were as follows: 27.9% at March 31, 2012; 28.5% at June 30, 2012; 28.8% at September 30, 2012; 28.9% atDecember 31, 2012; 28.8% at March 31, 2013; 28.7% at June 30, 2013; and 28.8% at September 30, 2013. These self-pay collection rates include paymentsmade by patients, including co-pays and deductibles paid by patients with insurance. Based on our accounts receivable from self-pay patients and co-paysand deductibles owed to us by patients with insurance at December 31, 2013, a 10% decrease or increase in our self-pay collection rate, or approximately 3%,which we believe could be a reasonably likely change, would result in an unfavorable or favorable adjustment to provision for doubtful accounts ofapproximately $9 million. 62Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 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 estimatedsame-hospital collection rate from managed care payers was approximately 98.3% at December 31, 2013 and 98.0% at December 31, 2012. Conifer continues to focus on revenue cycle initiatives to improve our cash flow. These initiatives are focused on standardizing and improving patientaccess processes, including pre-registration, registration, verification of eligibility and benefits, liability identification and collection at point-of-service, andfinancial counseling. The goals of the effort are focused on reducing denials, improving service levels to patients and increasing the quality of accounts thatend up in accounts receivable. Although we continue to focus on improving our methodology for evaluating the collectability of our accounts receivable, wemay incur future 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 $2.039 billion and $1.360 billion at December 31, 2013 and 2012,respectively, excluding cost report settlements payable and valuation allowances of $4 million and $24 million at December 31, 2013 and 2012, respectively: December 31, 2013MedicareMedicaidManagedCareIndemnity,Self-Payand OtherTotal0-60 days76%58%73%32%65%61-120 days9%21%13%17%14%121-180 days4%9%5%7%6%Over 180 days11%12%9%44%15%Total100%100%100%100%100% December 31, 2012MedicareMedicaidManagedCareIndemnity,Self-Payand OtherTotal0-60 days92%62%78%29%67%61-120 days2%19%11%17%12%121-180 days1%8%4%9%5%Over 180 days5%11%7%45%16%Total100%100%100%100%100% Our AR Days from continuing operations were 48.3 days at December 31, 2013 and 52.7 days at December 31, 2012, respectively, within our targetof less than 55 days. AR Days are calculated as our accounts receivable from continuing operations on the last date in the quarter divided by our net operatingrevenues from continuing operations for the quarter ended on that date divided by the number of days in the quarter. As of December 31, 2013, we had a cumulative total of patient account assignments to our Conifer subsidiary dating back at least three years orolder of approximately $3.3 billion related to our continuing operations, but excluding our newly acquired hospitals. These accounts have already been writtenoff and are not included in our receivables or in the allowance for doubtful accounts; however, an estimate of future recoveries from all the accounts assignedto our Conifer subsidiary is determined based on our historical experience and recorded in accounts receivable. Patient advocates from Conifer’s Medical Eligibility Program (“MEP”) screen patients in the hospital to determine whether those patients meeteligibility requirements for financial assistance programs. They also expedite the process of applying for these government programs. Receivables from patientswho are potentially eligible for Medicaid are classified as Medicaid pending, under the MEP, with appropriate contractual allowances recorded. At the presenttime our new acquisitions are not part of this program. Based on recent trends, approximately 93% of all accounts in the MEP are ultimately approved forbenefits under a government program, such as Medicaid. The following table shows the approximate amount of accounts 63Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 receivable in the MEP still awaiting determination of eligibility under a government program at December 31, 2013 and 2012 by aging category: December 31,201320120-60 days$132$9961-120 days2822121-180 days85Over 180 days1816Total$186$142 SALARIES, WAGES AND BENEFITS Salaries, wages and benefits expense as a percentage of net operating revenues increased 1.7% for the year ended December 31, 2013 compared to theyear ended December 31, 2012. Same-hospital salaries, wages and benefits per adjusted patient admission for our hospital operations and other segmentincreased by approximately 5.0% in the year ended December 31, 2013 compared to the same period in 2012. This increase is primarily due to an increase inthe number of physicians we employ, annual merit increases for certain of our employees, increased health benefits costs and increased contract labor,partially offset by a decrease in incentive compensation expense. Salaries, wages and benefits expense for the year ended December 31, 2013 and 2012included stock-based compensation expense of $37 million and $32 million, respectively. Salaries, wages and benefits expense for Conifer increased by $302 million in the year ended December 31, 2013 compared to the year endedDecember 31, 2012 due to an increase in employee headcount as a result of the growth in Conifer’s business primarily attributable to the new CHI partnership,the Vanguard acquisition and Conifer’s two acquisitions in the three months ended December 31, 2012. As of December 31, 2013, approximately 21% of our employees were represented by various labor unions. These employees — primarily registerednurses and service and maintenance workers — were located at 39 of our hospitals, the majority of which are in California, Florida, Massachusetts andMichigan. We currently have two expired contracts and are negotiating renewals under extension agreements. We are also negotiating an initial contract at one ofour hospitals where employees recently chose union representation. At this time, we are unable to predict the outcome of the negotiations, but increases insalaries, wages and benefits could result from these agreements. Furthermore, there is a possibility that strikes could occur during the negotiation process,which could increase our labor costs and have an adverse effect on our patient admissions and net operating revenues. Future organizing activities by laborunions could increase our level of union representation in 2014. SUPPLIES Supplies expense as a percentage of net operating revenues decreased 0.9% for the year ended December 31, 2013 compared to the year endedDecember 31, 2012. Same-hospital supplies expense per adjusted patient admission for our hospital operations and other segment increased by 1.3% in theyear ended December 31, 2013 compared to the same period in 2012. Supplies expense was favorably impacted by lower implant costs, orthopedic supplycosts and cardiology supply costs due to renegotiated prices, partially offset by increased costs of pharmaceuticals and increased surgical supply costs as aresult of higher surgical volumes. 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 group-purchasing strategies and supplies-management services in an effort to reduce costs. 64Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 OPERATING EXPENSES, NET Other operating expenses as a percentage of net operating revenues was 24.3% in the year ended December 31, 2013 compared to 23.5% in the yearended December 31, 2012. Same-hospital other operating expenses per adjusted patient admission for our hospital operations and other segment increased by2.4% in the year ended December 31, 2013 compared to the same period in 2012. The 2.6% increase in same-hospital other operating expenses in the yearended December 31, 2013 compared to the year ended December 31, 2012 is primarily due to: · increased costs of contracted services ($92 million) primarily related to Conifer’s new clients and business acquisitions; · increased medical fees primarily related to employed physicians ($42 million); · increased rent and lease expenses ($6 million); and · increased malpractice expense ($6 million). These increases were partially offset by lower consulting and legal expenses ($25 million) in part due to the aforementioned Medicare Budget Neutralitysettlement in 2012. Malpractice expense in the year ended December 31, 2013 included favorable adjustments totaling approximately $11 million due to a 127 basispoint increase in the interest rate used to estimate the discounted present value of projected future malpractice liabilities compared to an unfavorable adjustmentof $2 million due to a 17 basis point decrease in the interest rate in the 2012 period. IMPAIRMENT AND RESTRUCTURING CHARGES, AND ACQUISITION-RELATED COSTS During the year ended December 31, 2013, we recorded impairment and restructuring charges and acquisition-related costs of $103 million. Thisamount included a $12 million impairment charge for the write-down of buildings and equipment and other long-lived assets, primarily capitalized softwarecosts classified in other intangible assets, of one of our hospitals to their estimated fair values, primarily due to a decline in the fair value of real estate in themarket in which the hospital operates and a decline in the estimated fair value of equipment. Material adverse trends in our most recent estimates of futureundiscounted cash flows of the hospital indicated the carrying value of the hospital’s long-lived assets was not recoverable from the estimated future cashflows. We believe the most significant factors contributing to the adverse financial trends include reductions in volumes of insured patients, shifts in payermix from commercial to governmental payers combined with reductions in reimbursement rates from governmental payers, and high levels of uninsuredpatients. 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 carrying value ofthe 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. Unless the anticipated future financial trends of this hospital improve to the extent that the estimated futureundiscounted cash flows exceed the carrying value of the long-lived assets, this hospital is at risk of future impairments, particularly if we spend significantamounts 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 real estate orequipment continues to decline. The aggregate carrying value of assets held and used of the hospital for which an impairment charge was recorded was $44million as of December 31, 2013 after recording the impairment charge. We also recorded $16 million of restructuring costs, $14 million of employeeseverance costs, $2 million of lease termination costs, and $59 million in acquisition-related costs, which includes both transaction costs and acquisitionintegration charges. During the year ended December 31, 2012, we recorded net impairment and restructuring charges of $19 million, consisting of $3 million relating tothe impairment of obsolete assets, $2 million relating to other impairment charges, $8 million of employee severance costs and $6 million of other relatedcosts. Our impairment tests presume stable, improving or, in some cases, declining operating results in our hospitals, which are based on programs andinitiatives being implemented that are designed to achieve the hospital’s most recent projections. If these projections are not met, or if in the future negativetrends occur that impact our future outlook, future impairments of long-lived assets and goodwill may occur, and we may incur additional restructuringcharges. 65Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 LITIGATION AND INVESTIGATION COSTS Litigation and investigation costs for the year ended December 31, 2013 and 2012 were $31 million and $5 million, respectively, primarily related tocosts associated with various legal proceedings and governmental reviews. INTEREST EXPENSE Interest expense for the year ended December 31, 2013 was $474 million compared to $412 million for the year ended December 31, 2012, primarilydue to increased borrowings partially offset by a lower average interest rate on our outstanding debt. LOSS FROM EARLY EXTINGUISHMENT OF DEBT During the year ended December 31, 2013, we recorded a loss from early extinguishment of debt of $348 million consisting of $177 million related tothe difference between the purchase prices and the par values of the $714 million aggregate principal amount of our 10% senior secured notes due 2018 that wepurchased and called during the period, as well as the write-off of unamortized note discounts and issuance costs, and $171 million related to the differencebetween the purchase prices and the par values of the $925 million aggregate principal amount of our 8/% senior secured notes due 2019 that we purchasedand called during the period, as well as the write-off of unamortized note discounts and issuance costs. INCOME TAX EXPENSE During the year ended December 31, 2013, we recorded an income tax benefit of $65 million, primarily related to the loss from early extinguishmentof debt, compared to an expense of $125 million during the year ended December 31, 2012. DISCONTINUED OPERATIONS: IMPAIRMENT OF LONG-LIVED ASSETS AND GOODWILL, AND RESTRUCTURINGCHARGES During the year ended December 31, 2012, we recorded an impairment charge in discontinued operations of $100 million related to the sale ofCreighton University Medical Center, consisting of $98 million for the write-down of long-lived assets to their estimated fair values and a $2 million chargefor the write-down of goodwill. ADDITIONAL SUPPLEMENTAL NON-GAAP DISCLOSURES The financial information provided throughout this report, including our Condensed Consolidated Financial Statements and the notes thereto, hasbeen prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). However, we use certain non-GAAPfinancial measures defined below in communications with investors, analysts, rating agencies, banks and others to assist such parties in understanding theimpact of various items on our financial statements, some of which are recurring or involve cash payments. In addition, from time to time we use thesemeasures to define 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 loss (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 and restructuring charges andacquisition-related costs; and (13) depreciation and amortization. As is the case with all non-GAAP measures, investors should consider the limitationsassociated with this metric, including the potential lack of comparability of this measure from one company to another, and should recognize that AdjustedEBITDA does not provide a complete measure of our operating performance because it excludes many items that are included in our financial statements.Accordingly, investors are encouraged to use GAAP measures when evaluating our financial performance. 6678Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 reconciliation of Adjusted EBITDA to net income attributable to our common shareholders (the most comparable GAAPterm) for the years ended December 31, 2013 and 2012: Years Ended December 31,20132012Net income (loss) attributable to Tenet Healthcare Corporation common shareholders$(134)$141Less: Net loss (income) attributable to noncontrolling interests(30)19Preferred stock dividends—(11)Loss from discontinued operations, net of tax(11)(76)Income (loss) from continuing operations(93)209Income tax benefit (expense)65(125)Investment earnings11Loss from early extinguishment of debt(348)(4)Interest expense(474)(412)Operating income663749Litigation and investigation costs(31)(5)Impairment and restructuring charges, and acquisition-related costs(103)(19)Depreciation and amortization(545)(430)Adjusted EBITDA$1,342$1,203 Net operating revenues$11,102$9,119 Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin)12.1%13.2% RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2012 COMPARED TO THE YEAR ENDED DECEMBER 31, 2011 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, 2012 and 2011: Years Ended December 31,20122011Increase(Decrease)Net operating revenues:General hospitals$9,436$9,061$375Other operations468310158Net operating revenues before provision for doubtful accounts9,9049,371533Less provision for doubtful accounts78571768Net operating revenues9,1198,654465Operating expenses:Salaries, wages and benefits4,2574,015242Supplies1,5521,5484Other operating expenses, net2,1472,020127Electronic health record incentives(40)(55)15Depreciation and amortization43039832Impairment of long-lived assets and goodwill, and restructuring charges1920(1)Litigation and investigation costs555(50)Operating income$749$653$96 67Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 31,20122011Increase(Decrease)Net operating revenues100.0%100.0%—%Operating expenses:Salaries, wages and benefits46.7%46.4%0.3%Supplies17.0%17.9%(0.9)%Other operating expenses, net23.5%23.4%0.1%Electronic health record incentives(0.4)%(0.6)%0.2%Depreciation and amortization4.7%4.6%0.1%Impairment of long-lived assets and goodwill, and restructuring charges0.2%0.2%—%Litigation and investigation costs0.1%0.6%(0.5)%Operating income8.2%7.5%0.7% Revenues from our general hospitals represented approximately 95% and 97% of our total net operating revenues before provision for doubtful accounts for theyears ended December 31, 2012 and 2011, respectively. Net operating revenues from our other operations were $468 million and $310 million in the years ended December 31, 2012 and 2011, respectively.The increase in net operating revenues from other operations during 2012 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 for each of the years ended December 31, 2012 and 2011. The tables below show certain selected historical operating statistics of our continuing hospitals on a same-hospital basis. We have excluded statisticsrelated to hospitals previously owned by Vanguard from the same-hospital statistics for the years ended December 31, 2012 and 2011 because we did not ownthose hospitals during those years. Same-HospitalContinuing OperationsYears Ended December 31,Admissions, Patient Days and Surgeries20122011Increase(Decrease)Total admissions506,485507,834(0.3)%Adjusted patient admissions(1)796,520779,8332.1%Paying admissions (excludes charity and uninsured)470,756473,943(0.7)%Charity and uninsured admissions35,72933,8915.4%Admissions through emergency department312,902306,4242.1%Paying admissions as a percentage of total admissions92.9%93.3%(0.4)%(2)Charity and uninsured admissions as a percentage of total admissions7.1%6.7%0.4%(2)Emergency department admissions as a percentage of total admissions61.8%60.3%1.5%(2)Surgeries – inpatient141,288144,665(2.3)%Surgeries – outpatient239,667217,62110.1%Total surgeries380,955362,2865.2%Patient days – total2,368,9162,413,245(1.8)%Adjusted patient days(1)3,693,2183,673,4410.5%Average length of stay (days)4.684.75(1.5)%Number of hospitals (at end of period)4949—(2)Licensed beds (at end of period)13,21613,1190.7%Average licensed beds13,18713,1150.5%Utilization of licensed beds(3)49.1%50.4%(1.3)%(2) (1) Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services by multiplying actual patientadmissions/days by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues.(2) The change is the difference between the 2012 and 2011 amounts shown.(3) Utilization of licensed beds represents patient days divided by number of days in the period divided by average licensed beds. 68Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Same-HospitalContinuing OperationsYears Ended December 31,Outpatient Visits20122011Increase(Decrease)Total visits4,167,1143,954,0165.4%Paying visits (excludes charity and uninsured)3,728,4023,554,2314.9%Charity and uninsured visits438,712399,7859.7%Emergency department visits1,555,1021,457,2506.7%Surgery visits239,667217,62110.1%Paying visits as a percentage of total visits89.5%89.9%(0.4)%(1)Charity and uninsured visits as a percentage of total visits10.5%10.1%0.4%(1) (2) The change is the difference between the 2012 and 2011 amounts shown. Same-HospitalContinuing OperationsYears Ended December 31,Revenues20122011Increase(Decrease)Net operating revenues$9,119$8,6545.4%Revenues from the uninsured$636$6074.8%Net inpatient revenues(1)$6,200$6,0282.9%Net outpatient revenues(1)$3,167$2,9288.2% (2) Net inpatient revenues and net outpatient revenues are components of net operating revenues. Net inpatient revenues include self-pay revenues of$269 million and $271 million for the years ended December 31, 2012 and 2011, respectively. Net outpatient revenues include self-pay revenues of$367 million and $336 million for the years ended December 31, 2012 and 2011, respectively. Same-HospitalContinuing OperationsYears Ended December 31,Revenues on a Per Admission, Per Patient Day and Per Visit Basis20122011Increase(Decrease)Net inpatient revenue per admission$12,241$11,8703.1%Net inpatient revenue per patient day$2,617$2,4984.8%Net outpatient revenue per visit$760$7412.6%Net patient revenue per adjusted patient admission(1)$11,760$11,4852.4%Net patient revenue per adjusted patient day(1)$2,536$2,4384.0% (2) Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services by multiplying actual patientadmissions/days by the sum of gross inpatient revenues and outpatient revenues and dividing the results by gross inpatient revenues. Same-HospitalContinuing OperationsYears Ended December 31,Provision for Doubtful Accounts20122011Increase(Decrease)Provision for doubtful accounts$785$7179.5%Provision for doubtful accounts as a percentage of net operating revenues beforeprovision for doubtful accounts7.9%7.7%0.2%(1)Collection rate on self-pay accounts(2)28.9%27.7%1.2%(1)Collection rate on commercial managed care accounts98.0%98.2%(0.2)%(1) (1) The change is the difference between the 2012 and 2011 amounts shown.(2) Self-pay accounts receivable are comprised of both uninsured and balance after insurance receivables. 69Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Same-HospitalContinuing OperationsYears Ended December 31,Selected Operating Expenses20122011Increase(Decrease)Hospital Operations and otherSalaries, wages and benefits$3,983$3,7925.0%Supplies1,5521,5480.3%Other operating expenses2,0401,9464.8%Total$7,575$7,2864.0%ConiferSalaries, wages and benefits$274$22322.9%Other operating expenses1077444.6%Total$381$29728.3%TotalSalaries, wages and benefits$4,257$4,0156.0%Supplies1,5521,5480.3%Other operating expenses2,1472,0206.3%Total$7,956$7,5834.9%Rent/lease expense(1)Hospital Operations and other$144$1329.1%Conifer12119.1%Total$156$1439.1%Hospital Operations and other(2)Salaries, wages and benefits per adjusted patient day$1,078$1,0324.5%Supplies per adjusted patient day420421(0.2)%Other operating expenses per adjusted patient day5535304.3%Total per adjusted patient day$2,051$1,9833.4%Salaries, wages and benefits per adjusted patient admission$5,001$4,8632.8%Supplies per adjusted patient admission1,9481,985(1.9)%Other operating expenses per adjusted patient admission2,5612,4952.6%Total per adjusted patient admission$9,510$9,3431.8% (1) Included in other operating expenses.(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. REVENUES During the year ended December 31, 2012, net operating revenues before provision for doubtful accounts increased 5.7%, which included a 4.6%increase in net patient revenues, compared to the year ended December 31, 2011. Increases in pricing were the largest contributing factors, resulting in a 4.0%increase in net patient revenues, while increases in our overall volumes resulted in a 0.6% increase in net patient revenues. Our same-hospital net inpatient revenues for the year ended December 31, 2012 increased by 2.9% compared to the year ended December, 31, 2011.Several factors impacted our net inpatient revenues in the 2012 period compared to the 2011 period, including: · Improved managed care pricing as a result of renegotiated contracts; · Medicaid DSH and other state-funded subsidy revenues of $283 million in the year ended December 31, 2012 compared to $255 million in theyear ended December 31, 2011; · Favorable adjustments of approximately $81 million in the year ended December 31, 2012 related to the aforementioned Medicare BudgetNeutrality settlement; and · An unfavorable shift in our total payer mix. 70Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 decreased by 1.8% and total admissions decreased by 0.3% during the year ended December 31, 2012 compared to the year endedDecember 31, 2011. We believe the following factors contributed to the changes in our inpatient volume levels: (1) weak economic conditions, which we believeadversely impacted the level of elective procedures performed at our hospitals; (2) loss of patients to competing health care providers; and (3) industry trendsreflecting the shift of certain clinical procedures being performed in an outpatient setting rather than in an inpatient setting. Same-hospital net outpatient revenues and total outpatient visits increased 8.2% and 5.4%, respectively, during the year ended December 31, 2012compared to the year ended December 31, 2011. The growth in our outpatient revenues and volumes was related to both organic growth and growth fromacquisitions. Net outpatient revenue per visit increased 2.6% primarily due to the improved terms of our managed care contracts, partially offset by theprovision of lower acuity services by outpatient centers we acquired in the past several years, as well as an unfavorable shift in our total outpatient payer mix. Our Conifer subsidiary generated net operating revenues of $488 million and $340 million for the years ended December 31, 2012 and 2011,respectively, a portion of which was eliminated in consolidation as described in Note 20 to the Consolidated Financial Statements. The increase in the portionthat was not eliminated in consolidation is primarily due to new clients, expanded service offerings and acquisitions. PROVISION FOR DOUBTFUL ACCOUNTS The provision for doubtful accounts as a percentage of net operating revenues before provision for doubtful accounts was 7.9% for the year endedDecember 31, 2012 compared to 7.7% for the year ended December 31, 2011. The increase in provision for doubtful accounts primarily related to increaseduninsured patient volumes, partially offset by the impact of a 120 basis point improvement in our collection rate on self-pay accounts. The table below shows the net accounts receivable and allowance for doubtful accounts by payer at December 31, 2012 and 2011: December 31, 2012December 31, 2011AccountsReceivableBeforeAllowancefor DoubtfulAccountsAllowancefor DoubtfulAccountsNetAccountsReceivableBeforeAllowancefor DoubtfulAccountsAllowancefor DoubtfulAccountsNetMedicare$172$—$172$166$—$166Medicaid116—116118—118Net cost report settlements payable andvaluation allowances(24)—(24)(39)—(39)Managed care7697269776067693Self-pay uninsured2041782621519025Self-pay balance after insurance14378651347757Estimated future recoveries fromaccounts assigned to our Conifersubsidiary88—8862—62Other payers2646819621248164Total continuing operations1,7323961,3361,6283821,246Total discontinued operations1459471532$1,746$401$1,345$1,675$397$1,278 At December 31, 2012, our collection rate on self-pay accounts was approximately 28.9%. We experienced a relatively stable self-pay collection rateduring 2011 and 2012 as follows: 27.8% at March 31, 2011; 27.9% at June 30, 2011; 27.7% at both September 30, 2011 and December 31, 2011; 27.9% atMarch 31, 2012; 28.5% at June 30, 2012; and 28.8% at September 30, 2012. These self-pay collection rates include payments made by patients, includingco-pays and deductibles paid by patients with insurance. Based on our accounts receivable from self-pay patients and co-pays and deductibles owed to us bypatients with insurance at December 31, 2012, a 10% decrease or increase in our self-pay collection rate, or approximately 3%, which we believe could be areasonably likely change, would result in an unfavorable or favorable adjustment to provision for doubtful accounts of approximately $7 million. 71Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 collection rate from managed care payers was approximately 98.0% at December 31, 2012 and 98.2% at December 31, 2011. The following tables present the approximate aging by payer of our net accounts receivable from continuing operations of $1.360 billion and$1.285 billion at December 31, 2012 and 2011, respectively, excluding cost report settlements payable and valuation allowances of $24 million and$39 million at December 31, 2012 and 2011, respectively: December 31, 2012MedicareMedicaidManagedCareIndemnity,Self-Payand OtherTotal0-60 days92%62%78%29%67%61-120 days2%19%11%17%12%121-180 days1%8%4%9%5%Over 180 days5%11%7%45%16%Total100%100%100%100%100% December 31, 2011MedicareMedicaidManagedCareIndemnity,Self-Payand OtherTotal0-60 days93%63%75%31%68%61-120 days3%18%12%17%12%121-180 days2%9%5%10%6%Over 180 days2%10%8%42%14%Total100%100%100%100%100% Our AR Days from continuing operations were 53 days at both December 31, 2012 and 2011, within our target of less than 55 days. AR Days arecalculated as our accounts receivable from continuing operations on the last date in the quarter divided by our net operating revenues from continuingoperations for the quarter ended on that date divided by the number of days in the quarter. As of December 31, 2012, we had a cumulative total of patient account assignments to our Conifer subsidiary dating back at least three years orolder of approximately $3.2 billion related to our continuing operations. These accounts have already been written off and are not included in our receivables orin the allowance for doubtful accounts; however, an estimate of future recoveries from all the accounts assigned to our Conifer subsidiary is determined basedon our historical experience and recorded in accounts receivable. The following table shows the approximate amount of accounts receivable in the MEP still awaiting determination of eligibility under a governmentprogram at December 31, 2012 and 2011 by aging category: December 31,201220110-60 days$99$8261-120 days2218121-180 days57Over 180 days1615Total$142$122 SALARIES, WAGES AND BENEFITS Salaries, wages and benefits expense as a percentage of net operating revenues increased 0.3% for the year ended December 31, 2012 compared to theyear ended December 31, 2011. Salaries, wages and benefits per adjusted patient admission increased 2.8% in the year ended December 31, 2012 compared tothe same period in 2011. This increase is primarily due to an increase in the number of physicians we employ, annual merit and contractual wage increasesfor our employees, increased contract labor costs, increased annual incentive compensation expense, increased workers’ compensation expense, increasedhealth benefits costs and increased employee-related costs associated with our HIT implementation program, 72Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 partially offset by decreased overtime expense. Included in salaries, wages and benefits expense in 2012 is $1 million of expense due to a 17 basis pointdecrease in the interest rate used to estimate the discounted present value of projected future workers’ compensation liabilities, compared to a $4 millionunfavorable adjustment as a result of a 136 basis point decrease in the interest rate in the year ended December 31, 2011. Salaries, wages and benefits expensefor the years ended December 31, 2012 and 2011 also included stock-based compensation expense of $32 million and $24 million, respectively. Salaries, wages and benefits expense for our Conifer segment increased by 22.9% in the year ended December 31, 2012 compared to the year endedDecember 31, 2011 due to an increase in employee headcount as a result of the growth in Conifer’s business primarily attributable to the new CHI partnershipand Conifer’s two acquisitions in 2012. SUPPLIES Supplies expense as a percentage of net operating revenues decreased 0.9% for the year ended December 31, 2012 compared to the year endedDecember 31, 2011. Supplies expense per adjusted patient admission decreased 1.9% in the year ended December 31, 2012 compared to the same period in2011. Supplies expense was favorably impacted by lower pharmaceutical costs and a decline in orthopedic and cardiology-related costs due to renegotiatedprices, partially offset by increased costs of implants and surgical supplies. In general, supplies expense changes are primarily attributable to changes in ourpatient volume levels and the mix of procedures performed. OTHER OPERATING EXPENSES, NET Other operating expenses as a percentage of net operating revenues was 23.5% in the year ended December 31, 2012 compared to 23.4% in the yearended December 31, 2011. Other operating expenses per adjusted patient admission increased by 2.6% in the year ended December 31, 2012 compared to thesame period in 2011. The increase in other operating expenses for our Hospital Operations and other segment is primarily due to: · increased costs of contracted services ($33 million), primarily due to additional physician practices we acquired;· higher consulting and legal costs of $23 million, which includes costs related to the aforementioned Medicare Budget Neutrality settlement andvarious managed care payer settlements;· increased systems implementation costs ($17 million), primarily related to our HIT implementation program;· increased rent and lease expenses ($14 million);· $13 million of costs associated with funding indigent care services by certain of our Texas hospitals beginning in the three months endedDecember 31, 2012; and· gains totaling $4 million from the sale of land and buildings in the 2012 period compared to gains of $8 million from the sale of a building atthe former campus of one of our hospitals and a medical office building in the 2011 period. These increases were partially offset by decreased physician relocation expenses ($9 million). Malpractice expense was $92 million in the year ended December 31, 2012, which included an unfavorable adjustment of approximately $2 milliondue to a 17 basis point decrease in the interest rate used to estimate the discounted present value of projected future malpractice liabilities, compared tomalpractice expense of $108 million in the year ended December 31, 2011, which included an unfavorable adjustment of approximately $17 million due to a136 basis point decrease in the interest rate. The amount of malpractice expense in the year ended December 31, 2012 may not necessarily be indicative ofmalpractice expense amounts in future years due to changes in loss experience and interest rates used to estimate the discounted present value of projectedfuture malpractice liabilities. Other operating expenses for our Conifer segment increased by 44.6% in the year ended December 31, 2012 compared to the year endedDecember 31, 2011 primarily due to additional operating expenses related to the new CHI partnership and Conifer’s two acquisitions in 2012. 73Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 IMPAIRMENT OF LONG-LIVED ASSETS AND GOODWILL, AND RESTRUCTURING CHARGES During the year ended December 31, 2012, we recorded net impairment and restructuring charges of $19 million, consisting of $3 million relating tothe impairment of obsolete assets, $2 million relating to other impairment charges, $8 million of employee severance costs and $6 million of other relatedcosts. During the year ended December 31, 2011, we recorded net impairment and restructuring charges of $20 million. This amount included a $6 millionimpairment charge for the write-down of buildings and equipment of one of our previously impaired hospitals to their estimated fair values, primarily due to adecline 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 trendsin our estimates of future undiscounted cash flows of the hospital at that time, consistent with our previous estimates in prior years when impairment chargeswere recorded at this hospital, indicated the carrying value of the hospital’s long-lived assets was not recoverable from the estimated future cash flows. Webelieved the most significant factors contributing to the adverse financial trends at that time included reductions in volumes of insured patients, shifts in payermix from commercial to governmental payers combined with reductions in reimbursement rates from governmental payers, and high levels of uninsuredpatients. 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 carrying value ofthe 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. 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 impairment charges of $1 million in connection withthe sale 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 $1 million of other related costs. LITIGATION AND INVESTIGATION COSTS Litigation and investigation costs for the year ended December 31, 2012 were $5 million compared to $55 million for the year endedDecember 31, 2011. The 2012 amount primarily related to costs associated with various legal proceedings and governmental reviews. The 2011 amountprimarily related to costs associated with our evaluation of an unsolicited acquisition proposal received in November 2010 (which was subsequentlywithdrawn), changes in reserve estimates established in connection with certain governmental reviews, accruals for a physician privileges case and certainhospital-related tort claims, the settlement of a union arbitration claim and costs to defend various matters. INTEREST EXPENSE Interest expense for the year ended December 31, 2012 was $412 million compared to $375 million for the year ended December 31, 2011. Theincrease primarily related to a $30 million favorable impact from an interest rate swap agreement we terminated in August 2011. During the year endedDecember 31, 2011, the interest rate swap agreement generated approximately $8 million of cash interest savings and a $22 million gain on the settlement ofthe agreement. See Note 6 to the accompanying Consolidated Financial Statements for additional information about this agreement. LOSS FROM EARLY EXTINGUISHMENT OF DEBT During the year ended December 31, 2012, we recorded a loss from early extinguishment of debt of approximately $4 million, primarily related to thedifference between the purchase prices and the par values of the $161 million aggregate principal amount outstanding of our 7% senior notes due 2013 thatwe purchased during the period. During the year ended December 31, 2011, we recorded a loss from early extinguishment of debt of approximately$117 million, primarily related to the difference between the purchase prices and the par values of the $713 million aggregate principal amount of 9% seniorsecured notes due 2015 that we purchased during the period, as well as the write-off of unamortized note discounts and issuance costs. INCOME TAX EXPENSE During the year ended December 31, 2012, we recorded income tax expense of $125 million compared to $61 million during the year endedDecember 31, 2011. See Note 16 to the accompanying Consolidated Financial Statements for additional information about income taxes. 7438Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 DISCONTINUED OPERATIONS: IMPAIRMENT OF LONG-LIVED ASSETS AND GOODWILL, AND RESTRUCTURINGCHARGES During the year ended December 31, 2012, we recorded an impairment charge in discontinued operations of $100 million related to the sale ofCreighton University Medical Center, consisting of $98 million for the write-down of long-lived assets to their estimated fair values and a $2 million chargefor the write-down of goodwill. 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, 2013: Years Ending December 31,LaterTotal20142015201620172018Years(In Millions)Long-term debt(1)$15,449$736$1,114$1,023$618$1,659$10,299Capital lease obligations(1)408886525495176Long-term non-cancelable operating leases6631371171028056171Standby letters of credit189189—————Guarantees(2)1267430175——Asset retirement obligations142—————142Academic affiliation agreements(3)209442929291761Tax liabilities29—————29Defined benefit plan obligations5532820202020445Construction and capital improvements4661901506363——Information technology contract services1,364227164167169172465Purchase orders421421—————Total(4)$20,019$2,134$1,689$1,446$1,033$1,929$11,788 (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, 2013, the current and long-termprofessional and general liability reserves included in our Consolidated Balance Sheet were approximately $156 million and $543 million, respectively,and the current and long-term workers’ compensation reserves included in our Consolidated Balance Sheet were approximately $55 million and$179 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, 2013: · On October 1, 2013, we entered into supplemental indentures relating to the sale of $2.8 billion aggregate principal amount of 8/% senior notes,which will mature on April 1, 2022, and $1.8 billion aggregate principal amount of 6% senior secured notes, which will mature on October 1,2020. Interest payments for the life of these notes will be approximately $2.7 billion. The proceeds from the sale of the notes were used to financethe acquisition of Vanguard, which closed on October 1, 2013. As part of the acquisition, we assumed Vanguard’s cash obligations, including acapital expenditure commitment at Detroit Medical Center and remaining construction costs for a new hospital campus in New Braunfels, Texasand significant expansion at two hospitals, for a total of approximately $600 million. 7518Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 · Following our acquisition of Vanguard, in accordance with the terms of our Credit Agreement, on October 15, 2013, we increased the maximumaggregate principal amount of our revolving credit facility from $800 million to $1 billion, subject to borrowing availability. · We entered into non-cancellable capital leases of approximately $341 million, primarily for equipment and three hospitals we previously leasedunder operating lease agreements. 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 requirements, contractual restrictions and other factors. Theseactions are part of our strategy to manage our leverage and capital structure over time, which is dependent on our total amount of debt, our cash and ouroperating results. At December 31, 2013, using the last 12 months of Adjusted EBITDA, including Vanguard’s last 12 months of Adjusted EBITDA, ourratio of total long-term debt, net of cash and cash equivalent balances, to Adjusted EBITDA was 6.0x. We anticipate this ratio will fluctuate from quarter toquarter based on earnings performance and other factors, including acquisitions that involve the assumption of long-term debt. We intend to manage this ratioby following our business plan, managing our cost structure and through other changes in our capital structure, including, if appropriate, the issuanceof equity or convertible securities. Our ability to achieve our leverage and capital structure objectives is subject to numerous risks and uncertainties, many ofwhich are described in the Forward-Looking Statements and Risk Factors sections 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 $691 million, $508 million and $475 million in the years ended December 31, 2013, 2012 and 2011, respectively, which included $2 million and$8 million in the years ended December 31, 2012 and 2011, respectively, related to discontinued operations. We anticipate that our capital expenditures forcontinuing operations for the year ending December 31, 2014 will total approximately $900 million to $1 billion, including $193 million that was accrued as aliability at December 31, 2013. Our budgeted 2014 capital expenditures include approximately $18 million to improve disability access at certain of ourfacilities pursuant to the terms of a negotiated consent decree. We expect to spend approximately $13 million more on such improvements over the next twoyears. During the year ended December 31, 2013, we acquired Vanguard for approximately $4.3 billion, or $21.00 per share of Vanguard stock, includingthe assumption of $2.5 billion of net Vanguard debt. We also purchased the following businesses: (1) 11 ambulatory surgery centers (in one of which we hadpreviously held a noncontrolling interest); (2) an urgent care center; (3) a provider network based in Southern California that includes contracted independentphysicians, ancillary providers and hospitals; (4) a medical office building; and (5) various physician practice entities. The fair value of the considerationconveyed in the acquisitions was $1.515 billion. Interest payments, net of capitalized interest, were $426 million, $376 million and $347 million in the years ended December 31, 2013, 2012 and2011, respectively. 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. It had the effect of converting our 10% senior secured notes due 2018 from a fixed interest rate paid semi-annually to avariable interest rate paid semi-annually based on the six-month London Interbank Offered Rate plus a floating rate spread of 6.60%. During the term of theinterest rate swap agreement, changes in the fair value of the interest rate swap agreement and changes in the fair value of the 10% senior secured notes wererecorded in interest expense. During the year ended December 31, 2011, our interest rate swap agreement generated $8 million of cash interest savings and a$22 million gain on the settlement of the agreement. 76Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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, net of tax refunds, were approximately $6 million in the year ended December 31, 2013 compared to approximately$13 million in the year ended December 31, 2012. At December 31, 2013, our carryforwards available to offset future taxable income consisted of (1) federalnet operating loss (“NOL”) carryforwards of approximately $1.6 billion pretax expiring in 2024 to 2033, (2) approximately $19 million in alternativeminimum tax credits with no expiration, (3) general business credit carryforwards of approximately $14 million expiring in 2023 to 2031, and (4) state NOLcarryforwards of $3.8 billion expiring in 2014 to 2033 for which the associated deferred tax benefit, net of valuation allowance and federal tax impact, is $34million. Our ability to utilize NOL carryforwards to reduce future taxable income may be limited under Section 382 of the Internal Revenue Code if our “five-percent shareholders” (as defined in Section 382 of the Code) collectively increase their ownership by more than 50 percentage points (by value) over a rollingthree-year period. These ownership changes include purchases of common stock under share repurchase programs, our offering of stock, the purchase or saleof our stock by five-percent shareholders, or the issuance or exercise of rights to acquire our stock. While we expect to be able to realize our total NOLcarryforwards prior to their expiration, if an ownership change occurs, our ability to use the NOL carryforwards to offset future taxable income will be subjectto an annual limitation and will depend on the amount of taxable income we generate in future periods. 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. Our tax returns for years ended after December 31, 2007 andVanguard’s tax returns for fiscal years after June 30, 2004 are subject to examination by the IRS. SOURCES AND USES OF CASH Our liquidity for the year ended December 31, 2013 was primarily derived from net cash provided by operating activities, cash on hand andborrowings under our revolving credit facility. We had approximately $113 million of cash and cash equivalents on hand at December 31, 2013 to fund ouroperations and capital expenditures, and our borrowing availability under our credit facility was $406 million based on our borrowing base calculation as ofDecember 31, 2013. 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 $589 million in the year ended December 31, 2013 compared to $593 million in the year endedDecember 31, 2012. Key negative and positive factors contributing to the change between the 2013 and 2012 periods include the following: · Increased income from continuing operations before income taxes of $139 million, excluding net gain on sales of investments, investment earnings(loss), gain (loss) from early extinguishment of debt, interest expense, litigation and investigation costs, impairment and restructuring charges,acquisition-related costs, and depreciation and amortization in the year ended December 31, 2013 compared to the year ended December 31, 2012; · The unfavorable impact of increased DSH receivables of $30 million primarily related to the Texas uncompensated care 1115 waiver program; · $20 million less cash used in operating activities from discontinued operations; · An increase of $51 million in payments on reserves for restructuring charges, acquisition-related costs, and litigation costs and settlements; · $50 million of additional interest payments primarily due to $37 million of interest payments related to the Vanguard debt refinanced inconnection with the acquisition on October 1, 2013; and · Income tax payments of $6 million in the year ended December 31, 2013 compared to $13 million in the year ended December 31, 2012. We continue to seek further initiatives to increase the efficiency of our balance sheet by generating incremental cash. These initiatives may include thesale of excess land, buildings or other underutilized or inefficient assets. 77Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Capital expenditures were $691 million and $508 million in the years ended December 31, 2013 and 2012, respectively. In October 2012, we announced that our board of directors had authorized the repurchase of up to $500 million of our common stock through ashare repurchase program that expired in December 2013. 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 we maintained. Shares wererepurchased at times and in amounts based on market conditions and other factors. Pursuant to the share repurchase program, we paid approximately$100 million to repurchase a total of 3,406,324 shares during the period from the commencement of the program through December 31, 2012, and we paidapproximately $400 million to repurchase a total of 9,484,974 shares during the period from January 1, 2013 to December 31, 2013. We record our investments that are available-for-sale at fair market value. As shown in Note 13 to the Condensed Consolidated Financial Statements,the majority of our investments are valued based on quoted market prices or other observable inputs. We have no investments that we expect will be negativelyaffected by the current 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, the “Credit Agreement”), that provides, subject to borrowing availability, forrevolving loans in an aggregate principal amount of up to $1 billion, with a $300 million subfacility for standby letters of credit. The Credit Agreement has ascheduled maturity date of November 29, 2016, subject to our repayment or refinancing on or before November 3, 2014 of approximately $238 million of theaggregate outstanding principal amount of our 9/% senior notes due 2015 (approximately $474 million of which was outstanding at December 31, 2013). Ifsuch repayment or refinancing does not occur, borrowings under the Credit Agreement will be due November 3, 2014. We are in compliance with all covenantsand conditions in our Credit Agreement. There were $405 million of cash borrowings outstanding under the revolving credit facility at December 30, 2013, andwe had approximately $189 million of standby letters of credit outstanding. Our borrowing availability under the Credit Agreement was $406 million basedon our borrowing base calculation as of December 31, 2013. In October 2013, we sold $2.8 billion aggregate principal amount of 8/% senior notes, which will mature on April 1, 2022, and $1.8 billionaggregate principal amount of 6% senior secured notes, which will mature on October 1, 2020. We will pay interest on the 8/% senior notes and 6% seniorsecured notes semi-annually in arrears on April 1 and October 1 of each year, commencing on April 1, 2014. The proceeds from the sale of the notes were usedto finance the acquisition of Vanguard. In addition, in accordance with the terms of the Credit Agreement, on October 15, 2013, we increased the maximumaggregate principal amount of our revolving credit facility from $800 million to $1 billion, subject to borrowing availability. In May 2013, we sold $1.050 billion aggregate principal amount of 4% senior secured notes, which will mature on October 1, 2021. We will payinterest on the 4/% senior secured notes semi-annually in arrears on January 1 and July 1 of each year, commencing on January 1, 2014. We used a portionof the proceeds from the sale of the notes to purchase approximately $767 million aggregate principal amount outstanding of our 8/% senior secured notesdue 2019 in a tender offer and to call approximately $158 million of the remaining aggregate principal amount outstanding of those notes. In connection withthe purchase, we recorded a loss from early extinguishment of debt of $171 million, primarily 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. In February 2013, we sold $850 million aggregate principal amount of 4% senior secured notes, which will mature on April 1, 2021. We will payinterest on the 4% senior secured notes semi-annually in arrears on April 1 and October 1 of each year, which payments commenced on October 1, 2013. Weused a portion of the proceeds from the sale of the notes to purchase approximately $645 million aggregate principal amount outstanding of our 10% seniorsecured notes due 2018 in a tender offer and to call approximately $69 million of the remaining aggregate principal amount outstanding of those notes. Inconnection with the purchase, we recorded a loss from early extinguishment of debt of $177 million, primarily related to the difference between the purchaseprices and the par values of the purchased notes, as well as the write-off of unamortized note discounts and issuance costs. 781418183838781212Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 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, the significant recent changes to which are described above, provide significantflexibility 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. Webelieve that existing cash and cash equivalents on hand, availability under our revolving credit facility, anticipated future cash provided by operatingactivities, and our investments in marketable securities of our captive insurance companies classified as noncurrent investments on our balance sheet shouldbe adequate to meet our current cash needs. These sources of liquidity should also be adequate to finance planned capital expenditures, payments on thecurrent 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 services businesses within Conifer, 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, our 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, 2013, 2012 and 2011 include $392 million, $953 million and $908 million,respectively, of net operating revenues and $72 million, $132 million and $115 million, respectively, of operating income generated from general hospitalsoperated by us under operating lease arrangements (one hospital as of December 31, 2013 and four hospitals of December 31, 2012 and 2011). In accordancewith GAAP, the applicable buildings and the future lease obligations under these arrangements are not recorded on our consolidated balance sheet. The oneremaining operating lease is currently scheduled to expire in 2027. If we are unable to extend this lease or purchase the hospital, we would no longer generaterevenues or expenses from the hospital. 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 $315 million of standby letters of credit outstanding and guarantees as ofDecember 31, 2013. RECENTLY ISSUED ACCOUNTING STANDARDS See Note 21 to our Consolidated Financial Statements included in this report for a discussion of recently issued accounting standards. 79Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 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, including contractual allowances and provision for doubtful accounts;· Electronic health record incentives;· Accruals for general and professional liability risks;· Accruals for defined benefit plans;· Impairment of long-lived assets;· Impairment of goodwill, and· Accounting for income taxes. 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. 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, which can takeseveral years before they are completely resolved. The payers are billed for patient services on an individual patient basis. An individual patient’s bill issubject to adjustment on a patient-by-patient basis in the ordinary course of business by the payers following their review and adjudication of each particularbill. We estimate the discounts for contractual allowances at the individual hospital level utilizing billing data on an individual patient basis. At the end of eachmonth, on an individual hospital basis, we estimate our expected reimbursement for patients of managed care plans based on the applicable contract terms. Webelieve it is reasonably likely for there to be an approximately 3% increase or decrease in the estimated contractual allowances related to managed care plans.Based on reserves as of December 31, 2013, a 3% increase or decrease in the estimated contractual allowance would impact the estimated reserves byapproximately $13 million. Some of the factors that can contribute to changes in the contractual allowance estimates include: (1) changes in reimbursementlevels for procedures, supplies and drugs when threshold levels are triggered; (2) changes in 80Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 reimbursement levels when stop-loss or outlier limits are reached; (3) changes in the admission status of a patient due to physician orders subsequent to initialdiagnosis or testing; (4) final coding of in-house and discharged-not-final-billed patients that change reimbursement levels; (5) secondary benefits determinedafter primary insurance payments; and (6) reclassification of patients among insurance plans with different coverage levels. Contractual allowance estimatesare periodically reviewed for accuracy by taking into consideration known contract terms, as well as payment history. Although we do not separatelyaccumulate and disclose the aggregate amount of adjustments to the estimated reimbursement for every patient bill, we believe our estimation and reviewprocess enables us to identify instances on a timely basis where such estimates need to be revised. We do not believe there were any adjustments to estimates ofpatient bills that were material to our revenues. In addition, on a corporate-wide basis, we do not record any general provision for adjustments to estimatedcontractual 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. Although outcomes vary, our policy is to attempt to collect amounts due from patients, including co-pays and deductibles due from patients withinsurance, 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. Generally, we estimate this allowance based on the aging of our accounts receivable by hospital, ourhistorical collection experience by hospital and for each type of payer over a look-back period, and other relevant factors. Based on our accounts receivablefrom self-pay patients and co-pays and deductibles owed to us by patients with insurance as of December 31, 2012, a 10% decrease or increase in our self-paycollection 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 $9 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-pays and deductibles to be made by patients with insurance, and business practices related to collection efforts. Thesefactors 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-pays and deductibles due frompatients with insurance, to their estimated net realizable value at the time of billing. Generally, uncollected balances are assigned to Conifer between 90 to180 days, once patient responsibility has been identified. When accounts are assigned to Conifer by the hospital, the accounts are completely written off thehospital’s books through the provision for doubtful accounts, and an estimated future recovery amount is calculated and recorded as a receivable on thehospital’s books at the same time. The estimated future recovery amount is adjusted based on the aging of the accounts and changes to actual recovery rates.The estimated future recovery amount for self-pay accounts is written down whereby it is fully reserved if the amount is not paid within two years after theaccount is assigned to Conifer. At the present time, our new acquisitions have not been fully integrated into our Conifer collections processes. 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. Generally, managed careaccounts collected by Conifer are gradually written down whereby they are fully reserved if the accounts are not paid within two years. 81Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 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. 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, 2013, a 5% increase in the number of 82Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 expected claims would increase the estimated reserves by $37 million, and a 5% decrease in the number of expected claims would decrease the estimatedreserves by $33 million. A 5% increase in the average cost per claim would increase the estimated reserves by $52 million, and a 5% decrease in the averagecost per claim would decrease the estimated reserves by $46 million. Because our estimated reserves for future claim payments are discounted to present value,a change in our discount rate assumption could also have a significant impact on our estimated reserves. Our discount rate was 2.45%, 1.18% and 1.35% atDecember 31, 2013, 2012 and 2011, respectively. A 100 basis point increase or decrease in the discount rate would change the estimated reserves by$17 million. In addition, because of the complexity of the claims, the extended period of time to settle the claims and the wide range of potential outcomes, ourultimate liability for professional and general liability claims could change materially from our current estimates. The table below shows the case reserves and incurred but not reported and loss development reserves as of December 31, 2013, 2012 and 2011: December 31,201320122011Case reserves$175$97$111Incurred but not reported and loss development reserves575272319Total undiscounted reserves$750$369$430 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 both December 31, 2013 and 2012 representing unsettled claims is approximately 99%. The following table, which includes both our continuing and discontinued operations, presents the amount of our accruals for professional andgeneral liability claims and the corresponding activity therein: Years Ended December 31,201320122011Accrual for professional and general liability claims, beginning of the year$356$412$467Assumed from acquisition36100Expense (income) related to:(1)Current year10286107Prior years13(2)10Expense (income) from discounting(13)422Total incurred loss and loss expense10288139Paid claims and expenses related to:Current year(3)(2)(2)Prior years(117)(142)(192)Total paid claims and expenses(120)(144)(194)Accrual for professional and general liability claims, end of year$699$356$412 (1) Total malpractice expense for continuing operations, including premiums for insured coverage, was $112 million, $92 million and $108 million in theyears ended December 31, 2013, 2012 and 2011, respectively. ACCRUALS FOR DEFINED BENEFIT PLANS Our defined benefit plan obligations and related costs are calculated using actuarial concepts. The discount rate is a critical assumption indetermining the elements of expense and liability measurement. We evaluate this critical assumption 83Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 annually. Other assumptions include employee 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 settingthese rates is a high-quality long-term corporate bond rate. A lower discount rate increases the present value of benefit obligations and increases pensionexpense. Our discount rates for 2013 ranged from 5.00% to 5.18% and our discount rate for 2012 was 4.00%. The assumed discount rate for pension plansreflects the market rates for high-quality corporate bonds currently available. A 100 basis point decrease in the assumed discount rate would increase total netperiodic pension expense for 2013 by approximately $7 million and would increase the projected benefit obligation at December 31, 2013 by approximately$157 million. A 100 basis point increase in the assumed discount rate would decrease net periodic pension expense for 2014 by approximately $5 million anddecrease the projected benefit obligation at December 31, 2013 by approximately $131 million. 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. 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, 2013, we recorded impairment and restructuring charges and acquisition-related costs of $103 million. Thisamount included a $12 million impairment charge for the write-down of buildings and equipment and other long-lived assets, primarily capitalized softwarecosts classified in other intangible assets, of one of our hospitals to their estimated fair values, primarily due to a decline in the fair value of real estate in themarket in which the hospital operates and a decline in the estimated fair value of equipment. Material adverse trends in our most recent estimates of futureundiscounted cash flows of the hospital indicated the carrying value of the hospital’s long-lived assets was not recoverable from the estimated future cashflows. We believe the most significant factors contributing to the adverse financial trends include reductions in volumes of insured patients, shifts in payermix from commercial to governmental payers combined with reductions in reimbursement rates from governmental payers, and high levels of uninsuredpatients. 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 carrying value ofthe 84Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. Unless the anticipated future financial trends of this hospital improve to the extent that the estimated futureundiscounted cash flows exceed the carrying value of the long-lived assets, this hospital is at risk of future impairments, particularly if we spend significantamounts 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 real estate orequipment continues to decline. The aggregate carrying value of assets held and used of the hospital for which an impairment charge was recorded was$44 million as of December 31, 2013 after recording the impairment charge. We also recorded $16 million of restructuring costs, $14 million of employeeseverance costs, $2 million of lease termination costs, and $59 million in acquisition-related costs. Additionally, in our most recent impairment analysis as ofDecember 31, 2013, we had two hospitals with an aggregate carrying value of long-lived assets of approximately $227 million whose estimated futureundiscounted cash flows exceeded the carrying value of long-lived assets by an aggregate amount of approximately $150 million. These two hospitals had thesmallest excess of future undiscounted cash flows on an annual basis necessary to recover the carrying value of their assets. We also had one hospital whoseestimated future undiscounted cash flows did not exceed the carrying value of long-lived assets. However, the fair value of those assets, based on anindependent appraisal, exceeded the carrying value by $23 million, so no impairment was recorded. Future adverse trends that result in necessary changes inthe assumptions underlying these estimates of future undiscounted cash flows could result in the hospitals’ estimated cash flows being less than the carryingvalue 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 carrying value of theassets, impairment charges would occur and could be material. 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 comparable assets or internal estimates of future net cash flows and presume stable, improving or, in some cases,declining results at our hospitals, depending on their circumstances. If the presumed level of performance does not occur as expected, impairment may result. As of December 31, 2013, our continuing operations consisted of two operating segments, our Conifer subsidiary and our hospital and otheroperations. In the three months ended December 31, 2013, we acquired 28 hospitals (plus one more under construction), 39 outpatient centers and five healthplans, serving communities in Arizona, California, Illinois, Massachusetts, Michigan and Texas, through our acquisition of Vanguard, and we moved ourhospitals in Philadelphia, Pennsylvania from our Southern States region into our Northeast region. Our hospital and other operations segment was structuredas follows as of December 31, 2013: · Our California region included all of our hospitals and other operations in California; · Our Central region included all of our hospitals and other operations in Missouri, New Mexico, Tennessee and Texas, except for those in theSan Antonio or South Texas markets; · Our Florida region included all of our hospitals and other operations in Florida; · Our Northeast region included all of our hospitals and other operations in Illinois, Massachusetts and Pennsylvania; · Our Southern States region included all of our hospitals and other operations in Alabama, Georgia, North Carolina and South Carolina; · Our Detroit market region included all of our hospitals and other operations in the Detroit, Michigan area; · Our Phoenix market included all of our hospitals and other operations in the Phoenix, Arizona area; · Our San Antonio market included all of our hospitals and other operations in the San Antonio, Texas area; and 85Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 South Texas market included all of our hospitals and other operations in the Brownsville, Texas and Harlingen, Texas areas. These regions and markets are reporting units used to perform our goodwill impairment analysis and are one level below our hospital operations reportablebusiness segment level. The goodwill balance related to our acquisition of Vanguard has not yet been allocated by reporting unit. Our allocated goodwill balance isprimarily related to our Southern States region, which totals approximately $388 million, and our Central region, which totals approximately $370 million. Inour latest impairment analysis as of December 31, 2013, the estimated fair value of these regions exceeded the carrying value of long-lived assets, includinggoodwill, by approximately 18% and 116%, respectively. 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. During the year ended December 31, 2011, we reduced our valuation allowance by $5 million based on 2011 profits and projected profits for 2012. Duringthe year ended December 31, 2012, we reduced the valuation allowance by an additional $5 million based on 2012 profits and projected profits for 2013.During the year ended December 31, 2013, the valuation allowance increased by $51 million, $28 million due to the acquisition of Vanguard and $23 millionprimarily due to the recording of deferred tax assets for state net operating loss carryforwards that have a full valuation allowance. The remaining $107 millionbalance in the valuation allowance as of December 31, 2013 is primarily attributable to certain state net operating loss carryovers 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. 86Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 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, 2013. 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 31,20142015201620172018ThereafterTotalFair Value(Dollars in Millions)Fixed rate long-term debt$149$539$25$49$1,047$8,653$10,462$10,833Average effective interest rates7.0%8.9%5.3%8.7%6.6%7.0%7.0% Variable rate long-term debt$—$—$405$—$—$—$405$405Average effective interest rates——2.38%———2.38% At December 31, 2013, 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 $4 million. At December 31, 2013, 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. 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. 87Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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, 2013. 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 (1992) 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, 2013. As more fully described under the heading “Basis of Presentation” in Note 1 to the Consolidated Financial Statements in Item 8, we acquiredVanguard Health Systems, Inc. (“Vanguard”) on October 1, 2013. We excluded Vanguard from our 2013 assessment of the effectiveness of our internal controlover financial reporting. Vanguard accounted for approximately 12% and 39% of net and total assets, respectively, and 13% of net operating revenues of ourconsolidated financial statement amounts as of and for the year ended December 31, 2013. We expect that our internal control system will be fully implementedat Vanguard during 2014 and correspondingly evaluated by us for effectiveness. Tenet’s internal control over financial reporting as of December 31, 2013 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, 2013, 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/ DANIEL J. CANCELMITrevor FetterDaniel J. CancelmiPresident and Chief Executive OfficerChief Financial OfficerFebruary 24, 2014February 24, 2014 88Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Stockholders 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, 2013,based on criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of theTreadway Commission. As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from its assessment theinternal control over financial reporting at Vanguard Health Systems, Inc., which was acquired on October 1, 2013 and whose financial statementsconstitute 12% and 39% of net and total assets, respectively, and 13% of net operating revenues of the consolidated financial statement amounts as of andfor the year ended December 31, 2013. Accordingly, our audit did not include the internal control over financial reporting at Vanguard Health Systems, Inc.The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Ourresponsibility 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 requirethat we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures aswe considered necessary 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 andprincipal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnelto provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,or disposition of the company’s assets 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 ofchanges in 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, 2013, based on thecriteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the TreadwayCommission. 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, 2013 of the Company and our report dated February 24, 2014expressed an unqualified opinion on those financial statements and financial statement schedule. /s/ DELOITTE & TOUCHE LLPDallas, TexasFebruary 24, 2014 89Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Stockholders ofTenet Healthcare CorporationDallas, Texas We have audited the accompanying consolidated balance sheets of Tenet Healthcare Corporation and subsidiaries (the “Company”) as of December 31,2013 and 2012, and the related consolidated statements of operations, other comprehensive income (loss), changes in equity, and cash flows for each of thethree years in the period ended December 31, 2013. 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 thefinancial statements 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 requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believethat our audits provide 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, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period endedDecember 31, 2013, 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. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internalcontrol over financial reporting as of December 31, 2013, based on the criteria established in Internal Control — Integrated Framework (1992) issued bythe Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2014 expressed an unqualified opinion on theCompany’s internal control over financial reporting. /s/ DELOITTE & TOUCHE LLPDallas, TexasFebruary 24, 2014 90Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 31,20132012ASSETSCurrent assets:Cash and cash equivalents$113$364Accounts receivable, less allowance for doubtful accounts ($589 at December 31, 2013 and $401 atDecember 31, 2012)2,0381,345Inventories of supplies, at cost262153Income tax receivable07Current portion of deferred income taxes581354Other current assets716458Total current assets3,7102,681Investments and other assets405162Deferred income taxes, net of current portion90342Property and equipment, at cost, less accumulated depreciation and amortization ($3,898 atDecember 31, 2013 and $3,494 at December 31, 2012)7,6914,293Goodwill3,042916Other intangible assets, at cost, less accumulated amortization ($523 at December 31, 2013 and $426 atDecember 31, 2012)1,192650Total assets$16,130$9,044 LIABILITIES AND EQUITYCurrent liabilities:Current portion of long-term debt$149$94Accounts payable1,075722Accrued compensation and benefits631415Professional and general liability reserves15664Accrued interest payable198125Other current liabilities719343Total current liabilities2,9281,763Long-term debt, net of current portion10,6905,158Professional and general liability reserves543292Defined benefit plan obligations398292Other long-term liabilities446305Total liabilities15,0057,810Commitments and contingenciesRedeemable noncontrolling interests in equity of consolidated subsidiaries24716Equity:Shareholders’ equity:Common stock, $0.05 par value; authorized 262,500,000 shares; 144,057,351 shares issued atDecember 31, 2013 and 142,363,915 shares issued at December 31, 201277Additional paid-in capital4,5724,471Accumulated other comprehensive loss(24)(68)Accumulated deficit(1,422)(1,288)Common stock in treasury, at cost, 47,197,722 shares at December 31, 2013 and 37,730,431 shares atDecember 31, 2012(2,378)(1,979)Total shareholders’ equity7551,143Noncontrolling interests12375Total equity8781,218Total liabilities and equity$16,130$9,044 See accompanying Notes to Consolidated Financial Statements. 91Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 31,201320122011Net operating revenues:Net operating revenues before provision for doubtful accounts$12,074$9,904$9,371Less: Provision for doubtful accounts972785717Net operating revenues11,1029,1198,654Operating expenses:Salaries, wages and benefits5,3714,2574,015Supplies1,7841,5521,548Other operating expenses, net2,7012,1472,020Electronic health record incentives(96)(40)(55)Depreciation and amortization545430398Impairment and restructuring charges, and acquisition-related costs1031920Litigation and investigation costs31555Operating income663749653Interest expense(474)(412)(375)Loss from early extinguishment of debt(348)(4)(117)Investment earnings113Income (loss) from continuing operations, before income taxes(158)334164Income tax benefit (expense)65(125)(61)Income (loss) from continuing operations, before discontinued operations(93)209103Discontinued operations:Loss from operations(5)(2)(18)Impairment of long-lived assets and goodwill, and restructuring charges, net(0)(100)(6)Litigation and investigation costs(2)0(17)Net gains on sales of facilities010Income tax benefit (expense)(4)2532Loss from discontinued operations(11)(76)(9)Net income (loss)(104)13394Less: Preferred stock dividends01124Less: Net income (loss) attributable to noncontrolling interestsContinuing operations301311Discontinued operations(0)(32)1Net income (loss) attributable to Tenet Healthcare Corporation commonshareholders$(134)$141$58Amounts attributable to Tenet Healthcare Corporation common shareholdersIncome (loss) from continuing operations, net of tax$(123)$185$68Loss from discontinued operations, net of tax(11)(44)(10)Net income (loss) attributable to Tenet Healthcare Corporation commonshareholders$(134)$141$58Earnings (loss) per share attributable to Tenet Healthcare Corporation commonshareholders:BasicContinuing operations$(1.21)$1.77$0.58Discontinued operations(0.11)(0.42)(0.09)$(1.32)$1.35$0.49DilutedContinuing operations$(1.21)$1.70$0.56Discontinued operations(0.11)(0.40)(0.08)$(1.32)$1.30$0.48Weighted average shares and dilutive securities outstanding (in thousands):Basic101,648104,200117,182Diluted101,648108,926121,295 See accompanying Notes to Consolidated Financial Statements. 92Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)Dollars in Millions Years Ended December 31,201320122011 Net income (loss)$(104)$133$94Other comprehensive income (loss):Adjustments for defined benefit plans68(25)(15)Unrealized gains on securities held as available-for-sale100Reclassification adjustments for realized losses included in net income000Other comprehensive income (loss) before income taxes69(25)(15)Income tax benefit (expense) related to items of other comprehensive loss(25)96Total other comprehensive income (loss), net of tax44(16)(9)Comprehensive income (loss)(60)11785Less: Preferred stock dividends01124Less: Comprehensive income (loss) attributable to noncontrolling interests30(19)12Comprehensive income (loss) attributable to Tenet Healthcare Corporationcommon shareholders$(90)$125$49 See accompanying Notes to Consolidated Financial Statements. 93 Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 StockAccumulatedShares OutstandingIssued AmountShares OutstandingIssued Par AmountAdditional Paid-in CapitalOther ComprehensiveLossAccumulated DeficitTreasury StockNoncontrolling InterestsTotal EquityBalances atDecember 31, 2010345$334121,446$7$4,469$(43)$(1,522)$(1,479)$53$1,819Net income0000008201294Distributions paid tononcontrolling interests00000000(10)(10)Other comprehensive loss00000(9)000(9)Purchases of businesses orjoint venture interests000000001414Preferred stock dividends0000(24)0000(24)Repurchases of commonstock00(18,942)0000(374)0(374)Stock-based compensationexpense and issuance ofcommon stock001,2520(18)0000(18)Balances atDecember 31, 2011345$334103,756$7$4,427$(52)$(1,440)$(1,853)$69$1,492Net income (loss)0000001520(22)130Distributions paid tononcontrolling interests00000000(12)(12)Contributions fromnoncontrolling interests0000000033Other comprehensive loss00000(16)000(16)Purchases of businesses orjoint venture interests000000003737Preferred stock dividends0000(11)0000(11)Repurchases of commonstock00(4,733)0000(126)0(126)Repurchases of preferredstock(299)(289)0000000(289)Conversion of preferredstock to common stock(46)(45)1,97904500000Stock-based compensationexpense and issuance ofcommon stock003,631010000010Balances atDecember 31, 20120$0104,633$7$4,471$(68)$(1,288)$(1,979)$75$1,218Net income (loss)000000(134)021(113)Distributions paid tononcontrolling interests00000000(22)(22)Other comprehensive income000004400044Contributions fromnoncontrolling interests00005600049105Repurchases of commonstock00(9,485)0000(400)0(400)Stock-based compensationexpense and issuance ofcommon stock001,712045001046Balances atDecember 31, 20130$096,860$7$4,572$(24)$(1,422)$(2,378)$123$878 See accompanying Notes to Consolidated Financial Statements. 94 Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWSDollars in Millions Years Ended December 31,201320122011Net income (loss)$(104)$133$94Adjustments to reconcile net income (loss) to net cash provided by operatingactivities:Depreciation and amortization545430398Provision for doubtful accounts972785717Deferred income tax expense (benefit)(67)9281Stock-based compensation expense363224Impairment and restructuring charges, and acquisition-related costs1031920Litigation and investigation costs31555Loss from early extinguishment of debt3484117Amortization of debt discount and debt issuance costs192230Pre-tax loss (gain) from discontinued operations710141Other items, net(33)(12)(13)Changes in cash from operating assets and liabilities:Accounts receivable(1,060)(868)(850)Inventories and other current assets(130)(59)(35)Income taxes0(5)(63)Accounts payable, accrued expenses and other current liabilities389(32)Other long-term liabilities133(5)Payments for restructuring charges, acquisition-related costs, and litigation costsand settlements(114)(63)(44)Net cash used in operating activities from discontinued operations, excludingincome taxes(15)(35)(38)Net cash provided by operating activities589593497Cash flows from investing activities:Purchases of property and equipment — continuing operations(691)(506)(467)Purchases of property and equipment — discontinued operations0(2)(8)Purchases of businesses or joint venture interests, net of cash acquired(1,515)(211)(84)Proceeds from sales of facilities and other assets — discontinued operations16450Proceeds from sales of marketable securities, long-term investments and other assets151759Other long-term assets8(9)(2)Other items, net34(1)Net cash used in investing activities(2,164)(662)(503)Cash flows from financing activities:Repayments of borrowings under credit facility(1,286)(1,773)(365)Proceeds from borrowings under credit facility1,6911,693445Repayments of other borrowings(5,133)(248)(843)Proceeds from other borrowings6,5071,092900Repurchases of preferred stock0(292)0Deferred debt issuance costs(154)(17)(21)Repurchases of common stock(400)(126)(374)Cash dividends on preferred stock0(14)(24)Distributions paid to noncontrolling interests(27)(15)(10)Contributions from noncontrolling interests9930Proceeds from exercise of stock options22113Other items, net563Net cash provided by (used in) financing activities1,324320(286)Net increase (decrease) in cash and cash equivalents(251)251(292)Cash and cash equivalents at beginning of period364113405Cash and cash equivalents at end of period$113$364$113Supplemental disclosures:Interest paid, net of capitalized interest$(426)$(376)$(347)Proceeds from interest rate swap agreement$0$0$30Income tax payments, net$(6)$(13)$(10) See accompanying Notes to Consolidated Financial Statements. 95 Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 herein as “Tenet,” “we” or “us”) is an investor-owned health care servicescompany whose subsidiaries and affiliates as of December 31, 2013 primarily operated 77 hospitals with a total of 20,293 licensed beds, 183 outpatientcenters, six health plans, six accountable care networks and Conifer Health Solutions, LLC (“Conifer”), which provides business process solutions to morethan 700 hospital and other clients nationwide. 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 balances in the accompanying Consolidated Financial Statements and these notes have beenreclassified to give retrospective presentation for the discontinued operations described in Note 4. Furthermore, all amounts related to shares, share prices andearnings per share have been restated to give retrospective presentation for the reverse stock split described in Note 2. Effective October 1, 2013, we acquired the common stock of Vanguard Health Systems, Inc. (“Vanguard”) for $21 per share in an all cashtransaction. Vanguard owned and operated 28 hospitals (plus one more under construction), 39 outpatient centers and five health plans with approximately140,000 members, serving communities in Arizona, California, Illinois, Massachusetts, Michigan and Texas. We paid approximately $4.3 billion to acquireVanguard, including the assumption of $2.5 billion of Vanguard’s net debt. 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”) and other uninsured discount and charity programs. 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 amounts that are negotiated with insurance companies orare set by the government. Gross charges are used to calculate Medicare outlier payments and to determine certain elements of payment under managed carecontracts (such as stop-loss payments). Because Medicare requires that a hospital’s gross charges be the same for all patients (regardless of payer category),gross charges are also what hospitals charge all other patients prior to the application of discounts and allowances. 96Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 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, 2013, 2012 and 2011 by $38 million, $114 million ($81million related to the industry-wide Medicare Budget Neutrality settlement), and $1 million, respectively. Estimated cost report settlements and valuationallowances are included in accounts receivable in the accompanying Consolidated Balance Sheets (see Note 3). We believe that we have made adequateprovision for any adjustments that may result from final determination of amounts earned under 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, which can takeseveral years before they are completely resolved. The payers are billed for patient services on an individual patient basis. An individual patient’s bill issubject to adjustment on a patient-by-patient basis in the ordinary course of business by the payers following their review and adjudication of each particularbill. We estimate the discounts for contractual allowances at the individual hospital level utilizing billing data on an individual patient basis. At the end of eachmonth, on an individual hospital basis, we estimate our expected reimbursement for patients of managed care plans based on the applicable contract terms.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 patient bills that were material to our revenues. In addition, on a corporate-wide basis, we do not record any general provision foradjustments to estimated contractual allowances for managed care plans. Managed care accounts, net of contractual allowances recorded, are further reduced totheir net realizable value through provision for doubtful accounts based on historical collection trends for these payers and other factors that affect theestimation 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 or other uninsured discount programs, the discount offered to certain uninsured patients is recognized as a contractualallowance, which reduces net operating revenues at the time the self-pay accounts are recorded. The uninsured patient accounts, net of contractual allowancesrecorded, are further reduced to their net realizable value through provision for doubtful accounts based on historical collection trends for self-pay accountsand 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 Conifer’s 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. 97Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 31,201320122011General Hospitals:Medicare$2,357$2,195$2,068Medicaid975783802Managed care6,2775,3825,128Indemnity, self-pay and other1,2011,007958Acute care hospitals — other revenue7869105Other:Other operations1,186468310Net operating revenues before provision for doubtful accounts$12,074$9,904$9,371 Provision for Doubtful Accounts Although outcomes vary, our policy is to attempt to collect amounts due from patients, including co-pays and deductibles due from patients withinsurance, 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. Generally, we estimate this allowance based on the aging of our accounts receivable by hospital, ourhistorical collection experience by hospital and for each type of payer over a look-back period, and other relevant factors. A significant portion of our provisionfor doubtful accounts relates to self-pay patients, as well as co-pays and deductibles owed to us by patients with insurance. Payment pressure from managedcare payers also affects our provision for doubtful accounts. We typically experience ongoing managed care payment delays and disputes; however, wecontinue to work with these payers to obtain adequate and timely reimbursement for our services. 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 ofpatients through our emergency departments, the increased burden of co-pays and deductibles to be made by patients with insurance, and business practicesrelated to collection efforts. These factors continuously change and can have an impact on collection trends and our estimation 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. 98Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 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. During the years ended December 31, 2013, 2012 and 2011, certain of our hospitals and physicians satisfied the CMSAIU and/or meaningful use criteria. As a result, we recognized approximately $96 million, $40 million and $55 million of Medicare and Medicaid EHRincentive payments as a reduction to expense in our Consolidated Statement of Operations for years ended December 31, 2013, 2012 and 2011, respectively. 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 $364 million at December 31, 2013 and 2012, respectively. As of December 31, 2013 and 2012, our book overdrafts wereapproximately $245 million and $232 million, respectively, which were classified as accounts payable. At December 31, 2013 and 2012, approximately $62 million and $65 million, respectively, of total cash and cash equivalents in the accompanyingConsolidated Balance Sheets were intended for the operations of our captive insurance subsidiaries. Also at December 31, 2013 and 2012, we had $193 million and $98 million, respectively, of property and equipment purchases accrued for itemsreceived but not yet paid. Of these amounts, $138 million and $93 million, respectively, were included in accounts payable. During the years ended December 31, 2013 and 2012, we entered into non-cancellable capital leases of approximately $341 million and $88 million,respectively, primarily for buildings and 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, 2013 and 2012, 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 exceeding established minimum amounts with a useful life greater than one year arecapitalized at cost. Expenditures for maintenance and repairs are charged to expense as incurred. We use the straight-line method of depreciation for buildings,building improvements and equipment. The estimated useful life for buildings and improvements is primarily 15 to 40 years and, for equipment, three to15 years. Newly constructed hospitals are usually depreciated over 50 years. We record 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 lease payments or the fair value of the asset. Such assets, including improvements,are generally amortized over the shorter of either the lease term or their estimated useful life. Interest costs related to construction projects are capitalized. In theyears ended December 31, 2013, 2012 and 2011, capitalized interest was $14 million, $6 million and $8 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. 99Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. 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 comparableassets 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, and miscellaneous intangible assets related to ouracquisition of Vanguard. Accruals for General and Professional Liability Risks We accrue for estimated professional and general liability claims, when they are probable and can be reasonably estimated. The accrual, whichincludes an estimate for incurred but not reported claims, is updated each quarter based on an actuarial calculation of projected payments using case-specificfacts and circumstances and our historical loss reporting, development and settlement patterns and is discounted to its net present value using a risk-freediscount rate (2.45% at December 31, 2013 and 1.18% at December 31, 2012). To the extent that subsequent claims information varies from our estimates, theliability is adjusted in the period such information becomes available. Malpractice expense is presented within other operating expenses in the accompanyingConsolidated 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; 100Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 · 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. 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 primarily operate acute care hospitals and related health care facilities. Our general hospitals generated 90.2%, 95.3% and 96.7% of our netoperating revenues before provision for doubtful accounts in the years ended December 31, 2013, 2012 and 2011, respectively. Each of our operating regionsand markets reports directly 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. Historically, our business has consisted of one reportable segment, Hospital Operations and other. However, during 2012, our Hospital Operationsand other segment and our Conifer subsidiary entered into formal agreements, pursuant to which it was agreed that services provided by both parties to eachother would be billed based on estimated third-party pricing terms. As a result, we have presented Conifer as a separate reportable business segment for allperiods presented. The factors for determining the reportable segments include the manner in which management evaluates operating performance combinedwith the nature of the individual business activities. 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 Reverse Stock Split On October 11, 2012, our common stock began trading on the New York Stock Exchange on a split-adjusted basis following a one-for-four reversestock split we announced on October 1, 2012. Every four shares of our issued and outstanding common stock were exchanged for one issued and outstandingshare of common stock, without any change in the par value per share, and our authorized shares of common stock were proportionately decreased from1,050,000,000 shares to 262,500,000 shares. No fractional shares were issued in connection with the stock split. All current and prior period amounts in theaccompanying Consolidated Financial Statements and these notes related to shares, share prices and earnings per share have been restated to give retrospectivepresentation for the reverse stock split. Share Repurchase Programs In October 2012, we announced that our board of directors had authorized the repurchase of up to $500 million of our common stock through ashare repurchase program that expired in December 2013. 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 we maintained. Shares wererepurchased at times and in amounts based on market conditions and other factors. Pursuant to the share repurchase program, we paid approximately$500 million to repurchase a total of 12,891,298 shares during the period from the commencement of the program through December 31, 2013. 101 Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 PeriodTotal Number ofSharesPurchasedAverage PricePaid PerShareTotal Number ofShares Purchased asPart of PubliclyAnnounced ProgramMaximum Dollar Valueof Shares That May YetBe Purchased Under theProgram(In Thousands)(In Thousands)(In Millions)November 1, 2012 through December 31,20123,406$29.363,406$400January 1, 2013 through January 31, 201353137.13531380February 1, 2013 through February 28, 201391439.30914344March 1, 2013 through March 31, 20131,01043.951,010300Three Months Ended March 31, 20132,45540.742,455300May 1, 2013 through May 31, 201393346.78933256June 1, 2013 through June 30, 20131,06545.711,065208Three Months Ended June 30, 20131,99846.211,998208July 1, 2013 through July 31, 201316646.08166200August 1, 2013 through August 31, 20131,04540.431,045158September 1, 2013 through September 30, 20131,43140.351,431100Three Months Ended September 30, 20132,64240.752,642100November 1, 2103 through November 30, 201379642.2879666December 1, 2013 through December 31, 20131,59441.621,5940Three Months Ended December 31, 20132,39041.842,3900Total12,891$38.7912,891$0 Repurchased shares are recorded based on settlement date and are held as treasury stock. Mandatory Convertible Preferred Stock In April 2012, we repurchased and subsequently retired 298,700 shares of our 7% mandatory convertible preferred stock with a carrying value of$289 million. In a related private financing, we issued an additional $141 million aggregate principal amount of our 6/% senior secured notes due 2018 at apremium for $142 million of cash proceeds and an additional $150 million aggregate principal amount of our 8% senior notes due 2020. We recorded thedifference between the carrying value and the amount paid to redeem the preferred stock in April 2012 as preferred stock dividends in the accompanyingConsolidated Statements of Operations. On October 1, 2012, the remaining 46,300 shares outstanding of our mandatory convertible preferred stockautomatically converted to 1,978,633 shares of our common stock. We accrued approximately $6 million, or $17.50 per share, for dividends on thepreferred stock in the three months ended March 31, 2012 and $1 million in each of the three months ended June 30, 2012 and September 30, 2012, and paidthe dividends in April, July and October 2012, respectively. 10214Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Changes in Redeemable Noncontrolling Interests in Equity of Consolidated Subsidiaries The following table shows the changes in redeemable noncontrolling interests in equity of consolidated subsidiaries during the year endedDecember 31, 2013 and 2012: Year Ended December 31,20132012Balances at beginning of period$16$16Net income90Distributions paid to noncontrolling interests(5)0Sales of joint venture interests520Purchases of businesses1750Balances at end of period$247$16 As part of the acquisition of Vanguard, we obtained a 51% controlling interest in a partnership that held the assets and liabilities of Valley Baptist HealthSystem (“Valley Baptist”). The remaining 49% non-controlling interest is held by the former owner of Valley Baptist (the “seller”). The partnership operatingagreement includes a put option that the seller may exercise on its 49% non-controlling interest upon either the third or fifth anniversary, September 1, 2014and September 1, 2016, respectively, of the transaction date. The redemption value is calculated based upon the operating results and the debt of thepartnership, but is subject to a floor value. We also have the option to call a stated percentage of the seller’s non-controlling interest in the event the seller doesnot exercise its put option on either of the anniversary dates. The carrying value of the redeemable noncontrolling interest in Valley Baptist has been determinedbased upon the calculated acquisition date fair value of the seller’s interest in the partnership, such fair value based upon Level 3 (consistent with the valuemethodologies for Level 3 described in Note 18) estimates of future operating results of the partnership, plus the seller’s portion of the partnership earningsduring the three months ended December 31, 2013. If the seller exercises its put option, we may purchase the non-controlling interest with cash or by issuingstock. NOTE 3. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS The principal components of accounts receivable are shown in the table below: December 31,20132012Continuing operations:Patient accounts receivable$2,537$1,668Allowance for doubtful accounts(589)(396)Estimated future recoveries from accounts assigned to our Conifer subsidiary9188Net cost report settlements payable and valuation allowances(4)(24)2,0351,336Discontinued operations:Patient accounts receivable111Allowance for doubtful accounts0(5)Estimated future recoveries from accounts assigned to our Conifer subsidiary02Net cost report settlements receivable and valuation allowances2139Accounts receivable, net$2,038$1,345 As of December 31, 2013 and 2012, our allowance for doubtful accounts was 23.2% and 23.7%, respectively, of our patient accounts receivable.Accounts that are pursued for collection through the regional business offices of Conifer are maintained on our hospitals’ books and reflected in patientaccounts receivable with an allowance for doubtful accounts established to reduce the carrying value of such receivables to their estimated net realizable value.Generally, we estimate this allowance based on the aging of our accounts receivable by hospital, our historical collection experience by hospital and for eachtype of payer, and other relevant factors. As of December 31, 2013 and 2012, our allowance for doubtful accounts for self-pay was 75.9% and 73.8%,respectively, of our self-pay patient accounts receivable, including co-pays and deductibles owed by patients with insurance. As of December 31, 2013 and2012, our allowance for doubtful accounts for managed care was 5.6% and 9.4%, respectively, of our managed care patient accounts receivable. During theyear ended December 31, 2013, we experienced a significant change in the overall composition of our patient accounts receivable due to the acquisition ofVanguard in October 2013. 103Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 assigned to our Conifer subsidiary are written off and excluded from patient accounts receivable and allowance for doubtful accounts;however, an estimate of future recoveries from all accounts at our Conifer subsidiary is determined based on historical experience and recorded on ourhospitals’ books as a component of accounts receivable in the accompanying Consolidated Balance Sheets. At the present time, our new acquisitions have notbeen fully integrated into our Conifer collections processes. 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, 2013, 2012 and 2011 were approximately $545 million, $430 million and $379 million,respectively. Our estimated costs (based on the selected operating expenses described above) of caring for charity care patients for the years ended December 31,2013, 2012 and 2011 were approximately $158 million, $136 million, and $113 million, respectively. Most states include an estimate of the cost of charitycare in the determination of a hospital’s eligibility for Medicaid disproportionate share hospital (“DSH”) payments. Revenues attributable to DSH paymentsand other state-funded subsidy payments for the years ended December 31, 2013, 2012 and 2011 were approximately $428 million, $283 million and$255 million, respectively. These payments are intended to mitigate our cost of uncompensated care, as well as reduced Medicaid funding levels. Generally,our method of measuring the estimated costs uses adjusted self-pay/charity patient days multiplied by selected operating expenses per adjusted patient day. Theadjusted self-pay/charity patient days represents actual self-pay/charity patient days adjusted to include self-pay/charity outpatient services by multiplyingactual self-pay/charity patient days by the sum of gross self-pay/charity inpatient revenues and gross self-pay/charity outpatient revenues and dividing theresults by gross self-pay/charity inpatient revenues. NOTE 4. DISCONTINUED OPERATIONS In the year ended December 31, 2013, we recognized a $12 million gain in discontinued operations related to the sale of land. In the three months ended June 30, 2012, our Creighton University Medical Center hospital (“CUMC”) in Nebraska was reclassified intodiscontinued operations based on the guidance in the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 360, “Property,Plant and Equipment,” as a result of our plan to sell CUMC. We recorded an impairment charge in discontinued operations of $100 million, consisting of$98 million for the write-down of CUMC’s long-lived assets to their estimated fair values, less estimated costs to sell, and a $2 million charge for the write-down of goodwill related to CUMC in the three months ended June 30, 2012. We completed the sale of CUMC on August 31, 2012 at a transaction price of$40 million, excluding working capital, and recognized a loss on sale of approximately $1 million in discontinued operations. Because we did not sell theaccounts receivable of CUMC, net receivables of approximately $9 million are included in our accounts receivable in the accompanying Consolidated BalanceSheet at December 31, 2012. In May 2012, we completed the sale of Diagnostic Imaging Services, Inc. (“DIS”), our former diagnostic imaging center business in Louisiana, fornet proceeds of approximately $10 million. As a result of the sale, DIS was reclassified into discontinued operations in the three months ended June 30, 2012,and a gain on sale of approximately $2 million was recognized in discontinued operations. We recorded a $6 million impairment charge in discontinued operations during the year ended December 31, 2011 for the write-down of goodwillrelated to DIS. Material adverse trends in our estimates of future operating results of the centers at that time, primarily due to our limited market presence,indicated that the carrying value of the goodwill exceeded its fair value. As a result, we reduced the carrying value of the goodwill to its fair value as determinedbased on an appraisal. Net operating revenues and loss before income taxes reported in discontinued operations are as follows: Years Ended December 31,201320122011Net operating revenues$7$154$216Loss before income taxes(7)(101)(41) 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 recoveries from our reinsurancecarriers in connection with the settlement. We had previously recorded a $5 million reserve for this matter as of December 31, 2010. Also included in lossbefore income taxes from discontinued operations in the year ended December 31, 2011 is approximately $17 million of expense recorded in litigation andinvestigation 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. 104Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 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, AND ACQUISITION-RELATED COSTS We recognized impairment charges on long-lived assets in 2013, 2012 and 2011 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 operating results in our hospitals, which are based on programs andinitiatives being implemented that are designed to achieve the hospital’s most recent projections. If these projections are not met, or if in the future negativetrends occur that impact our future outlook, impairments of long-lived assets and goodwill may occur, and we may incur additional restructuring charges,which could be material. As of December 31, 2013, our continuing operations consisted of two operating segments, our hospital and other operations and our Conifersubsidiary. In the three months ended December 31, 2013, we acquired 28 hospitals (plus one more under construction), 39 outpatient centers and five healthplans, serving communities in Arizona, California, Illinois, Massachusetts, Michigan and Texas, through our acquisition of Vanguard, and we moved ourhospitals in Philadelphia, Pennsylvania from our Southern States region into our Northeast region. Our hospital and other operations segment was structuredas follows as of December 31, 2013: · Our California region included all of our hospitals and other operations in California; · Our Central region included all of our hospitals and other operations in Missouri, New Mexico, Tennessee and Texas, except for those in theSan Antonio or South Texas markets; · Our Florida region included all of our hospitals and other operations in Florida; · Our Northeast region included all of our hospitals and other operations in Illinois, Massachusetts and Pennsylvania; · Our Southern States region included all of our hospitals and other operations in Alabama, Georgia, North Carolina and South Carolina; · Our Detroit market region included all of our hospitals and other operations in the Detroit, Michigan area; · Our Phoenix market included all of our hospitals and other operations in the Phoenix, Arizona area; · Our San Antonio market included all of our hospitals and other operations in the San Antonio, Texas area; and · Our South Texas market included all of our hospitals and other operations in the Brownsville, Texas and Harlingen, Texas areas. We periodically incur costs to implement restructuring efforts for specific operations, which are recorded in our statement of operations as they areincurred. Our restructuring plans focus on various aspects of operations, including aligning our operations in the most strategic and cost-effective structure.Certain restructuring and acquisition-related costs are based upon estimates. Changes in estimates are recognized as they occur. Year Ended December 31, 2013 During the year ended December 31, 2013, we recorded impairment and restructuring charges and acquisition-related costs of $103 million. Thisamount included a $12 million impairment charge for the write-down of buildings and equipment and 105Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 long-lived assets, primarily capitalized software costs classified in other intangible assets, of one of our 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 indicated the carrying value of the hospital’s long-lived assetswas not recoverable from the estimated future cash flows. We believe the most significant factors contributing to the adverse financial trends include reductionsin volumes of insured patients, shifts in payer mix from commercial to governmental payers combined with reductions in reimbursement rates fromgovernmental payers, and high levels of uninsured patients. As a result, we updated the estimate of the fair value of the hospital’s long-lived assets andcompared 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 ofthe hospital’s long-lived assets, an impairment charge was recorded for the difference in the amounts. Unless the anticipated future financial trends of thishospital improve to the extent that the estimated future undiscounted cash flows exceed the carrying value of the long-lived assets, this hospital is at risk offuture impairments, particularly if we spend significant amounts of capital at the hospital without generating a corresponding increase in the hospital’s fairvalue or if the fair value of the hospital’s real estate or equipment continues to decline. The aggregate carrying value of assets held and used of the hospital forwhich an impairment charge was recorded was $44 million as of December 31, 2013 after recording the impairment charge. We also recorded $16 million ofrestructuring costs, $14 million of employee severance costs, $2 million of lease termination costs, and $59 million in acquisition-related costs, whichincludes both transaction costs and acquisition integration charges. Year Ended December 31, 2012 During the year ended December 31, 2012, we recorded net impairment and restructuring charges of $19 million, consisting of $3 million relating tothe impairment of obsolete assets, $2 million relating to other impairment charges, $8 million of employee severance costs and $6 million of other relatedcosts. Year Ended December 31, 2011 During the year ended December 31, 2011, we recorded net impairment and restructuring charges of $20 million. This amount included a $6 millionimpairment charge for the write-down of buildings and equipment of one of our previously impaired hospitals to their estimated fair values, primarily due to adecline 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 trendsin our estimates of future undiscounted cash flows of the hospital at that time, consistent with our previous estimates in prior years when impairment chargeswere recorded at this hospital, indicated the carrying value of the hospital’s long-lived assets was not recoverable from the estimated future cash flows. Webelieved the most significant factors contributing to the adverse financial trends at that time included reductions in volumes of insured patients, shifts in payermix from commercial to governmental payers combined with reductions in reimbursement rates from governmental payers, and high levels of uninsuredpatients. 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 carrying value ofthe 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. 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 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 $1 million of other related costs. NOTE 6. LONG-TERM DEBT AND LEASE OBLIGATIONS The table below shows our long-term debt as of December 31, 2013 and 2012: December 31,December 31,20132012Senior notes:7/%, due 2013$0$559/%, due 201460609/%, due 20154744746/%, due 20203003008%, due 20207507508/%, due 20222,80006/%, due 2031430430Senior secured notes:6/%, due 20181,0411,04110%, due 201807148/%, due 201909254/%, due 20205005006%, due 20201,80004/%, due 202185004/%, due 20211,0500Credit facility due 20164050Capital leases and mortgage notes407119Unamortized note discounts and premium(28)(116)Total long-term debt10,8395,252Less current portion14994Long-term debt, net of current portion$10,690$5,1583878143418781478341238Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. 106Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Credit Agreement We have a senior secured revolving credit facility (as amended, “Credit Agreement”), that provides, subject to borrowing availability, for revolvingloans in an aggregate principal amount of up to $1 billion, with a $300 million subfacility for standby letters of credit. The Credit Agreement has a scheduledmaturity date of November 29, 2016, subject to our repayment or refinancing on or before November 3, 2014 of approximately $238 million of the aggregateoutstanding principal amount of our 9/% senior notes due 2015 (approximately $474 million of which was outstanding at December 31, 2013). If suchrepayment or refinancing does not occur, borrowings under the Credit Agreement will be due November 3, 2014. The revolving credit facility is collateralizedby patient accounts receivable of all of our wholly owned acute care and specialty hospitals. In addition, borrowings under the Credit Agreement are guaranteedby our wholly owned hospital subsidiaries. Outstanding revolving loans accrued interest during a six-month initial period that ended in May 2012 at the rateof either (i) a base rate plus a margin of 1.25% or (ii) the London Interbank Offered Rate (“LIBOR”) plus a margin of 2.25% per annum. Outstandingrevolving loans now accrue interest at a base rate plus a margin ranging from 1.00% to 1.50% or LIBOR plus a margin ranging from 2.00% to 2.50% perannum based on available credit. An unused commitment fee was payable on the undrawn portion of the revolving loans at a six-month initial rate that endedin May 2012 of 0.438% per annum. The unused commitment fee now ranges from 0.375% to 0.500% per annum based on available credit. Our borrowingavailability is based on a specified percentage of eligible accounts receivable, including self-pay accounts. At December 31, 2013, we had $405 million of cashborrowings outstanding under the revolving credit facility subject to an interest rate of 2.38%, and we had approximately $189 million of standby letters ofcredit outstanding. Based on our eligible receivables, approximately $406 million was available for borrowing under the revolving credit facility atDecember 31, 2013. Senior Notes and Senior Secured Notes In October 2013, we sold $2.8 billion aggregate principal amount of 8/% senior notes, which will mature on April 1, 2022, and $1.8 billionaggregate principal amount of 6% senior secured notes, which will mature on October 1, 2020. We will pay interest on the 8/% senior notes and 6% seniorsecured notes semi-annually in arrears on April 1 and October 1 of each year, commencing on April 1, 2014. The proceeds from the sale of the notes were usedto finance the acquisition of Vanguard. In May 2013, we sold $1.050 billion aggregate principal amount of 4/% senior secured notes, which will mature on October 1, 2021. We will payinterest on the 4/% senior secured notes semi-annually in arrears on January 1 and July 1 of each year, commencing on January 1, 2014. We used a portionof the proceeds from the sale of the notes to purchase approximately $767 million aggregate principal amount outstanding of our 8/% senior secured notesdue 2019 in a tender offer and to call approximately $158 million of the remaining aggregate principal amount outstanding of those notes. In connection withthe purchase, we recorded a loss from early extinguishment of debt of $171 million, primarily 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. In February 2013, we sold $850 million aggregate principal amount of 4/% senior secured notes, which will mature on April 1, 2021. We will payinterest on the 4/% senior secured notes semi-annually in arrears on April 1 and October 1 of each year, which payments commenced on October 1, 2013. Weused a portion of the proceeds from the sale of the notes to purchase approximately $645 million aggregate principal amount outstanding of our 10% seniorsecured notes due 2018 in a tender offer and to call approximately $69 million of the remaining aggregate principal amount outstanding of those notes. Inconnection with the purchase, we recorded a loss from early extinguishment of debt of $177 million, primarily related to the difference between the purchaseprices and the par values of the purchased notes, as well as the write-off of unamortized note discounts and issuance costs. The remaining net proceeds wereused for general corporate purposes, including the repayment of borrowings under our senior secured revolving credit facility. 1071418183838781212Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 October 2012, we sold $500 million aggregate principal amount of 4/% senior secured notes due 2020 and $300 million aggregate principalamount of 6/% senior notes due 2020. The 4/% senior secured notes will mature on June 1, 2020, and the 6/% senior notes will mature on February 1,2020. We will pay interest on the 4/% senior secured notes semi-annually in arrears on June 1 and December 1 of each year, commencing on June 1, 2013.We will pay interest on the 6/% senior notes semi-annually in arrears on February 1 and August 1 of each year; payments commenced on February 1, 2013.We used a portion of the proceeds from the sale of the notes to purchase $161 million aggregate principal amount outstanding of our 7/% senior notes due2013 in a tender offer. In connection with the purchase, we recorded a loss from early extinguishment of debt of approximately $4 million primarily related tothe difference between the purchase prices and the par values of the purchased notes. In April 2012, we issued an additional $141 million aggregate principal amount of our 6/% senior secured notes due 2018 at a premium for $142million of cash proceeds and an additional $150 million aggregate principal amount of our 8% senior notes due 2020 in a private financing related to ourrepurchase and subsequent retirement of 298,700 shares of our 7% mandatory convertible preferred stock. 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. All of our senior secured notes are guaranteed by our wholly owned hospital company subsidiaries and secured by a first-priority pledge of thecapital stock and other ownership interests of those subsidiaries. All of our senior secured notes and the related subsidiary guarantees are our and thesubsidiary guarantors’ senior secured obligations. All of our senior secured notes rank equally in right of payment with all of our other senior securedindebtedness. Our senior secured notes rank senior to any subordinated indebtedness that we or such subsidiary guarantors may incur; they are effectivelysenior to our and such subsidiary guarantors’ existing and future unsecured indebtedness and other liabilities to the extent of the value of the collateral securingthe notes and the subsidiary guarantees; they are effectively subordinated to our and such subsidiary guarantors’ obligations under our Credit Agreement to theextent of the value 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 4/% senior secured notes and our 6/% senior secured notes, in whole or in part, at any time at aredemption price equal to 100% of the principal amount of the notes redeemed plus the make-whole premium set forth in the related indenture, together withaccrued and unpaid interest thereon, if any, to the redemption date. In addition, we, at our option, may redeem our 8/% and 10% senior secured notes, inwhole or in part, or on or prior to July 1, 2014 in the case of the 8/% senior secured notes and May 1, 2014 in the case of the 10% senior secured notes, at aredemption price equal to 100% of the principal amount of the notes redeemed plus the applicable make-whole 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 to time after July 1, 2014 in the case of the8/% senior secured notes and May 1, 2014 in the case of the 10% senior secured notes, we, at our option, may redeem the notes, in whole or in part, at theredemption 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 10834343434343438143414787878Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Credit Agreement to satisfy our operating cash requirements. Our ability to borrow under the Credit Agreement is subject to conditions that we believe arecustomary in revolving credit facilities, including that 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. Future Maturities Future long-term debt maturities and minimum operating lease payments as of December 31, 2013 are as follows: Years Ending December 31,LaterTotal20142015201620172018YearsLong-term debt, including capital lease obligations$10,867$149$539$430$49$1,047$8,653Long-term non-cancelable operating leases$663$137$117$102$80$56$171 Rental expense under operating leases, including short-term leases, was $186 million, $156 million and $143 million in the years endedDecember 31, 2013, 2012 and 2011, respectively. Included in rental expense for each of these periods was sublease income of $8 million, which were recordedas 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, 2013, the maximum potential amount of future payments under our income guarantees to certain physicians who agree to relocateand revenue collection guarantees to hospital-based physician groups providing certain services at our hospitals was $108 million. We had a liability of$78 million recorded for these guarantees included in other current liabilities at December 31, 2013. 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, 2013 was $16 million. We had a liability of $2 million recorded forthese guarantees at December 31, 2013, of which $1 million was included in other current liabilities and $1 million was included in other long-term liabilities. 109Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 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, 2013, approximately 2.1 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. Our income from continuing operations for the years ended December 31, 2013, 2012 and 2011 includes $39 million, $33 million and $25 million,respectively, of pretax compensation costs related to our stock-based compensation arrangements ($24 million, $21 million and $15 million, respectively,after-tax, excluding the impact of the deferred tax valuation allowance). The table below shows certain stock option and restricted stock unit grants and otherawards that comprise the $37 million of stock-based compensation expense recorded in salaries, wages and benefits in the year ended December 31, 2013.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, 2013(In Thousands)(In Millions)Stock Options:February 28, 2013266$39.31$14.46$1February 29, 2012355$22.6011.962Restricted Stock Units:October 31, 201317847.191June 13, 201331847.131May 6, 20133047.00(1)1February 28, 201384139.317February 29, 201298722.606January 31, 20126421.162November 4, 20116019.44(1)1February 23, 201189027.609Other grants6$37 (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. 110Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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, 2013, 2012 and 2011: OptionsWeightedAverageExercisePrice PerShareAggregateIntrinsicValueWeightedAverageRemainingLife(In Millions)Outstanding as of December 31, 201010,788,88739.88Granted0Exercised(629,021)5.24Forfeited/Expired(1,661,473)128.92Outstanding as of December 31, 20118,498,39325.04Granted477,50022.79Exercised(3,657,127)5.77Forfeited/Expired(1,029,574)69.72Outstanding as of December 31, 20124,289,19230.49Granted295,63939.41Exercised(946,086)23.34Forfeited/Expired(330,634)55.79Outstanding as of December 31, 20133,308,111$30.79$413.3 yearsVested and expected to vest at December 31, 20133,294,282$30.76$413.3 yearsExercisable as of December 31, 20132,776,320$30.66$362.8 years There were 946,086 stock options exercised during the year ended December 31, 2013 with a $18 million aggregate intrinsic value, and 3,657,127stock options exercised in 2012 with a $71 million aggregate intrinsic value. As of December 31, 2013, there were $4 million of total unrecognized compensation costs related to stock options. These costs are expected to berecognized over a weighted average period of 1.7 years. In the year ended December 31, 2013, we granted an aggregate of 295,639 stock options under our 2008 Stock Incentive Plan to certain of our seniorofficers. These stock options will all vest on the third anniversary of the grant date, subject to the terms of the plan, and will expire on the fifth anniversary ofthe grant date. In the year ended December 31, 2012, we granted an aggregate of 477,500 stock options under our 2008 Stock Incentive Plan to certain of oursenior officers; 257,500 of these stock options are subject to time-vesting and 220,000 of these stock options were granted subject to performance-basedvesting. Because all conditions were met, the performance-based options will vest and be settled ratably over a three-year period from the grant date. The weighted average estimated fair value of stock options we granted in the year ended December 31, 2013 and 2012 was $14.46 and $12.05 pershare, respectively. These fair values were calculated based on each grant date, using a binomial lattice model with the following assumptions: Year Ended December 31,20132012Expected volatility50%52%Expected dividend yield0%0%Expected life3.6 years6.9 yearsExpected forfeiture rate6%2%Risk-free interest rate0.48%1.06%-1.41%Early exercise threshold100% gain70% gainEarly exercise rate50% per year20% 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 on two dates (one in 2010 and one in 2011) with unusual volatility due to an unsolicited acquisitionproposal. The expected life of options granted is derived from the output of the binomial lattice model and represents the period of time that the options 111Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 expected to be outstanding. This model incorporates an early exercise assumption in the event of a significant increase in stock price. The risk-free interestrates are based on zero-coupon United States Treasury yields in effect at the date of grant consistent with the expected exercise timeframes. The following table summarizes information about our outstanding stock options at December 31, 2013: Options OutstandingOptions ExercisableRange of Exercise Prices Number ofOptionsWeighted AverageRemainingContractual LifeWeighted AverageExercise PriceNumber ofOptionsWeighted AverageExercise Price$0.00 to $4.569324,5425.1 years$4.56324,542$4.56$4.57 to $25.0891,027,9635.9 years20.83774,62320.17$25.09 to $32.569518,8042.5 years29.64518,80429.64$32.57 to $42.529798,7812.2 years41.17520,33042.17$42.53 to $55.129638,0210.2 years48.11638,02148.113,308,1113.3 years$30.792,776,320$30.66 As of December 31, 2013, approximately 78.9% of our outstanding options were held by current employees and approximately 21.1% were held byformer employees. Approximately 77.2% of our outstanding options were in-the-money, that is, they had an exercise price less than the $42.12 market price ofour common stock on December 31, 2013, and approximately 22.8% were out-of-the-money, that is, they had an exercise price of more than $42.12 as shownin the table below: In-the-Money OptionsOut-of-the-Money OptionsAll OptionsOutstanding% of TotalOutstanding% of TotalOutstanding% of TotalCurrent employees2,177,53085.3%433,84157.4%2,611,37178.9%Former employees375,22714.7%321,51342.6%696,74021.1%Totals2,552,757100.0%755,354100.0%3,308,111100.0%% of all outstanding options77.2%22.8%100.0% Restricted Stock Units The following table summarizes restricted stock unit activity during the years ended December 31, 2013, 2012 and 2011: Restricted StockUnitsWeighted AverageGrant Date Fair ValuePer UnitUnvested as of December 31, 20101,580,31820.56Granted1,138,35027.04Vested(722,471)19.92Forfeited(68,890)23.72Unvested as of December 31, 20111,927,30724.52Granted1,654,33722.18Vested(1,033,632)23.51Forfeited(252,070)23.39Unvested as of December 31, 20122,295,94223.40Granted1,564,22441.20Vested(966,838)24.20Forfeited(186,106)29.69Unvested as of December 31, 20132,707,222$33.34 In the year ended December 31, 2013, we granted 1,122,811 restricted stock units subject to time-vesting, of which 1,023,112 will vest and besettled ratably over a three-year period from the date of the grant, 80,133 will vest 100% on the fifth anniversary of the grant date and 19,566 will vest 100%on the third anniversary of the grant date. In addition, we granted 206,058 performance-based restricted stock units to certain of our senior officers. If allconditions are met, the performance-based restricted stock units will vest and be settled ratably over a three-year period from the grant date. We also awarded agrant of 23,175 performance-based restricted stock units to one of our senior executives. If target conditions are met, 100% of this grant will vest and be settledthree years from the grant date. We also awarded a grant of 212,180 restricted stock units to our chief executive officer, of which 106,090 are subject to time-vesting and 106,090 are performance-based. If target conditions are met, 50% of this grant will vest three years from the grant date and the remaining 50% willvest six years from the grant date. The award also allows for an additional 106,090 shares to be issued if higher performance criteria are met. In the year ended 112Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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, 2012, we granted 1,538,082 restricted units subject to time-vesting. In addition, we granted 116,255 performance-based restricted stock unitsto certain of our senior officers. Because all conditions were met, the performance-based restricted stock units will vest and be settled ratably over a three-yearperiod from the grant date. As of December 31, 2013, there were $63 million of total unrecognized compensation costs related to restricted stock units. These costs are expectedto be recognized over a weighted average period of 2.9 years. Employee Stock Purchase Plan We have an employee stock purchase plan under which we are currently authorized to issue up to 5,062,500 shares of common stock to our eligibleemployees. As of December 31, 2013, there were approximately 405,381 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, 2013, 2012 and 2011: Years Ended December 31,201320122011Number of shares100,217144,021187,409Weighted average price$42.88$22.81$21.44 Employee Retirement Plans Substantially all of our employees, upon qualification, are eligible to participate in one of our defined contribution 401(k) plans. Under the plans,employees may contribute a portion of their eligible compensation, and we match such contributions annually up to a maximum percentage for participantsactively employed, as defined by the plan documents. Employer matching contributions will vary by plan. Plan expenses, primarily related to ourcontributions to the plan, were approximately $35 million, $32 million and $32 million for the years ended December 31, 2013, 2012 and 2011, respectively.Such amounts are reflected in salaries, wages and benefits in the accompanying Consolidated Statements of Operations. We maintain one active and two frozen non-qualified defined benefit pension plans (“SERPs”) that provide supplemental retirement benefits to certainof our current and former executives. These plans are not funded, and plan obligations for these plans are paid from our working capital. Pension benefits aregenerally based on years of service and compensation. Upon completing the acquisition of Vanguard on October 1, 2013, we assumed a frozen qualifieddefined benefit plan (“DMC Pension Plan”) covering substantially all of the employees of our Detroit market that were hired prior to June 1, 2003. The benefitspaid under the DMC Pension Plan are primarily based on years of service and final average earnings. The following tables summarize the balance sheetimpact, as well as the benefit obligations, funded status and rate assumptions associated with the SERPs and the DMC Pension Plan based on actuarialvaluations prepared as of December 31, 2013 and 2012: 113 Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents December 31,20132012Reconciliation of funded status of plans and the amounts included in the ConsolidatedBalance Sheets:Projected benefit obligations(1)Beginning obligations$(312)$(285)Assumed from acquisition(1,037)(0)Service cost(2)(2)Interest cost(25)(14)Actuarial gain(loss)44(30)Plan changes(2)(0)Benefits paid/employer contributions3119Ending obligations(1,303)(312)Fair value of plans assetsBeginning obligations(0)(0)Assumed from acquisition863(0)Gain on plan assets34(0)Benefits paid(11)(0)Ending plan assets886(0)Funded status of plans$(417)$(312)Amounts recognized in the Consolidated Balance Sheets consist of:Other current liability$(19)$(20)Other long-term liability(398)(292)Accumulated other comprehensive loss2290$(395)$(222)SERP Assumptions:Discount rate5.00%4.00%Compensation increase rate3.00%3.00%Measurement dateDecember 31, 2013December 31, 2012DMC Pension Plan Assumptions:Discount rate5.18%n/aCompensation increase rateFrozenn/aMeasurement dateDecember 31, 2013n/a (1) The accumulated benefit obligation at December 31, 2013 and 2012 was approximately $1,297 million and $308 million, respectively. The components of net periodic benefit costs and related assumptions are as follows: Years Ended December 31,201320122011Service costs$2$2$2Interest costs251414Amortization of prior-year service costs(15)00Amortization of net actuarial loss753Net periodic benefit cost$19$21$19SERP Assumptions:Discount rate4.00%5.00%5.50%Long-term rate of return on assetsn/an/an/aCompensation increase rate3.00%3.00%3.00%Measurement dateJanuary 1, 2013January 1, 2012January 1, 2011Census dateJanuary 1, 2013January 1, 2012January 1, 2011DMC Pension Plan Assumptions:Discount rate5.01%n/an/aLong-term rate of return on assets7.00%n/an/aCompensation increase rateFrozenn/an/aMeasurement dateOctober 1, 2013n/an/aCensus dateJanuary 1, 2013n/an/a Net periodic benefit costs for the current year are based on assumptions determined at the valuation date of the prior year for the SERPs and at the date ofacquisition for the DMC Pension Plan. 114Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 recorded gain/(loss) adjustments of $68 million, ($25) million and ($15) million in other comprehensive income (loss) in the years endedDecember 31, 2013, 2012 and 2011, respectively, to recognize changes in the funded status of our SERPs and the DMC Pension Plan. Changes in the fundedstatus are recorded as a direct increase or decrease to shareholders’ equity through accumulated other comprehensive loss. Net actuarial gains/(losses) of$63 million, ($30) million and ($19) million during the years ended December 31, 2013, 2012 and 2011, respectively, and the amortization of net priorservice costs of less than $1 million for the years ended December 31, 2013, 2012 and 2011 were recognized in other comprehensive income (loss).Cumulative net actuarial losses of $21 million, $90 million and $65 million as of December 31, 2013, 2012 and 2011, respectively, and unrecognized priorservice costs of less than $1 million as of each of the years ended December 31, 2013, 2012 and 2011, have not yet been recognized as components of netperiodic benefit costs. To develop the expected long-term rate of return on plan assets assumption, the DMC Pension Plan considers the current level of expected returns onrisk-free investments (primarily government bonds), the historical level of risk premium associated with the other asset classes in which the portfolio isinvested and the expectations for future returns on each asset class. The expected return for each asset class is then weighted based on the target asset allocationto develop the expected long-term rate of return on assets assumption for the portfolio. The weighted-average asset allocations by asset category as ofDecember 31, 2013, were as follows: Asset CategoryTargetActualCash and cash equivalents6%6%United States government obligations1%1%Equity securities45%51%Debt Securities48%42% The DMC Pension Plan assets are invested in separately managed portfolios using investment management firms. The objective for all assetcategories is to maximize total return without assuming undue risk exposure. The DMC Pension Plan maintains a well-diversified asset allocation that bestmeets these objectives. The DMC Pension Plan assets are largely comprised of equity securities, which include companies with various market capitalizationsizes in addition to international and convertible securities. Cash and cash equivalents are comprised of money market funds. Debt securities include domesticand foreign government obligations, corporate bonds, and mortgage-backed securities. Under the investment policy of the DMC Pension Plan, investments inderivative securities are not permitted for the sole purpose of speculating on the direction of market interest rates. Included in this prohibition are leveraging,shorting, swaps, futures, options, forwards, and similar strategies. In each investment account, the DMC Pension Plan investment managers are responsible to monitor and react to economic indicators, such as grossdomestic product, consumer price index and U.S. monetary policy that may affect the performance of their account. The performance of all managers and theaggregate asset allocation are formally reviewed on a quarterly basis, with a rebalancing of the asset allocation occurring at least once a year. The current assetallocation objective is to maintain a certain percentage with each class allowing for a 10% deviation from the target. The following tables summarize the DMC Pension Plan assets measured at fair value on a recurring basis as of December 31, 2013, aggregated bythe level in the fair value hierarchy within which those measurements are determined. Fair value methodologies for Level 1, Level 2 and Level 3 are consistentwith the inputs described in Note 18. December 31, 2013(Level 1)(Level 2)(Level 3)Cash and cash equivalents$53$53$—$—United States government obligations55——Corporate bonds376376——Equity securities452452——$886$886$—$— 115Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 presents the estimated future benefit payments to be made from the SERPs and the DMC Pension Plan, a portion of which will befunded from plan assets, for the next five years and in the aggregate for the five years thereafter: Years Ending December 31,Five YearsTotal20142015201620172018ThereafterEstimated benefit payments$841$88$74$76$80$82$441 The SERP and DMC Pension Plan obligations of $417 million at December 31, 2013 are classified in the accompanying Consolidated Balance Sheetas an other current liability ($19 million) and defined benefit plan obligations ($398 million) based on an estimate of the expected payment patterns. We expectto make total contributions to the plans of approximately $28 million for the year ending December 31, 2014. NOTE 9. CAPITAL COMMITMENTS In connection with Vanguard’s acquisition of Detroit Medical Center, certain capital commitments were agreed upon to be satisfied at particular dates.If these commitments are not met by these required dates, we are required to escrow cash for the purpose of funding certain capital projects. There was norequired escrow balance as of December 31, 2013. NOTE 10. PROPERTY AND EQUIPMENT The principal components of property and equipment are shown in the table below: December 31,20132012Land$589$341Buildings and improvements6,3694,087Construction in progress593140Equipment4,0383,21911,5897,787Accumulated depreciation and amortization(3,898)(3,494)Net property and equipment$7,691$4,293 Property and equipment is stated at cost, less accumulated depreciation and amortization and impairment write-downs related to assets held andused. 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, 2013 and 2012: 20132012Hospital Operations and otherAs of January 1:Goodwill$3,268$3,166Accumulated impairment losses(2,430)(2,430)Total838736Goodwill acquired during the year and purchase price allocation adjustments2,121104Goodwill allocated to hospital sold(0)(2)Impairment of goodwill00Total$2,959$838As of December 31:Goodwill$5,389$3,268Accumulated impairment losses(2,430)(2,430)Total$2,959$838 116Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 20132012ConiferAs of January 1:Goodwill$78$0Accumulated impairment losses00Total780Goodwill acquired during the year and purchase price allocation adjustments578Total$83$78 As of December 31:Goodwill$83$78Accumulated impairment losses00Total$83$78 The following table provides information regarding other intangible assets, which are included in the accompanying Consolidated Balance Sheets asof December 31, 2013 and 2012: GrossCarryingAmountAccumulatedAmortizationNet BookValueAs of December 31, 2013:Capitalized software costs$1,260$(475)$785Long-term debt issuance costs230(31)199Trade Names81081Contracts64(2)62Other80(15)65Total$1,715$(523)$1,192As of December 31, 2012:Capitalized software costs$927$(399)$528Long-term debt issuance costs106(25)81Other43(2)41Total$1,076$(426)$650 Estimated future amortization of intangibles with finite useful lives as of December 31, 2013 is as follows: Years Ending December 31,LaterTotal20142015201620172018YearsAmortization of intangible assets$1,102$224$206$126$82$77$387 NOTE 12. INVESTMENTS AND OTHER ASSETS The principal components of investments and other assets in our accompanying Consolidated Balance Sheets are as follows: December 31,20132012Marketable debt securities$62$15Equity investments in unconsolidated health care entities(1)5622Total investments11837Cash surrender value of life insurance policies2521Long-term deposits3516Land held for expansion, long-term receivables and other assets22788Investments and other assets$405$162 (1) Equity earnings of unconsolidated affiliates are included in net operating revenues in the accompanying Consolidated Statements of Operations and were$15 million and $8 million in of the years ended December 31, 2013 and 2012, 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, 2013 and 2012, there were less than $1 million of accumulated unrealized gains on these investments. NOTE 13. ACCUMULATED OTHER COMPREHENSIVE LOSS Our accumulated other comprehensive loss is comprised of the following: Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.117Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents December 31,20132012Unamortized realized losses from interest rate lock derivatives$—$(1)Adjustments for defined benefit plans(24)(67)Accumulated other comprehensive loss$(24)$(68) There was a tax effect allocated to the adjustments for our defined benefit plans for the years ended December 31, 2013 and 2012 of $(25) millionand $9 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. Professional and General Liability Insurance At December 31, 2013 and 2012, the aggregate current and long-term professional and general liability reserves in our accompanying ConsolidatedBalance Sheets were approximately $699 million and $356 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 patterns discounted to their present value under a risk-free rate approach using a Federal Reserve seven-year maturity rate of 2.45%,1.18% and 1.35% at December 31, 2013, 2012 and 2011, respectively. 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 $112 million,$92 million and $108 million for the years ended December 31, 2013, 2012 and 2011, respectively. NOTE 15. CLAIMS AND LAWSUITS We operate in a highly regulated and litigious industry. As a result, we commonly become involved in disputes, litigation and regulatory mattersincidental to our operations, including governmental investigations, personal injury lawsuits, employment claims and other matters arising out of the normalconduct of our business. We record accruals for estimated losses relating to claims and lawsuits when available information indicates that a loss is probable and we canreasonably estimate the amount of the loss or a range of loss. If a loss on a material matter is reasonably possible and estimable, we disclose an estimate of theloss 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. Governmental Reviews Health care companies are subject to numerous investigations by various governmental agencies. Further, private parties have the right to bring quitam or “whistleblower” lawsuits against companies that allegedly submit false claims for payments to, or improperly retain overpayments from, thegovernment and, in some states, private payers. Certain of our individual facilities have received inquiries from government agencies, and our facilities mayreceive such inquiries in future periods. The following material governmental reviews, which have been previously reported, are currently pending. · Kyphoplasty—From March 2009 through July 2010, seven of our hospitals became the subject of a review by the U.S. Department of Justice(“DOJ”) and certain other federal agencies regarding the appropriateness of inpatient treatment for Medicare patients receiving kyphoplasty,which is a surgical procedure used to treat certain spinal conditions. We believe this review is part of a national investigation and is related to aqui tam settlement between the government and the manufacturer and distributor of Kyphon, the product used in performing kyphoplastyprocedures. In January 2013, we paid $900,000 to settle potential Medicare reimbursement claims against one of our hospitals subject to thisreview. Management has established a reserve, as described below, to reflect the current 118Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 probable liability for two of the remaining hospitals under review. We are unable to calculate an estimate of loss or a range of losswith respect to the four other hospitals because (i) our external clinical expert has not completed its report on the billing practices of two of thosehospitals, and (ii) we have not reached agreement with the DOJ on the appropriate review methodology with respect to the remaining twohospitals. We are engaged in potential settlement discussions with the DOJ to resolve this matter, but it is impossible at this time to predict theoutcome of those discussions or the amount of any potential resolution. · Implantable Cardioverter Defibrillators (“ICDs”)—At this time, 52 of our hospitals are part of a nationwide investigation to determine ifICD procedures from 2002 to 2010 complied with Medicare coverage requirements. (The number of our hospitals under review may increase ordecrease depending on the timeframe of the government’s examination, which commenced in March 2010.) In August 2012, the DOJ released its“Medical Review Guidelines/Resolution Model,” which sets out, for purposes of this investigation, the patient conditions and criteria for themedical necessity of the implantation of ICDs in Medicare beneficiaries and how the DOJ will enforce the repayment obligations of hospitals.Management has established a reserve, as described below, to reflect the current estimate of probable liability for 21 of the hospitals underreview. We are unable to calculate an estimate of loss or a range of loss with respect to the 31 other hospitals because our external clinical experthas not completed its report on the billing practices of those hospitals. We are engaged in potential settlement discussions with the DOJ to resolvethis matter, but it is impossible at this time to predict the outcome of those discussions or the amount of any potential resolution. · Clinica de la Mama Investigations and Qui Tam Action—As previously reported, we received a subpoena in May 2012 from the Office ofInspector General (“OIG”) of U.S. Department of Health and Human Services in Atlanta seeking documents from January 2004 throughMay 2012 related to the relationship that certain of our Georgia and South Carolina hospitals had with Hispanic Medical Management, Inc.(“HMM”). HMM is an unaffiliated entity that owns and operates clinics that provide, among other things, prenatal care predominantly touninsured patients. The hospitals contracted with HMM for translation, marketing, management and Medicaid eligibility determinationservices. The civil investigation is being conducted by the Civil Division of the DOJ, the U.S. Attorney’s Office for the Middle District ofGeorgia and the Georgia Attorney General’s Office, while the parallel criminal investigation is being conducted by the Criminal Division of theDOJ and the U.S. Attorney’s Office for the Northern District of Georgia. The investigations arose out of a qui tam action captioned United States of America, ex. rel. Ralph D. Williams v. Health ManagementAssociates, Inc., et al. filed in the U.S. District Court for the Middle District of Georgia. Tenet and four of its hospital subsidiaries aredefendants in the qui tam action, which alleges that the arrangements the hospitals had with HMM violated the federal and state anti-kickbackstatutes and false claims acts. The Georgia Attorney General’s Office, on behalf of the State of Georgia, has intervened in the qui tam action and,on February 18, 2014, the Civil Division of the DOJ and the U.S. Attorney’s Office for the Middle District of Georgia filed a motion seekingleave of court to intervene in the action on behalf of the United States. Our motion to dismiss, which was filed on November 8, 2013, ispending. If we or our subsidiaries were determined to have violated the anti-kickback statutes, the government could require us to reimburse relatedgovernment program payments received during the subject period, assess civil monetary penalties including treble damages, exclude individualsor subsidiaries from participation in federal health care programs, or seek criminal sanctions against current or former employees of our hospitalsubsidiary companies or the hospital companies themselves. Management has established a reserve, as described below, to reflect the currentestimate of probable liability for these matters, but it is impossible at this time to predict the amount and terms of any potential resolution. Wewill continue to vigorously defend against the government’s allegations. Except with respect to the matter settled in January 2013 involving one hospital, as discussed above, our analysis of each of these pending reviews isstill ongoing, and we are unable to predict with any certainty the progress or final outcome of any discussions with government agencies at this time. Based oncurrently available information, as of December 31, 2013, we had recorded reserves of approximately $27 million in the aggregate for our potentialreimbursement obligations with respect to 23 hospitals under review for their billing practices for kyphoplasty and cardiac defibrillator implantationprocedures, as well as the Clinica de la Mama matters. Changes in the reserves may be required in the future as additional information becomes available. Wecannot predict the ultimate resolution of any governmental review, and the final amounts paid in settlement or otherwise, if any, could differ materially fromour currently recorded reserves. 119Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Settlement of Previously Reported Litigation · Hospital-Related Tort Claim—In 2013, we settled for $8 million a previously disclosed lawsuit — which was captioned Rosenberg v.Encino-Tarzana Regional Medical Center and Tenet Healthcare Corporation — filed in January 2007 in connection with an allegedApril 2006 assault at Tarzana Regional Medical Center (a hospital we divested in 2008). · Class Action Lawsuits Relating to Vanguard Acquisition—In August 2013, Vanguard entered into a proposed settlement agreement withrespect to two class action lawsuits filed in June 2013 on behalf of Vanguard stockholders in the Chancery Court for Davidson County,Tennessee, captioned James A. Kaurich v. Vanguard Health Systems, Inc., et al., and Marion Edinburgh TTEE FBO Marion EdinburghTrust U/T/D/ 7/8/1991 v. Vanguard Health Systems, Inc., et al. In January 2014, the court issued a preliminary order approving the proposedsettlement. The final hearing to approve the settlement is scheduled to be held in April 2014. Under the terms of the settlement, Vanguard madecertain supplemental disclosures related to the acquisition, extended the period for its stockholders to exercise their appraisal rights (which hassince expired), and agreed to pay the fees and expenses of the plaintiffs’ counsel. The settlement will not have a material adverse effect on ourbusiness, financial condition or results of operations. Ordinary Course Matters We are also subject to other claims and lawsuits arising in the ordinary course of business, including potential claims related to, among other things,the care and treatment provided at our hospitals and outpatient facilities, the application of various federal and state labor laws, tax audits and other matters.Although the results of these claims and lawsuits cannot be predicted with certainty, we believe that the ultimate resolution of these ordinary course claims andlawsuits will not have a material effect on our business, financial condition or results of operations. In addition to the proceedings described above, we are defendants in a class action lawsuit in which the plaintiffs claim that in April 1996 patientidentifying records from a psychiatric hospital that we closed in 1995 were temporarily placed in an unsecure location while the hospital was undergoingrenovations. The lawsuit, Doe, et al. v. Jo Ellen Smith Medical Foundation, was filed in the Civil District Court for the Parish of Orleans in Louisiana inMarch 1997. The plaintiffs allege tortious invasion of privacy and negligent infliction of emotional distress. The plaintiffs contend that the class consists ofover 5,000 persons; however, only eight individuals have been identified to date in the class certification process. The plaintiffs have asserted each member ofthe class is entitled to common damages under a theory of presumed “common damage” regardless of whether or not any members of the class were actuallyharmed or even aware of the incident. We believe there is no authority for an award of common damages under Louisiana law. In addition, we believe that thereis no basis for the certification of this proceeding as a class action under applicable federal and Louisiana law precedents. The lawsuit is expected to be tried inJune 2014. We are not able to estimate the reasonably possible loss or a reasonably possible range of loss given: the small number of class members that havebeen identified or otherwise responded to the class certification process; the novel theories asserted by plaintiffs, including their assertion that a theory ofpresumed common damage exists under Louisiana law; and the failure of the plaintiffs to provide any evidence of damages. We intend to vigorously contestthe plaintiffs’ claims. 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 injudgments or settlements, which individually or in the aggregate could exceed amounts, if any, that may be recovered under our insurance policies wherecoverage applies and is available, (2) cause us to incur substantial expenses, (3) require significant time and attention from our management, and (4) cause usto close or sell hospitals or otherwise modify the way we conduct business. 120Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 presents reconciliations of the beginning and ending liability balances in connection with legal settlements and related costs recordedduring the years ended December 31, 2013, 2012 and 2011: Balances atBeginningof PeriodLitigation andInvestigationCostsCashPaymentsOtherBalances atEnd ofPeriodYear Ended December 31, 2013Continuing operations$5$31$(10)$14$40Discontinued operations52(1)06$10$33$(11)$14$46Year Ended December 31, 2012Continuing operations$49$5$(49)$0$5Discontinued operations170(12)05$66$5$(61)$0$10Year Ended December 31, 2011Continuing operations$30$55$(36)$0$49Discontinued operations0170017$30$72$(36)$0$66 For the years ended December 31, 2013, 2012 and 2011, we recorded net costs of $33 million, $5 million and $72 million, respectively, inconnection with significant legal proceedings and investigations. The 2013 and 2012 amounts primarily related to costs associated with various legalproceedings and governmental reviews. The 2011 amount primarily related to costs associated with our evaluation of an unsolicited acquisition proposalreceived in November 2010 (which was subsequently withdrawn), changes in reserve estimates established in connection with certain governmental reviewsdescribed above, accruals for a physician privileges case and certain hospital-related tort claims, the settlement of a union arbitration claim, and costs todefend various matters. The amount for 2013 in the column entitled “Other” above relates to the reserves assumed as part of our acquisition of Vanguard inOctober 2013. NOTE 16. INCOME TAXES The provision for income taxes for continuing operations for the years ended December 31, 2013, 2012 and 2011 consists of the following: Years Ended December 31,201320122011Current tax expense (benefit):Federal$2$(3)$0State411(6)68(6)Deferred tax expense (benefit):Federal(56)11762State(15)05(71)11767$(65)$125$61 121Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents A reconciliation between the amount of reported income tax expense (benefit) and the amount computed by multiplying income (loss) from continuingoperations before income taxes by the statutory federal income tax rate is shown below: Years Ended December 31,201320122011Tax expense at statutory federal rate of 35%$(55)$117$57State income taxes, net of federal income tax benefit11310Tax attributable to noncontrolling interests(10)(4)(4)Nondeductible transaction costs600Other changes in valuation allowance(2)(5)(2)Change in tax contingency reserves, including interest(7)(1)(12)Prior-year provision to return adjustment and other changes in deferred taxes, net ofvaluation allowance337Other items(1)25$(65)$125$61 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, 2013December 31, 2012AssetsLiabilitiesAssetsLiabilitiesDepreciation and fixed-asset differences$0$678$0$375Reserves related to discontinued operations and restructuringcharges20050Receivables (doubtful accounts and adjustments)20901730Deferred gain on debt exchanges053053Accruals for retained insurance risks28801820Intangible assets01630122Other long-term liabilities760550Benefit plans29902140Other accrued liabilities600110Investments and other assets04560Net operating loss carryforwards70805880Stock-based compensation280320Other items2903601,7179391,302550Valuation allowance(107)0(56)0$1,610$939$1,246$550 Below is a reconciliation of the deferred tax assets and liabilities and the corresponding amounts reported in the accompanying Consolidated BalanceSheets. December 31,20132012Current portion of deferred income tax asset$581$354Deferred income tax asset, net of current portion90342Noncurrent deferred income tax liability00Net deferred tax asset$671$696 During the year ended December 31, 2013, the valuation allowance increased by $51 million, $34 million due to the acquisition of Vanguard and$17 million primarily due to the adjustment of deferred tax assets for state net operating loss carryforwards that have a full valuation allowance. The $107million balance in the valuation allowance as of December 31, 2013 is primarily attributable to certain state net operating loss carryovers that, more likely thannot, will expire unutilized. During the year ended December 31, 2012, we reduced the valuation allowance by an additional $5 million based on 2012 profitsand projected profits for 2013. During the year ended December 31, 2011, we reduced the valuation allowance for our deferred tax assets by $5 million basedon 2011 profits and projected profits for 2012. We account for uncertain tax positions in accordance with ASC 740-10-25, which prescribes a comprehensive model for the financial statementrecognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be 122Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 taken in income tax returns. The table below summarizes the total changes in unrecognized tax benefits during the years ended December 31, 2013, 2012 and2011. The additions and reductions for tax positions include the impact of items for which the ultimate deductibility is highly certain, but for which there isuncertainty about the timing of such deductions. Such amounts include unrecognized tax benefits that have impacted deferred tax assets and liabilities atDecember 31, 2013, 2012 and 2011. ContinuingOperationsDiscontinuedOperationsTotalBalance at December 31, 201034135Additions 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, 201134135Additions for prior-year tax positions000Reductions for tax positions of prior years(2)0(2)Additions for current-year tax positions202Reductions for current-year tax positions000Reductions due to settlements with taxing authorities(3)0(3)Reductions due to a lapse of statute of limitations(0)0(0)Balance at December 31, 201231132Additions for prior-year tax positions15015Reductions for tax positions of prior years(0)0(0)Additions for current-year tax positions303Reductions for current-year tax positions000Reductions due to settlements with taxing authorities(0)0(0)Reductions due to a lapse of statute of limitations(6)(1)(7)Balance at December 31, 2013$43$0$43 The total amount of unrecognized tax benefits as of December 31, 2013 was $43 million, of which $34 million, if recognized, would affect our effective taxrate and income tax expense (benefit) from continuing operations. Income tax expense in the year ended December 31, 2013 includes a benefit of $1 million incontinuing operations attributable to a decrease in our estimated liabilities for uncertain tax positions, net of related deferred tax effects. The total amount ofunrecognized tax benefits as of December 31, 2012 was $32 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, 2012 includes expense of $3 million in continuing operationsattributable to an increase in our estimated liabilities for uncertain tax positions, net of related deferred tax effects. The total amount of unrecognized tax benefitsas of December 31, 2011 was $35 million which, if recognized, would affect our effective tax rate and income tax expense (benefit) from continuing anddiscontinued operations. Income tax expense in the year ended December 31, 2011 includes a benefit of $21 million ($2 million related to continuing operationsand $19 million related to discontinued operations) attributable to a reduction in our estimated liabilities for uncertain tax positions, net of related deferred taxeffects, 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 related to continuing operations are included in theaccompanying Consolidated Statement of Operations for the year ended December 31, 2013. Total accrued interest and penalties on unrecognized tax benefitsas of December 31, 2013 were $5 million, all of which related to continuing operations. 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. 123Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 As of December 31, 2013, approximately $1 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, 2013, 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 2033, (2) approximately $19 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 $3.8 billion expiring in 2014through 2033 for which the associated deferred tax benefit, net of valuation allowance and federal tax impact, is $34 million. Our ability to utilize NOLcarryforwards to reduce future taxable income may be limited under Section 382 of the Internal Revenue Code if certain ownership changes in our companyoccur during a rolling three-year period. These ownership changes include purchases of common stock under share repurchase programs (see Note 2), theoffering of stock by us, the purchase or sale of our stock by 5% shareholders, as defined in the Treasury regulations, or the issuance or exercise of rights toacquire our stock. If such ownership changes by 5% shareholders result in aggregate increases that exceed 50 percentage points during the three-year period,then Section 382 imposes an annual limitation on the amount of our taxable income that may be offset by the NOL carryforwards or tax credit carryforwardsat the time of ownership change. NOTE 17. EARNINGS (LOSS) PER COMMON SHARE The table below is a reconciliation of the numerators and denominators of our basic and diluted earnings (loss) per common share calculations forincome (loss) from continuing operations for the years ended December 31, 2013, 2012 and 2011. Income (loss) is expressed in millions and weighted averageshares are expressed in thousands. Income(Numerator)WeightedAverageShares(Denominator)Per-ShareAmountYear Ended December 31, 2013Loss attributable to Tenet Healthcare Corporation common shareholders for basic earnings pershare$(123)101,648$(1.21)Effect of dilutive stock options and restricted stock units000.00Loss attributable to Tenet Healthcare Corporation common shareholders for dilutedearnings per share$(123)101,648$(1.21)Year Ended December 31, 2012Income available to Tenet Healthcare Corporation common shareholders for basic earnings pershare$185104,200$1.77Effect of dilutive stock options and restricted stock units04,726(0.07)Income available to Tenet Healthcare Corporation common shareholders for dilutedearnings per share$185108,926$1.70Year Ended December 31, 2011Income available to Tenet Healthcare Corporation common shareholders for basic earnings pershare$68117,182$0.58Effect of dilutive stock options and restricted stock units04,113(0.02)Income available to Tenet Healthcare Corporation common shareholders for dilutedearnings per share$68121,295$0.56 All potentially dilutive securities were excluded from the calculation of diluted earnings (loss) per share for the year ended December 31, 2013 becausewe did not report income from continuing operations in the period. In circumstances where we do not have income from continuing operations, the effect ofstock options and other potentially dilutive securities is anti-dilutive, that is, a loss from continuing operations has the effect of making the diluted loss pershare less than the basic loss per share. Had we generated income from continuing operations in that period, the effect (in thousands) of employee stockoptions, restricted stock units and deferred compensation units on the diluted shares calculation would have been an increase of 2,310. Stock options (inthousands) whose exercise price exceeded the average market price of our common stock and, therefore, were not included in the computation of diluted sharesfor the years ended December 31, 2013, 2012 and 2011 were 755, 2,876 and 3,421 shares, respectively. 124Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 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. The following tables present information about our assets and liabilities that are measured at fair value on a recurring basisas of December 31, 2013 and 2012. The following tables also indicate the fair value hierarchy of the valuation techniques we utilized to determine such fairvalues. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. We consider asecurity that trades at least weekly to have an active market. Fair values determined by Level 2 inputs utilize data points that are observable, such as quotedprices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situationswhere there is little, if any, market activity for the asset or liability. December 31, 2013Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1)Significant OtherObservable Inputs(Level 2)SignificantUnobservableInputs(Level 3)Investments:Marketable securities – current$1$1$0$0Investments in Reserve Yield Plus Fund2020Marketable debt securities – noncurrent6223381$65$24$40$1 December 31, 2012Quoted Prices in ActiveMarkets forIdentical Assets(Level 1)Significant OtherObservable Inputs(Level 2)SignificantUnobservableInputs(Level 3)Investments:Marketable securities – current$4$4$0$0Investments in Reserve Yield Plus Fund2020Marketable debt securities – noncurrent142111$20$6$13$1 There was no change in the fair value of our auction rate securities valued using significant unobservable inputs during the years endedDecember 31, 2013 or 2012. At December 31, 2013, 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, 2013 or 2012. 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 and indicates the fair value hierarchy of the valuation techniques we utilized to determine such fair values. In general, fair values determined byLevel 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities, which generally are not applicable to non-financial assetsand liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as definitive sales agreements, appraisals or establishedmarket values of comparable assets. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability and include situationswhere there is little, if any, market activity for the asset or liability, such as internal estimates of future cash flows. December 31, 2013Quoted Prices in ActiveMarkets forIdentical Assets(Level 1)Significant OtherObservable Inputs(Level 2)SignificantUnobservableInputs(Level 3)Long-lived assets held and used$44$—$44$— As described in Note 5, we recorded a $12 million impairment charge in continuing operations in the year ended December 31, 2013 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 hospitals totheir estimated fair values primarily due to a decline in the fair value of real estate in the market in which the hospital operates and a decline in the estimatedfair value of equipment. 125Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 fair value of our long-term debt is based on quoted market prices (Level 1). At December 31, 2013 and 2012, the estimated fair value of our long-term debt was approximately 103.5% and 108.2%, respectively, of the carrying value of the debt. NOTE 19. ACQUISITIONS During the year ended December 31, 2013, we acquired 28 hospitals (plus one more under construction), 39 outpatient centers and five health plans,serving communities in Arizona, California, Illinois, Massachusetts, Michigan and Texas, through our acquisition of Vanguard. We also purchased thefollowing businesses: (1) 11 ambulatory surgery centers (in one of which we had previously held a noncontrolling interest); (2) an urgent care center; (3) aprovider network based in Southern California that includes contracted independent physicians, ancillary providers and hospitals; (4) a medical officebuilding; and (5) various physician practice entities. The fair value of the consideration conveyed in the acquisitions (the “purchase price”) was$1.515 billion. We are required to allocate the purchase prices of the acquired businesses to assets acquired or 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 primarily for Vanguard and several recent acquisitions; therefore,those purchase price allocations are subject to adjustment once the valuations are completed. During the year ended December 31, 2013, we made adjustmentsto purchase price allocations for businesses acquired in 2012 that increased goodwill by approximately $5 million. During the year ended December 31, 2012, we acquired a diagnostic imaging center, an oncology center, an urgent care center, a health plan, acyberknife center in which we previously held a noncontrolling interest, a majority interest in nine ambulatory surgery centers (in one of which we hadpreviously held a noncontrolling interest), as well as 20 physician practice entities and a physician practice management company in which we had previouslyheld a noncontrolling interest as part of our Hospital Operations and other segment. Also during the year ended December 31, 2012, our Conifer segmentacquired an information management and services company and a hospital revenue cycle management business. The purchase price was $211 million. Preliminary purchase price allocations for all the acquisitions made during the years ended December 31, 2013 and 2012 are as follows: 20132012Current assets$1,058$19Property and equipment3,13424Other intangible assets16653Goodwill2,121182Investments and other assets830Other long-term assets1260Current liabilities(1,024)(23)Deferred tax liabilities(174)0Long-term liabilities(3,741)(7)Redeemable noncontrolling interests in equity ofconsolidated subsidiaries(175)0Noncontrolling interests(49)(37)Net cash paid$1,515$211Gain on business combination$10$0 The goodwill generated from these transactions, the majority of which will not be deductible for income tax purposes, can be attributed to the benefits that weexpect to realize from operating efficiencies and increased reimbursement. Approximately $52 million and $6 million in transaction costs related to prospectiveand closed acquisitions were expensed during the years ended December 31, 2013 and 2012, respectively, and are included in impairment and restructuringcharges, and acquisition-related costs in the accompanying Consolidated Statements of Operations. Included in equity earnings of unconsolidated affiliates is $10 million of earnings associated with stepping up our basis in a previously heldinvestment in an ambulatory surgery center in which we acquired a controlling interest and are now consolidating for the year ended December 31, 2013. 126Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Acquisition of Vanguard Health Systems Effective October 1, 2013, we acquired the common stock of Vanguard for $21 per share in an all cash transaction. Vanguard owned and operated28 hospitals (plus one more under construction), 39 outpatient centers and five health plans with approximately 140,000 members, serving communities inArizona, California, Illinois, Massachusetts, Michigan and Texas. We paid approximately $4.3 billion to acquire Vanguard, including the assumption of$2.5 billion of Vanguard’s net debt. We have not yet finalized the analysis required to complete the purchase price allocation for this acquisition and the relateddisclosures. The preliminary purchase price allocation for our Vanguard acquisition is as follows: Current assets$1,054Investments and other assets82Property and equipment3,074Other long term assets118Other intangible assets108Goodwill1,936Current liabilities(1,012)Deferred taxes long term(161)Long-term liabilities(3,726)Redeemable noncontrolling interests in equity ofconsolidated subsidiaries(165)Noncontrolling interests(7)Net cash paid$1,301 Pro Forma Information - Unaudited The following table provides certain pro forma financial information for Tenet as if the Vanguard Health Systems acquisition had occurred at thebeginning of the year ended December 31, 2012. Year Ended December 31,20132012 Net operating revenues$15,650$15,140Income (loss) from continuing operations , before income taxes$(294)$294 NOTE 20. SEGMENT INFORMATION In the three months ended June 30, 2012, we began reporting Conifer as a separate reportable business segment. Our other segment is HospitalOperations and other. Historically, our business has consisted of one reportable segment. However, during the three months ended June 30, 2012, our HospitalOperations and other segment and our Conifer subsidiary entered into formal agreements, pursuant to which it was agreed that services provided by bothparties to each other would be billed based on estimated third-party pricing terms. The factors for determining the reportable segments include the manner inwhich management evaluates operating performance combined with the nature of the individual business activities. Our core business is Hospital Operations and other, which is focused on owning and operating acute care hospitals and outpatient facilities. We alsoown various related health care businesses. At December 31, 2013, our subsidiaries operated 77 hospitals with a total of 20,293 licensed beds, primarilyserving urban and suburban communities, as well as 183 outpatient centers, six health plans and six accountable care networks. We operate revenue cycle management and patient communications and engagement services businesses under our Conifer subsidiary. In addition,Conifer operates a management services business that supports value-based performance through clinical integration, financial risk management andpopulation health management. At December 31, 2013, Conifer provided services to more than 700 Tenet and non-Tenet hospital and other clients nationwide. As mentioned above, in 2012, our Conifer subsidiary and our Hospital Operations and other segment entered into formal agreements documentingterms and conditions of various services provided by Conifer to Tenet hospitals, as well as certain administrative services provided by our HospitalOperations and other segment to Conifer. The services provided by both parties under these agreements are charged to the other party based on estimated third-party pricing terms. In 2011, the services provided by both parties were charged to the other party based on an estimate of the internal costs to provide such 127Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 services. The amounts in the tables directly below reflect the services being charged based on estimated third-party terms in 2013 and 2012, but not in 2011. The following table includes amounts for each of our reportable segments and the reconciling items necessary to agree to amounts reported in theaccompanying Consolidated Balance Sheets and Consolidated Statements of Operations: December 31,201320122011 Assets:Hospital Operations and other$15,874$8,825$8,389Conifer25621973Total$16,130$9,044$8,462 Year Ended December 31,201320122011Capital expenditures:Hospital Operations and other Core Services$670$495$461Conifer211314Total$691$508$475 Net operating revenues:Hospital Operations and other$10,587$9,002$8,575ConiferTenet404371261Other customers5151177911,5069,4908,915Intercompany eliminations(404)(371)(261)Total$11,102$9,119$8,654 Adjusted EBITDA:Hospital Operations and other Core Services$1,210$1,098$1,083Conifer13210543Total$1,342$1,203$1,126 Depreciation and amortization:Hospital Operations and other Core Services$526$420$389Conifer19109Total$545$430$398 Adjusted EBITDA$1,342$1,203$1,126Depreciation and amortization(545)(430)(398)Impairment and restructuring charges, and acquisition-related costs(103)(19)(20)Litigation and investigation costs(31)(5)(55)Interest expense(474)(412)(375)Loss from early extinguishment of debt(348)(4)(117)Investment earnings113Income (loss) before income taxes$(158)$334$164 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. 128Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 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. Effective December 31, 2012, we adopted ASU 2012-02, “Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assetsfor Impairment,” which permits an entity to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangibleasset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test as described in Topic 350. The adoption of thisstandard had no impact on our financial condition, results of operations or cash flows Recently Issued Accounting Standards In July 2013, the FASB issued, ASU No. 2013-11 “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, aSimilar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU 2013-11”). ASU 2013-11 addresses the diversity in practice that exists for the balance sheetpresentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to adeferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. ASU No. 2013-11 is effective for our fiscal quarterending March 31, 2014. ASU 2013-11 impacts balance sheet presentation only. We do not expect the adoption of this standard to impact our balance sheet. 129Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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, 2013FirstSecondThirdFourthNet operating revenues$2,387$2,422$2,408$3,885Net income (loss) attributable to Tenet HealthcareCorporation common shareholders$(88)$(50)$28$(24)Net income (loss)$(83)$(43)$36$(14)Earnings (loss) per share attributable to Tenet HealthcareCorporation common shareholders:Basic$(0.85)$(0.49)$0.28$(0.24)Diluted$(0.85)$(0.49)$0.27$(0.24) Year Ended December 31, 2012FirstSecondThirdFourthNet operating revenues$2,302$2,265$2,221$2,331Net income (loss) attributable to Tenet HealthcareCorporation common shareholders$58$(6)$40$49Net income (loss)$67$(20)$32$54Earnings (loss) per share attributable to Tenet HealthcareCorporation common shareholders:Basic$0.56$(0.06)$0.38$0.46Diluted$0.53$(0.06)$0.37$0.45 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 reportsettlements and valuation allowances; managed care contract negotiations, settlements or terminations and payer consolidations; changes in Medicare andMedicaid regulations; Medicaid funding levels set by the states in which we operate; the timing of approval by CMS of Medicaid provider fee revenueprograms; 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, the results ofoperations at our hospitals and related health care facilities include, but are not limited to: the business environment, economic conditions and demographics oflocal communities in which we operate; the number of uninsured and underinsured individuals in local communities treated at our hospitals; seasonal cyclesof 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 or terminations; any unfavorable publicity about us, which impacts our relationships withphysicians and patients; changes in health care regulations and the participation of individual states in federal programs; and the timing of elective procedures.These considerations apply to year-to-year comparisons as well. All amounts related to shares, share prices and earnings per share have been restated to give retrospective presentation for the reverse stock splitdescribed in Note 2. 130Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 completed our acquisition of Vanguard effective October 1, 2013. The facilities acquired as part of the Vanguard acquisition utilize differentinformation technology systems than our other facilities. We have excluded all of the Vanguard operations from our assessment of and conclusion on theeffectiveness of our internal control over financial reporting. The rules of the Securities and Exchange Commission (“SEC”) require us to include acquiredentities in our assessment of the effectiveness of internal control over financial reporting no later than the annual management report following the firstanniversary of the acquisition. We will complete the evaluation and integration of the Vanguard operations within the required timeframe and reportmanagement’s assessment of our internal control over financial reporting, including the acquired hospitals and other operations, in our first annual report inwhich such assessment is required. Other than the Vanguard acquisition, there were no changes in our internal control over financial reporting during thequarter ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 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 “Exchange Act”), as of the end of the period covered by this report withrespect to our operations that existed prior to the Vanguard acquisition. The evaluation was performed under the supervision and with the participation ofmanagement, including our chief executive officer and chief financial officer. Based upon that evaluation, our chief executive officer and chief financial officerconcluded that our disclosure controls and procedures are effective to ensure that material information is recorded, processed, summarized and reported bymanagement on a timely basis in order to comply with our disclosure obligations under the Exchange Act and the SEC rules thereunder. Management’s report on internal control over financial reporting is set forth on page 88 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 89 herein. ITEM 9B. OTHER INFORMATION None. 131Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Standards to Conduct, by which all of our employees, including our chief executive officer, chief financialofficer and principal accounting officer, are required to abide appears under Item I, Business — Compliance and Ethics, of Part I of this report. 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. 132Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 91 through 129. FINANCIAL STATEMENT SCHEDULES Schedule II—Valuation and Qualifying Accounts (included on page 140). 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 (2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession (a) Agreement and Plan of Merger, dated as of June 24, 2013, by and among the Registrant, Orange Merger Sub, Inc. and Vanguard HealthSystems, Inc. (Incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K, dated and filed June 24, 2013) (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, 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) (c) Certificate of Change Pursuant to NRS 78.209, filed with the Nevada Secretary of State effective October 10, 2012 (Incorporated byreference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K, dated October 10, 2012 and filed October 11, 2012) (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 ) Seventh Supplemental Indenture, dated as of June 18, 2004, between the Registrant and The Bank of New York, as trustee, relating to9/% Senior Notes due 2014 (Incorporated by reference to Exhibit 4(a) to Registrant’s Quarterly Report on Form 10-Q for the quarterended June 30, 2004, filed August 3, 2004) (d) Eighth Supplemental Indenture, dated as of January 28, 2005, between the Registrant and The Bank of New York, as trustee, relating to9¼% 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) 1337878Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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) 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) (f) 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 6¼% 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) (g) Fifteenth Supplemental Indenture, dated as of October 16, 2012, 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 4¾% Senior Secured Notesdue 2020 (Incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K, dated and filed October 16, 2012) (h) Sixteenth Supplemental Indenture, dated as of October 16, 2012, between the Registrant and The Bank of New York Mellon TrustCompany, N.A., as successor trustee to The Bank of New York, relating to 6¾% Senior Notes due 2020 (Incorporated by reference toExhibit 4.2 to Registrant’s Current Report on Form 8-K, dated and filed October 16, 2012) (i) Seventeenth Supplemental Indenture, dated as of February 5, 2013, 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 4½% Senior Secured Notesdue 2021 (Incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K, dated and filed February 5, 2013) (j) Twentieth Supplemental Indenture, dated as of May 30, 2013, 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 4/% Senior Secured Notesdue 2021 (Incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K, dated May 30, 2013 and filed May 31,2013) (k) Indenture, dated as of September 27, 2013, among THC Escrow Corporation and The Bank of New York Mellon Trust Company,N.A., as trustee, relating to 6% Senior Secured Notes due 2020 (Incorporated by reference to Exhibit 4.1 to Registrant’s Current Report onForm 8-K, dated and filed October 1, 2013) (l) Supplemental Indenture, dated as of October 1, 2013, among the Registrant, certain of its subsidiaries and The Bank of New YorkMellon Trust Company, N.A., as trustee, relating to 6% Senior Secured Notes due 2020 (Incorporated by reference to Exhibit 4.2 toRegistrant’s Current Report on Form 8-K, dated and filed October 1, 2013) (m) Indenture, dated as of September 27, 2013, among THC Escrow Corporation and The Bank of New York Mellon Trust Company,N.A., as trustee, relating to 8/% Senior Notes due 2022 (Incorporated by reference to Exhibit 4.3 to Registrant’s Current Report onForm 8-K, dated and filed October 1, 2013) (n) Supplemental Indenture, dated as of October 1, 2013, among the Registrant, certain of its subsidiaries and The Bank of New YorkMellon Trust Company, N.A., as trustee, relating to 8/% Senior Notes due 2022 (Incorporated by reference to Exhibit 4.4 toRegistrant’s Current Report on Form 8-K, dated and filed October 1, 2013) (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., 134381818Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 as administrative agent, Bank of America, N.A., as syndication agent, Citigroup Global Markets Inc. and Banc of America SecuritiesLLC, as joint lead arrangers, and the joint bookrunners and co-documentation agents named therein (Incorporated by reference toExhibit 10.1 to Registrant’s Current Report on Form 8-K, dated November 29, 2011 and filed December 1, 2011) (c) Amendment No. 2, dated as of January 23, 2014, 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., assyndication agent, Citigroup Global Markets Inc. and Banc of America Securities LLC, as joint lead arrangers, and the jointbookrunners and co-documentation agents named therein† (d) 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) (e) 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) (f) 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) (g) Exchange and Registration Rights Agreement, dated as of October 1, 2013, by and among the Registrant, certain of its subsidiaries,Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Capital Inc., Citigroup Global Markets Inc. and Wells Fargo Securities,LLC (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated and filed October 1, 2013) (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 Keith B. Pitts dated June 21, 2013*† (k) Letter from the Registrant to Britt T. Reynolds, dated December 15, 2011 (Incorporated by reference to Exhibit 10(j) to Registrant’sAnnual Report on Form 10-K for the year ended December 31, 2011, filed February 28, 2012)* (l) Letter from the Registrant to Daniel J. Cancelmi, dated September 6, 2012 (Incorporated by reference to Exhibit 10(c) to Registrant’sQuarterly Report on Form 10-Q for the quarter ended September 30, 2012, filed November 7, 2012)* (m) Letter from the Registrant to Audrey Andrews, accepted January 24, 2013 (Incorporated by reference to Exhibit 10(m) to Registrant’sAnnual Report on Form 10-K for the year ended December 31, 2012, filed February 26, 2013)* (n) 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)* 135Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 (o) Letter from the Registrant to R. Scott Ramsey, dated September 10, 2012 (Incorporated by reference to Exhibit 10(d) to Registrant’sQuarterly Report on Form 10-Q for the quarter ended September 30, 2012, filed November 7, 2012)* (p) Tenet Second Amended and Restated Executive Severance Plan, as amended and restated effective December 31, 2008 (Incorporated byreference to Exhibit 10(e) to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, filed November 7,2012)* (q) 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)* (r) Tenet Healthcare Corporation Seventh Amended and Restated Supplemental Executive Retirement Plan, as amended and restated effectiveDecember 31, 2008 (Incorporated by reference to Exhibit 10(f) to Registrant’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2012, filed November 7, 2012)* (s) Ninth Amended and Restated Tenet 2001 Deferred Compensation Plan, as amended and restated effective December 31, 2008(Incorporated by reference to Exhibit 10(g) to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, filedNovember 7, 2012)* (t) Second Amended and Restated Tenet 2006 Deferred Compensation Plan, as amended and restated effective December 31, 2008(Incorporated by reference to Exhibit 10(h) to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, filedNovember 7, 2012)* (u) 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)* (v) 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)* (w) 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)* (x) 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)* (y) Fifth Amended and Restated Tenet Healthcare Corporation 2001 Stock Incentive Plan, as amended and restated effectiveDecember 31, 2008 (Incorporated by reference to Exhibit 10(i) to Registrant’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2012, filed November 7, 2012)* (z) 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)* (aa) Third Amended and Restated Tenet Healthcare 2008 Stock Incentive Plan (Incorporated by reference to Exhibit 10(j) to Registrant’sQuarterly Report on Form 10-Q for the quarter ended September 30, 2012, filed November 7, 2012)* (bb) 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)* (cc) Award Agreement, dated June 13, 2013, used to evidence grant of performance-based restricted stock units to Trevor Fetter under theAmended and Restated Tenet Healthcare 2008 Stock Incentive Plan (Incorporated by 136Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 reference to Exhibit 10 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, filed August 6, 2013)* (dd) 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)* (ee) 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)* (ff) Second Amended Tenet Healthcare Corporation Annual Incentive Plan, as amended and restated effective December 31, 2008(Incorporated by reference to Exhibit 10(k) to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, filedNovember 7, 2012)* (gg) 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† (31) Rule 13a-14(a)/15d-14(a) Certifications (a) Certification of Trevor Fetter, President and Chief Executive Officer† (b) Certification of Daniel J. Cancelmi, Chief Financial Officer† (32) Section 1350 Certifications of Trevor Fetter, President and Chief Executive Officer, and Daniel J. Cancelmi, 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 * Management contract or compensatory plan or arrangement.† Filed herewith. 137Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 24, 2014By:/s/ R. SCOTT RAMSEYR. Scott Ramsey 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 24, 2014By:/s/ TREVOR FETTERTrevor FetterPresident, Chief Executive Officer and Director(Principal Executive Officer) Date: February 24, 2014By:/s/ DANIEL J. CANCELMIDaniel J. CancelmiChief Financial Officer(Principal Financial Officer) Date: February 24, 2014By:/s/ R. SCOTT RAMSEYR. Scott RamseyVice President and Controller(Principal Accounting Officer) Date: February 24, 2014By:/s/ JOHN ELLIS BUSHJohn Ellis BushDirector Date: February 24, 2014By:/s/ BRENDA J. GAINESBrenda J. GainesDirector Date: February 24, 2014By:/s/ KAREN M. GARRISONKaren M. GarrisonDirector Date: February 24, 2014By:/s/ EDWARD A. KANGASEdward A. KangasDirector Date: February 24, 2014By:/s/ J. ROBERT KERREYJ. Robert KerreyDirector Date: February 24, 2014By:/s/ RICHARD R. PETTINGILLRichard R. PettingillDirector 138Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 24, 2014By:/s/ RONALD A. RITTENMEYERRonald A. RittenmeyerDirector Date: February 24, 2014By:/s/ JAMES A. UNRUHJames A. UnruhDirector 139Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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) Additions Charged To:Balance atBeginningof PeriodCosts andExpenses(1)(2)OtherAccountsDeductions(3)OtherItems(4)Balance atEnd ofPeriodAllowance for doubtful accounts:Year ended December 31, 2013$401$975$—$(787)$—$589Year ended December 31, 2012$397$789$—$(785)$—$401Year ended December 31, 2011$352$721$—$(676)$—$397 Valuation allowance for deferred tax assetsYear ended December 31, 2013$56$23$(1)$—$29$107Year ended December 31, 2012$61$(5)$—$—$—$56Year ended December 31, 2011$66$(5)$—$—$—$61 (1) Includes amounts recorded in discontinued operations.(2) Before considering recoveries on accounts or notes previously written off.(3) Accounts written off.(4) Vanguard acquisition. 140Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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(c) AMENDMENT NO. 2 AMENDMENT NO. 2, dated as of January 23, 2014 (this “Amendment”), by and among Tenet Healthcare Corporation, a Nevada corporation (the“Borrower”), Citicorp USA, Inc., as Administrative Agent (in such capacity, the “Administrative Agent”) under the Credit Agreement (as defined below), theLoan Parties and the Lenders party hereto. PRELIMINARY STATEMENTS: WHEREAS, reference is hereby made to the Amended and Restated Credit Agreement, dated as of October 19, 2010 (as amended, supplemented,amended and restated or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the Administrative Agent and each Lender andIssuer from time to time party thereto (capitalized terms used but not defined herein having the meaning provided in the Credit Agreement); WHEREAS, pursuant to Section 11.1 of the Credit Agreement, the Borrower has requested that the Administrative Agent and the Requisite Lendersconsent to the amendment to the Credit Agreement set forth herein; WHEREAS, each Lender party hereto has agreed to consent to the amendment set forth herein, in each case, on the terms and conditions set forthherein. NOW, THEREFORE, in consideration of the premises and agreements, provisions and covenants herein contained, the parties hereto agree asfollows: 1. Amendment to the Credit Agreement. Effective as of the Amendment Effective Date (as defined below) and subject to the satisfaction of theterms and conditions set forth herein, the definition of “Excluded Subsidiary” is hereby amended and restated in its entirety to read as follows: “Excluded Subsidiary” means, (a) each Subsidiary of the Borrower designated from time to time by the Borrower as such, unless the Borrower shallhave subsequently revoked such designation by written notice of such revocation to the Administrative Agent and such Subsidiary shall havecomplied with the requirements of Section 7.10(a) (Additional Collateral and Guaranties); provided, however, that (i) the aggregate total assets ofall Excluded Subsidiaries on the last day of the most recent fiscal period for which financial statements have been delivered pursuant to Section 6.1(Financial Statements) shall be less than 30% of the Consolidated total assets of the Borrower and its Subsidiaries as of such date and (ii) theaggregate gross revenues of all such Subsidiaries for any Fiscal Quarter shall be less than 30% of the Consolidated gross revenues of the Borrowerand its Subsidiaries for such Fiscal Quarter, in each case determined in accordance with GAAP, (b) any Subsidiary of the Borrower of which lessthan 60% of the outstanding Voting Stock is, at the time, directly or indirectly, owned or controlled by the Borrower or one or more Guarantors and(c) as of the Effective Date, each of the Subsidiaries of the Borrower listed on Schedule 1.1(a) (“Excluded Subsidiaries”). 2. Conditions to Effectiveness. This Amendment shall become effective on the date when each of the following conditions precedent have first beensatisfied (the “Amendment Effective Date”): Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. (a) this Amendment shall have been executed and delivered by the Borrower, the Loan Parties, the Requisite Lenders and the AdministrativeAgent; (b) there shall have been paid to the Administrative Agent, for the account of itself and the Lenders, as applicable, all fees and expenses(including, to the extent invoiced, the reasonable fees and expenses of Weil, Gotshal & Manges LLP) due and payable on or before theAmendment Effective Date; (c) each of the representations set forth in Section 3 hereof shall be true and correct as of the Amendment Effective Date; and (d) no Default or Event of Default shall have occurred and be continuing as of the Amendment Effective Date. 3. Representations and Warranties. By its execution of this Amendment, the Borrower hereby certifies that: (a) (i) each Loan Party has taken all necessary action to authorize the execution, delivery and performance of this Amendment, (ii) thisAmendment has been duly executed and delivered by each Loan Party, (iii) this Amendment is the legal, valid and binding obligation of theeach Loan Party, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy,insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitableprinciples and (iv) such execution, delivery and performance will not (A) contravene or violate any Loan Party’s Constituent Documents,(B) violate any other Requirement of Law applicable to any Loan Party or any order or decree of any Governmental Authority or arbitratorapplicable to the Borrower or (C) conflict with or result in the breach of, or constitute a default under, or result in or permit the terminationor acceleration of, any Related Document or any other material Contractual Obligation of any Loan Party; (b) each of the representations and warranties made by any Loan Party in the Credit Agreement, as amended hereby, and the other LoanDocuments to which it respectively is a party or by which it is bound, is true and correct in all material respects on and as of theAmendment Effective Date (other than representations and warranties in any such Loan Document which expressly speak as of a specificdate, which shall have been true and correct in all material respects as of such specific date); and (c) no Default or Event of Default has occurred and is continuing. 4. Acknowledgments; Liens Unimpaired. Each Loan Party hereby acknowledges that it has read this Amendment and consents to the terms hereof,and further hereby affirms, confirms, represents, warrants and agrees that (a) notwithstanding the effectiveness of this Amendment, the obligationsof such Loan Party under each of the Loan Documents to which it is a party shall not be impaired and each of the Loan Documents to which suchLoan Party is a party is, and shall continue to be, in full force and effect and is hereby confirmed and ratified in all respects; (b) after giving effect tothis Amendment, (i) the execution, delivery, performance or effectiveness of this Amendment shall not impair the validity, effectiveness or priority ofthe Liens granted pursuant to the Loan Documents and such Liens shall continue unimpaired with the same priority to secure repayment of allObligations, whether heretofore or hereafter incurred and (ii) in the case of any Guarantor, its Guaranty, as and to the extent provided in the LoanDocuments, shall 2Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. continue in full force and effect in respect of the Obligations under the Credit Agreement and the other Loan Documents; (c) the execution, delivery,performance or effectiveness of this Amendment does not require that any new filings be made or other action taken to perfect or maintain theperfection of such Liens; and (d) the position of the Lenders with respect to such Liens, the Collateral (as defined in the applicable Loan Documents)in which a security interest was granted pursuant to the Loan Documents, and the ability of the Collateral Agent to realize upon such Liens pursuantto the terms of the Loan Documents have not been adversely affected in any material respect by the execution, delivery, performance or effectivenessof this Amendment. 5. Amendment, Modification and Waiver. This Amendment may not be amended, modified or waived except in accordance with Section 11.1 ofthe Credit Agreement. 6. Entire Agreement. This Amendment, the Credit Agreement and the other Loan Documents constitute the entire agreement among the parties heretowith respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and verbal, among theparties hereto with respect to the subject matter hereof. Except as expressly set forth herein, this Amendment shall not by implication or otherwiselimit, impair, constitute a waiver of, or otherwise affect the rights and remedies of any party under, the Credit Agreement or other Loan Documents,nor alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreementor other Loan Documents, all of which are ratified and affirmed in all respects and shall continue in full force and effect. It is understood and agreedthat each reference in each Loan Document to the Credit Agreement, whether direct or indirect, shall hereafter be deemed to be a reference to the CreditAgreement as amended hereby and that this Amendment is a Loan Document. 7. GOVERNING LAW AND SUBMISSION TO JURISDICTION. SECTIONS 11.11 AND 11.12 OF THE CREDIT AGREEMENT AREHEREBY INCORPORATED BY REFERENCE INTO THIS AMENDMENT AND SHALL APPLY HERETO MUTATIS MUTANDIS. 8. Waiver of Jury Trial. Section 11.13 of the Credit Agreement is hereby incorporated by reference into this Amendment and shall apply heretomutatis mutandis. 9. Counterparts. Section 11.16 of the Credit Agreement is hereby incorporated by reference into this Amendment and shall apply hereto mutatismutandis. 10. Entire Agreement. Section 11.17 of the Credit Agreement is hereby incorporated by reference into this Amendment and shall apply hereto mutatismutandis. [SIGNATURE PAGES FOLLOW] 3Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. IN WITNESS WHEREOF, each of the undersigned has caused its duly authorized officer to execute and deliver this Amendment as of the datefirst written above. CITICORP USA, INC.as the Administrative Agent By:/s/ Justin McMahanName: Justin McMahanTitle: Vice President TENET HEALTHCARE CORPORATION,as the Borrower By:/s/ Tyler C. MurphyName: Tyler C. MurphyTitle: Treasurer AMISUB (SFH), INC.AMISUB OF NORTH CAROLINA, INC.AMISUB OF SOUTH CAROLINA, INC.BROOKWOOD HEALTH SERVICES, INC.COASTAL CAROLINA MEDICAL CENTER, INC.DELRAY MEDICAL CENTER, INC.DOCTORS HOSPITAL OF MANTECA, INC.DOCTORS MEDICAL CENTER OF MODESTO, INC.EAST COOPER COMMUNITY HOSPITAL, INC.FOUNTAIN VALLEY REGIONAL HOSPITAL AND MEDICAL CENTERFRYE REGIONAL MEDICAL CENTER, INC.HOUSTON SPECIALTY HOSPITAL, INC.JFK MEMORIAL HOSPITAL, INC.LAKEWOOD REGIONAL MEDICAL CENTER, INC.LIFEMARK HOSPITALS OF FLORIDA, INC.LOS ALAMITOS MEDICAL CENTER, INC.NORTH FULTON MEDICAL CENTER, INC.PALM BEACH GARDENS COMMUNITY HOSPITAL, INC.PLACENTIA-LINDA HOSPITAL, INC.SIERRA VISTA HOSPITAL, INC.TENET GOOD SAMARITAN, INC.TENET HEALTHSYSTEM BARTLETT, INC.TENET HEALTHSYSTEM DESERT, INC.TENET HEALTHSYSTEM DI, INC.TENET HEALTHSYSTEM GB, INC.TENET HEALTHSYSTEM HOSPITALS, INC.TENET HEALTHSYSTEM NORTH SHORE, INC.TENET HEALTHSYSTEM SGH, INC.TENET HEALTHSYSTEM SL, INC. [SIGNATURE PAGE TO AMENDMENT] Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. TENET HEALTHSYSTEM SPALDING, INC.TENET HIALEAH HEALTHSYSTEM, INC.TENET ST. MARY’S, INC.TWIN CITIES COMMUNITY HOSPITAL, INC.WEST BOCA MEDICAL CENTER, INC. By:/s/ Tyler C. MurphyName: Tyler C. MurphyTitle: Treasurer CGH HOSPITAL, LTD.By: Coral Gables Hospital, Inc., as General PartnerHILTON HEAD HEALTH SYSTEM, L.P.By: Tenet Physician Services — Hilton Head, Inc., as General PartnerNEW MEDICAL HORIZONS II, LTD.By: Cypress Fairbanks Medical Center Inc., as General PartnerTENET FRISCO, LTD.By: Tenet Healthsystem Hospitals, Inc., as General PartnerTENET HEALTHSYSTEM HAHNEMANN, L.L.C.By: Tenet HealthSystem Philadelphia, Inc., as Sole MemberTENET HEALTHSYSTEM ST. CHRISTOPHER’S HOSPITAL FORCHILDREN, L.L.C.By: Tenet HealthSystem Philadelphia, Inc., as Sole MemberTENET HOSPITALS LIMITEDBy: Tenet Texas, Inc., as General PartnerTH HEALTHCARE, LTD.By: Lifemark Hospitals, Inc., as General Partner By:/s/ Tyler C. MurphyName: Tyler C. MurphyTitle: Treasurer VHS SAN ANTONIO PARTNERS, LLC By: VHS Acquisition Subsidiary Number 5, Inc., its Managing Member, andVHS Holding Company, Inc. By:/s/ Tyler C. MurphyName: Tyler C. MurphyTitle: Treasurer HOSPITAL DEVELOPMENT OF WEST PHOENIX, INC.VHS ACQUISITION CORPORATIONVHS ACQUISITION SUBSIDIARY NUMBER 1, INC.VHS ACQUISITION SUBSIDIARY NUMBER 7, INC.VHS ACQUISITION SUBSIDIARY NUMBER 9, INC. [SIGNATURE PAGE TO AMENDMENT] Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. VHS CHILDREN’S HOSPITAL OF MICHIGAN, INC.VHS DETROIT RECEIVING HOSPITAL, INC.VHS HARPER-HUTZEL HOSPITAL, INC.VHS HURON VALLEY-SINAI HOSPITAL, INC.VHS OF ARROWHEAD, INC.VHS OF ILLINOIS, INC.VHS REHABILITATION INSTITUTE OF MICHIGAN, INC.VHS SINAI-GRACE HOSPITAL, INC.VHS WEST SUBURBAN MEDICAL CENTER, INC.VHS WESTLAKE HOSPITAL, INC.VHS OF PHOENIX, INC. By:/s/ Tyler C. MurphyName: Tyler C. MurphyTitle: Treasurer CITIBANK, N.A.,as a Lender By:/s/ Justin McMahanName: Justin McMahanTitle: Vice President WELLS FARGO CAPITAL FINANCE LLC,as a Lender By:/s/ David KlagesName: David KlagesTitle: Duly Authorized Signor Siemens Financial Services, Inc.,as a Lender By:/s/ John FinoreName: John FinoreTitle: Vice President By:/s/ Uri SkyName: Uri SkyTitle: Vice President [SIGNATURE PAGE TO AMENDMENT] Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. CIT HEALTHCARE LLC,as a Lender By:/s/ Barbara PerichName: Barbara PerichTitle: Director Goldman Sachs Bank USA,as a Lender By:/s/ Michelle LatzoniName: Michelle LatzoniTitle: Authorized Signatory ROYAL BANK OF CANADA,as a Lender By:/s/ Mustafa TopiwallaName: Mustafa TopiwallaTitle: Authorized Signatory Bank of America, N.A.as a Lender By:/s/ Laura WeilandName: Laura WeilandTitle: Vice President COMPASS BANK,as a Lender By:/s/ Marla CannonName: Marla CannonTitle: Vice President [SIGNATURE PAGE TO AMENDMENT] Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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] June 21, 2013 Mr. Keith B. PittsVice ChairmanVanguard Health Systems, Inc. Dear Keith: I am pleased to offer you supplemental compensation and benefits in consideration of your transition to Tenet Healthcare Corporation in connection withTenet’s acquisition of Vanguard Health Systems, Inc. (“Acquisition”). By accepting these terms, you agree to waive any occurrence of “good reason” underyour employment agreement with Vanguard that results from Vanguard no longer being a publicly-traded company as a result of the Acquisition or youracceptance of your role described herein. Except as modified below, other terms of your employment agreement will remain in effect. The terms included inthis letter are contingent on the successful closing of the Acquisition and become effective at that time. 1. Role: Vice Chairman of Tenet, reporting to Tenet’s President and Chief Executive Officer. Your position will be located at Tenet’s headquartersin Dallas after a reasonable transition period from Nashville to be mutually agreed upon. (See Addendum for additional detail.) 2. Compensation and Benefits: You will be entitled to compensation and benefits as follows: a. Base Compensation: Your base compensation will continue to be an annual exempt rate of $700,000.00, 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 will continue to be 100% of your base salary. Participating in the AIP does not guarantee that an award will be made. d. Manager’s Paid Time Off Plan: You are eligible to participate in the company’s paid time off plan (the “MTO Plan”) according to yourtenure with the company (4 weeks per year). e. Long Term Incentives. As Vice Chairman, you will be eligible for future long-term incentive grants, which are typically awarded annuallyand based on guidelines established by Tenet’s Compensation Committee. In your role, the current guideline for such an award has anannual value of between $2,000,000 and $2,500,000. In addition, you will receive an up-front grant of restricted stock units (“RSUs”)valued at $2,500,000, which will be granted upon closing of the Acquisition. The RSUs will vest in the same manner as standard annualTenet RSU grants, over three years in one-third annual increments. 3. Relocation: Tenet will provide relocation benefits related to your move to Dallas in accordance with its relocation policies for key executives. The details of these benefits will be provided in a separate communication. Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. 4. Supplemental Executive Retirement Plan: You will be eligible to participate in Tenet’s supplemental executive retirement plan (SERP), whichprovides enhanced retirement, disability and life insurance benefits, effective as of the close of the Acquisition. Upon completion of five yearsof service with Tenet following the closing of the Acquisition, the SERP will credit your pre-closing service with Vanguard for purposes ofcalculating SERP benefits. Details of that plan (e.g., benefit accrual levels, vesting terms) will be provided in a separate communication. Should Tenet’s Compensation Committee determine to freeze or terminate the SERP plan following the Acquisition, you will be provided with asubstitute of similar value. 5. Executive Severance Plan: At the time specified in the next paragraph, you will be eligible to participate in the Executive Severance Plan, whichprovides you with certain severance benefits in the event of a Qualifying Termination (i.e., Not for Cause or Good Reason) as defined in theplan. These benefits include severance benefits of two and one-half years of base salary and target annual bonus for a Qualifying Termination,and three years base salary and target annual bonus for Qualifying Termination related to a Change of Control. Participation will require execution of a Tenet Executive Severance Plan Agreement. Upon execution of this agreement, which must be completedwithin one year of the closing of the Acquisition, both parties agree to terminate your existing employment agreement with Vanguard. You will receive a separate communication containing more details about the plan, your participation in the plan and an agreement which youwill need to sign, from the Executive Compensation Department following your employment date with Tenet. 6. Use of Company Aircraft: You will have priority access to private aircraft for business travel in accordance with Tenet’s policies. All payments to you are subject to applicable tax withholding, and nothing in this letter constitutes a contract to employ you for any specified time. This lettermay be modified only by a writing signed by both you and a designated senior officer of Tenet. If you accept these supplemental items and benefits, please sign and date this letter and return it to me. We are very excited about the Acquisition and lookforward to you joining our team. Sincerely, /s/ Trevor Fetter Trevor FetterPresident and CEO cc: Cathy Fraser, SVP Human ResourcesPaul Slavin, VP Executive and Corporate HR Services Acknowledged and accepted: /s/ Keith B. PittsDate: 6/24, 2013Signature 2Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. Addendum Responsibilities of Vice-Chairman: A. Primary responsibilities: 1. Responsible for sourcing, evaluating, and executing material mergers, acquisitions, divestitures, investments, joint ventures and similar corporatedevelopment activities across Tenet’s business lines 2. Management responsibility for Tenet’s current acquisitions and development department 3. Member of Tenet’s Senior Operating Committee (top corporate officers) 4. Advisor on strategies to Tenet’s CEO 5. Member of the board of managers (equivalent to board of directors) of Conifer 6. Represent Tenet as a director of the Federation of American Hospitals and other national-level industry or business organizations 7. Participate in all Tenet board meetings 8. Co-Chair of Tenet’s Capital Expenditure Review Committee (“CERC”)(1) B. Extensive involvement in the following areas, in coordination with functional leaders: 1. Investor relations (i.e., represent Tenet at selected investor conferences or road shows, in coordination with CFO and SVP of IR) 2. Government relations (in coordination with SVP Public Affairs) 3. Industry relations (i.e., represent Tenet at industry conferences, C-level industry meetings, or other venues, in coordination with SVP Public Affairs) (1) This management committee approves key investments/expenditures greater than $5 million. 3Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Tenet Subsidiaries List(As of 12/31/13) All of the subsidiaries listed below are 100% owned by Tenet Healthcare Corporation unless otherwise indicated. Conifer Holdings, Inc.(a) Conifer Ethics and Compliance, Inc.(a) Conifer Health Solutions, LLC — ownership — Conifer Holdings, Inc., managing member (98%);Catholic Health Initiatives (2%)(b) Conifer Patient Communications, LLC(b) Conifer Revenue Cycle Solutions, LLC(c) Conifer HIM & Revenue Integrity Services, LLC(c) Syndicated Office Systems, LLC(c) Hospital RCM Services, LLC(c) United Patient Financing, Inc.(b) Conifer Value-Based Care, LLC(c) InforMed Medical Management Services, LLC(c) InforMed Insurance Services, LLC DigitalMed, Inc. National Imaging Center Holdings, Inc.(a) DMC Imaging, L.L.C. National Surgery Center Holdings, Inc.(a) Bluffton Okatie Surgery Center, L.L.C.(a) Coral Ridge Outpatient Center, LLC — ownership — National Surgery Center Holdings, Inc.,managing member (51%); other outside members (49%)(a) El Paso Day Surgery, LLC — ownership — National Surgery Center Holdings, Inc.,managing member (61%); other outside members (39%)(a) GCSA Ambulatory Surgery Center, LLC — ownership — National Surgery Center Holdings, Inc.,managing member (51%); other outside members (49%)(a) Murdock Ambulatory Surgical Center, LLC — ownership — National Surgery Center Holdings, Inc.,managing member (51%); other outside members (49%)(a) NSCH/USP Desert Surgery Centers, LLC — ownership — National Surgery Center Holdings, Inc.,managing member (50.1%); Surgical Health Partners, Inc. (49.9%)(b) El Mirador Surgery Center, L.L.C. — ownership — NSCH/USP Desert Surgery Centers, LLC,managing member (77.93%); other outside members (22.07%)(a) Pacific Endoscopy and Surgery Center, LLC — ownership — National Surgery Center Holdings, Inc.,managing member (55%); other outside members (45%)(a) Pediatric Surgery Center - Odessa, LLC— ownership — National Surgery Center Holdings, Inc.,managing member (60%); other outside members (40%)(a) Pediatric Surgery Centers, LLC — ownership — National Surgery Center Holdings, Inc.,managing member (60%); other outside members (40%)(a) South Florida Ambulatory Surgical Center, LLC — ownership — National Surgery Center Holdings, Inc.(50.65%); other outside physician partners (49.35%)(a) Surgery Center of Okeechobee, LLC — ownership — National Surgery Center Holdings, Inc.,managing member (51%); other outside members (49%)(a) Surgery Center of Pembroke Pines, L.L.C. — ownership — National Surgery Center Holdings, Inc.,managing member (67.5%); other outside members (32.5%)(a) The Surgery Center at Jensen Beach, LLC— ownership — National Surgery Center Holdings, Inc.,managing member (53.5%); other outside members (46.5%)(a) Theda Oaks Gastroenterology & Endoscopy Center, LLC — ownership — National Surgery CenterHoldings, Inc., managing member (51%);other outside members (49%)(a) Winter Haven Ambulatory Surgical Center, L.L.C. — ownership — National Surgery Center Holdings, Inc.,managing member (51%); other outside members (49%) Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. National Urgent Care Holdings, Inc.(a) AMC/North Fulton Urgent Care #1, L.L.C.(a) AMC/North Fulton Urgent Care #2, L.L.C.(a) AMC/North Fulton Urgent Care #3, L.L.C.(a) AMC/North Fulton Urgent Care #4, L.L.C.(a) AMC/North Fulton Urgent Care #5, L.L.C.(a) AMC/North Fulton Urgent Care #6, L.L.C.(a) Camp Creek Urgent Care, L.L.C.(a) Des Peres Urgent Care, L.L.C.(a) Memphis Urgent Care #1, L.L.C.(a) Memphis Urgent Care #2, L.L.C.(a) NUCH of Georgia, L.L.C.(a) NUCH of Texas(a) Olive Branch Urgent Care #1, LLC(a) Selma Carlson, Inc.(a) St. Louis Urgent Care #2, L.L.C.(a) St. Louis Urgent Care #3, L.L.C.(a) Walker Street Imaging Care, Inc.(a) West Boynton Urgent Care, L.L.C. 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.(a) TenetCare Frisco, 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) 601 N 30th Street III, Inc.(c) 601 N 30th Street I, L.L.C. — ownership — 601 N 30th Street III, Inc. (74.06%)Tenet HealthSystem Medical, Inc. (25.94%)(d) 601 N 30th Street II, L.L.C.(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.(e) Surgicare of Miramar, L.L.C. — ownership — Lifemark Hospitals of Florida, Inc.,managing member (50.97%); other outside members (49.03%) 2Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. (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) Park Plaza Hospital Billing Center, L.L.C.(c) Tenet Employment, Inc.(b) AMI Diagnostic Services, Inc.(b) AMI Information Systems Group, Inc.(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 (SFH), Inc.(c) Saint Francis Hospital Billing Center, L.L.C.(c) Saint Francis Surgery Center, L.L.C. (60.6061% member interest)(c) Tenet HealthSystem SF-SNF, Inc.(b) Amisub of California, Inc.(b) Amisub of North Carolina, Inc.(c) Central Carolina Ambulatory Surgery Center, LLC(b) Amisub of South Carolina, Inc.(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.(b) Brookwood Center Development Corporation(c) Alabama Digestive Health Endoscopy Center, L.L.C. (53% member interest)(c) Brookwood Home Health, LLC — ownership — Brookwood Center Development Corporation (51%);other outside member (49%)(c) BWP Associates, Ltd. — ownership — Brookwood Center Development Corporation (80%)Brookwood Development, Inc. (20%)(c) C.K. of Birmingham, LLC(c) Hoover Doctors Group, Inc.(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 MedicalCenters, Inc. (1% LP)(b) Brookwood Development, Inc.(b) Brookwood Health Services, Inc.(c) Brookwood Garages, L.L.C.(b) Brookwood Parking Associates, Ltd. — ownership — Tenet HealthSystem Medical, Inc. (99%),Brookwood Garages, L.L.C. (1%)(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.(c) The Southeastern Spine Institute Surgery Center, L.L.C. — ownership — East Cooper CommunityHospital, Inc., managing member (55%);other outside members (45%)(b) Eastern Professional Properties, Inc.(b) Frye Regional Medical Center, Inc.(c) FryeCare Outpatient Imaging, L.L.C. 3Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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) Frye Heart Excellence Team, LLC (50% member interest)(c) Frye Home Infusion, Inc.(c) Guardian Health Service, L.L.C. (50% member interest)(c) Tate Surgery Center, L.L.C.(c) Unifour Neurosurgery, L.L.C.(c) Viewmont Surgery Center, L.L.C.(b) Magnetic Resonance Imaging of San Luis Obispo, Inc.(b) New H Acute, Inc.(b) North Fulton Medical Center, Inc.(c) Endoscopy Consultants, LLC — ownership — North Fulton Medical Center, Inc. (51%); other outside physician partners (49%)(c) Georgia Center, LLC — ownership — North Fulton Medical Center, Inc. (51%); other outside physician partners (49%)(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.(b) Palm Beach Gardens Community Hospital, Inc.(c) Palm Beach Gardens Cardiac and Vascular Partners, LLC — ownership — Palm Beach GardensCommunity Hospital, Inc. (50%); other outside physician partners (50%)(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, LLC(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 Express Care at Sutton Road, L.L.C.(c) Piedmont Family Practice at Baxter Village, 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, L.L.C.(c) Sutton Road Pediatrics, L.L.C.(b) Physician Performance Network, L.L.C.(c) Physician Performance Network of Georgia, L.L.C.(c) Physician Performance Network of Philadelphia, L.L.C.(b) Professional Healthcare Systems Licensing Corporation(b) Roswell Medical Ventures, Inc.(c) North Fulton Parking Deck, L.P. — ownership — Roswell Medical Ventures, Inc. (89.836%),other outside partners (10.164%)(b) Sierra Vista Hospital, Inc.(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.(c) Cardiovascular & Thoracic Surgery Associates, L.L.C.(c) Okatie Surgical Partners, L.L.C.(c) Hardeeville Hospitalists, L.L.C. 4Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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) Heritage Medical Group of Hilton Head, 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) Nephrology Associates of Hilton Head, L.L.C.(c) Oncology Associates of the Low Country, 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.(c) Good Samaritan Cardiac & Vascular Management, LLC — ownership — Tenet Good Samaritan,Inc. (50%); other outside physician partners (50%)(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.(c) Tenet South Fulton Health Care Centers, 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. — ownership — Tenet HealthSystem Nacogdoches ASC GP, Inc. (1% GP);Tenet HealthSystem Nacogdoches ASC, LP, Inc. (58.999% LP);other outside partners (49.001% LP)(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 Practices, L.L.C.(b) Tenet HealthSystem Philadelphia, Inc.(c) HPS of PA, L.L.C.(c) Tenet HealthSystem Bucks County, L.L.C.(c) Tenet HealthSystem City Avenue, L.L.C.(c) Tenet HealthSystem Elkins Park, L.L.C.(c) Tenet HealthSystem Graduate, L.L.C.(c) Tenet HealthSystem Hahnemann, L.L.C.(c) Tenet HealthSystem Parkview, L.L.C.(c) Tenet HealthSystem Roxborough, LLC(c) Tenet HealthSystem Roxborough MOB, LLC(c) Tenet HealthSystem St. Christopher’s Hospital for Children, L.L.C.(d) Center for the Urban Child, Inc.(d) SCHC Pediatric Anesthesia Associates, L.L.C.(d) SCHC Pediatric Associates, L.L.C.(e) St. Christopher’s Pediatric Urgent Care Center, L.L.C.(e) St. Christopher’s Pediatric Urgent Care Center - Allentown, L.L.C.(d) StChris Care at Northeast Pediatrics, L.L.C.(c) Tenet Home Services, L.L.C.(c) Tenet Medical Equipment Services, L.L.C.(c) The Healthcare Underwriting Company, a Risk Retention Group(c) TPS of PA, L.L.C. 5Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. (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.(b) Tenet HealthSystem SGH, Inc.(b) Tenet HealthSystem SL, Inc.(c) SLUH Anesthesia Physicians, L.L.C.(c) Tenet SLUH Physicians, L.L.C.(b) Tenet HealthSystem SL-HLC, Inc.(b) Tenet HealthSystem Spalding, Inc.(c) Griffin Imaging, LLC — ownership — Tenet HealthSystem Spalding, Inc.,managing member (50.5%); other outside members (49.5%)(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 Investments, Inc.(b) Tenet Physician Services - Hilton Head, Inc.(b) Tenet Practice Resources, LLC(b) Tenet St. Mary’s, Inc.(c) The Heart and Vascular Clinic, L.L.C.(b) Tenet Ventures, Inc.(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) 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.(d) Universal Medical Care Center, 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(c) Specialty Surgery Center at Fountain Valley Regional Hospital, L.L.C. — ownership —Fountain Valley Regional Hospital and Medical Center (51%);other outside members (49%)(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) HNMC, Inc.(d) HNW GP, Inc.(e) Houston Northwest Partners, Ltd. — ownership — GP: HNW GP, Inc. (1%)LP: HNW LP, Inc. (99%) 6Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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) Conroe Surgery Center 2, LLC — ownership — Houston Northwest Partners, Ltd.managing member (50.89%); other outside members (49.11%)(f) Houston Northwest Operating Company, L.L.C. — ownership —Houston Northwest Partners, Ltd. (86.69%); other outside members (13.31%)(g) Houston Northwest Concessions, L.L.C.(f) Northwest Surgery Center, Ltd — ownership — Houston Northwest Partners, Ltd. (51%);other outside partners (49%)(d) HNW LP, Inc.(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. (94.674%); other outside members (5.326%)(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, L.L.C.(b) SHL/O Corp.(b) Tenet HealthSystem CFMC, Inc.(b) Tenet HealthSystem CM, Inc.(a) Tenet MetroWest Healthcare System, Limited Partnership Tenet HealthSystem International, Inc.(a) N.M.E. International (Cayman) Limited(b) HUG Services, Inc. — ownership — N.M.E. International (Cayman) Limited (67%); Tenet HealthcareCorporation (30%); Tenet HealthSystem 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) Alabama Hand and Sports Medicine, L.L.C.(c) Brookwood - Maternal Fetal Medicine, L.L.C.(c) Brookwood Medical Partners - ENT, L.L.C.(c) Brookwood Occupational Health Clinic, L.L.C.(c) Brookwood Primary Care Cahaba Heights, L.L.C.(c) Brookwood Primary Care - Homewood, L.L.C.(c) Brookwood Primary Care Hoover, L.L.C.(c) Brookwood Primary Care - Inverness, L.L.C.(c) Brookwood Primary Care - Mountain Brook, 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. 7Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 - Trussville, L.L.C.(c) Brookwood Primary Care - Vestavia, L.L.C.(c) Brookwood Primary Care Network - McCalla, L.L.C.(c) Brookwood Sports and Orthopedics, L.L.C.(c) Brookwood Specialty Care - Endocrinology, L.L.C.(c) Brookwood Women’s Care, L.L.C.(c) Cardiovascular Associates of the Southeast, L.L.C.(c) Greystone Internal Medicine - Brookwood, L.L.C.(c) Norwood Clinic of Alabama, L.L.C.(b) Brookwood Retail Pharmacy, L.L.C.(a) Tenet California, Inc.(b) Anaheim MRI Holding, Inc.(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) First Choice Physician Partners(b) Golden State Medicare Health Plan(b) JFK Memorial Hospital, Inc.(c) SSC Holdings, 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 (52%);other outside members (48%)(b) National Medical Ventures, Inc.(b) Network Management Associates, Inc.(b) PHPS-CHM Acquisition, Inc.(c) Coast Healthcare Management, LLC(c) Premier Health Plan Services, Inc.(b) Placentia-Linda Hospital, Inc.(c) Anaheim Hills Medical Imaging, L.L.C.(b) San Ramon ASC, L.P.(b) San Ramon Surgery Center, L.L.C.(b) SRRMC Management, Inc.(c) San Ramon Network Joint Venture, LLC — ownership — SRRMC Management, Inc (51%);John Muir Health (49%)(d) San Ramon Ambulatory Care, LLC(c) San Ramon Regional Medical Center, LLC — ownership — SRRMC Management, Inc (51%);John Muir Health (49%)(d) Pleasanton Diagnostic Imaging, Inc.(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.(b) Twin Cities Community Hospital, Inc.(c) Templeton Imaging, Inc.(a) Tenet Florida, Inc.(b) Advantage Health Network, Inc. — ownership — Tenet Florida, Inc. (50%); other outside members (50%)(b) Delray Medical Center, Inc.(b) Florida Regional Medical Center, Inc.(b) FMCC Network Contracting, L.L.C.(b) FREH Real Estate, L.L.C.(b) FRS Imaging Services, L.L.C.(b) Hollywood Medical Center, Inc. 8Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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) International Health and Wellness, Inc.(b) National Medical Services II, Inc.(b) National Urgent Care, Inc.(b) Tenet Florida Physician Services, L.L.C.(c) Center for Advanced Research Excellence, L.L.C.(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.(c) Tenet Florida Physician Services II, L.L.C.(c) Tenet Florida Physician Services III, L.L.C.(b) Tenet Hialeah HealthSystem, Inc.(c) Hialeah Real Properties, Inc.(c) Tenet Hialeah (ASC) HealthSystem, Inc.(b) Tenet Network Management, Inc.(b) West Boca Medical Center, Inc.(c) West Boca Health Services, L.L.C.(a) Tenet Georgia, Inc.(b) AMC Neurosurgical Associates, L.L.C.(b) Atlanta Medical Center Interventional Neurology Associates, L.L.C.(b) Atlanta Medical Center Neurosurgical & Spine Specialists, L.L.C.(b) Atlanta Medical Center Physician Group, 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 Northside Ear, Nose and Throat, L.L.C.(b) Georgia Spectrum Neurosurgical Specialists, L.L.C.(b) Jackson Medical Center, L.L.C.(b) North Fulton Cardiovascular Medicine, 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 - Wylie Bridge, L.L.C.(b) North Fulton Pulmonary Specialists, 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) Roswell Orthopedic Specialists, 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) 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) 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(a) Tenet Missouri, Inc. 9Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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) 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) Bridgeton Imaging, L.L.C.(c) U.S. Center for Sports Medicine, L.L.C.(a) Tenet Nebraska, Inc.(a) Tenet North Carolina, Inc.(b) Cardiology Physicians Associates, L.L.C.(b) Cardiology Physicians Corporation, L.L.C.(b) Central Carolina-CIM, L.L.C.(b) Central Carolina-IMA, L.L.C.(b) Central Carolina Hospital Pro Fee Billing, L.L.C.(b) Central Carolina Physicians - Sandhills, L.L.C.(b) FryeCare Appalachian, L.L.C.(b) FryeCare Boone, L.L.C.(b) FryeCare Morganton, L.L.C.(b) FryeCare Northwest Hickory, L.L.C.(b) FryeCare Physicians, L.L.C.(b) FryeCare Valdese, L.L.C.(b) FryeCare Watauga, L.L.C.(b) FryeCare Women’s Services, L.L.C.(b) Frye Physicians - Tenet NC, 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) 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) East Cooper Hyperbarics, L.L.C.(b) East Cooper OBGYN, L.L.C.(b) East Cooper Primary Care 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.(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 Behavioral Health Associates, L.L.C.(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. 10Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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) Saint Francis Medical Specialists, L.L.C.(b) Saint Francis Surgical Associates, 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(b) Houston Sunrise Investors, Inc.(b) National Ancillary, Inc.(b) National HHC, Inc.(b) National ICN, Inc.(b) Physicians Performance Network of Houston(b) Practice Partners Management, L.P. — ownership — GP: Tenet Texas, Inc. (1%);LP: Tenetsub Texas, Inc. (99%)(b) Sierra Providence Healthcare Enterprises(b) Sierra Providence Health Network, Inc.(b) Tenet El Paso, Ltd. — ownership — GP: Tenet Texas, Inc. (1%); LP: Tenetsub Texas, Inc. (99%)(b) Tenet Frisco, Ltd. — ownership — GP: Tenet Texas, Inc. (1%); LP: Tenetsub Texas, Inc. (99%)(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.(d) Surgery Affiliate of El Paso, LLC — ownership — PDN, LLC, managing member (61%);other outside members (39%)(c) Tenet Sun View Imaging, L.L.C.(b) Tenet Relocation Services, L.L.C.(b) Tenetsub Texas, Inc. T.I. GPO, Inc. Vanguard Health Systems, Inc.(a) Vanguard Health Holding Company I, LLC(b) Vanguard Holding Company I, Inc.(b) Vanguard Health Holding Company II, LLC(c) Vanguard Health Management, Inc.(d) Harbor Health Plans, Inc.(d) Vanguard Health Financial Company, LLC(e) C7 Technologies, LLC(e) Central Texas Corridor Hospital Company, LLC(e) Hospital Development of West Phoenix, Inc.(e) MacNeal Management Services, Inc.(f) Chicago Health System ACO, LLC(f) MacNeal Health Providers, Inc.(f) Midwest Pharmacies, Inc.(f) Primary Care Physicians Center, LLC - ownership - MacNeal Management Services, Inc.(94% of capital interests) and Thomas Mizen (6% of capital interests)(f) Pros Temporary Staffing, Inc.(f) The 6300 West Roosevelt Partnership - ownership - MacNeal Management Services, Inc.50.326% (29.876% GP interest and 20.450% LP interest) and numerous limited partners(f) Watermark Physician Services, Inc.(e) MacNeal Medical Records, Inc.(e) Resolute Hospital Company, LLC(e) Southwest Children’s Hospital, LLC(e) V-II Acquisition Co., Inc.(e) Valley Baptist Insurance Company 11Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. (e) Vanguard IT Services, LLC(e) VHS Acquisition Corporation(e) VHS Acquisition Subsidiary Number 1, Inc.(e) VHS Acquisition Subsidiary Number 2, Inc.(e) VHS Acquisition Subsidiary Number 3, Inc.(f) LakeFront Medical Associates, LLC(e) VHS Acquisition Subsidiary Number 4, Inc.(e) VHS Acquisition Subsidiary Number 5, Inc. - ownership - Vanguard Health FinancialCompany, LLC (100% voting common - 8,010 common shares) and BaptistHealth Foundation of San Antonio (3,582 preferred)(f) VHS San Antonio Imaging Partners, L.P. - ownership - VHS Acquisition Subsidiary Number5, Inc. General Partner (2%), Imaging Center Partners, L.P., Limited Partner(50%) and VHS San Antonio Partners, LLC, Limited Partner (48%)(f) VHS San Antonio Partners, LLC - ownership - VHS Acquisition Subsidiary Number 5, Inc.,Managing Member (2%) and VHS Holding Company, Inc. (98%)(g) Baptist Medical Management Service Organization, LLC(g) BHS Accountable Care, LLC(g) BHS Integrated Physician Partners, LLC(g) BHS Physicians Alliance For ACE, LLC(g) Home Health Partners of San Antonio, LLC(h) Journey Home Healthcare of San Antonio, LLC(e) VHS Acquisition Subsidiary Number 6, Inc.(f) VHS Acquisition Partnership Number 1, L.P. - ownership - VHS Acquisition SubsidiaryNumber 6, Inc., General Partner (2%) and VHS Holding Company, Inc.,Limited Partner (98%)(e) VHS Acquisition Subsidiary Number 7, Inc.(f) Saint Vincent Physician Services, Inc.(e) VHS Acquisition Subsidiary Number 8, Inc.(f) Community Connection Health Plan, Inc.(f) Advantage Health Care Management Company, LLC(e) VHS Acquisition Subsidiary Number 9, Inc.(f) MetroWest Accountable Health Care Organization, LLC - ownership - VHS AcquisitionSubsidiary Number 9, Inc. (50%) and MetroWest Health Care Alliance, Inc. (50%)(g) Total Accountable Care Organization, LLC - ownership - MetroWest AccountableHealth Care Organization, LLC (70%) and VHS Acquisition SubsidiaryNumber 7, Inc. (30%)(f) VHM Services, Inc.(e) VHS Acquisition Subsidiary Number 10, Inc.(e) VHS Acquisition Subsidiary Number 11, Inc.(e) VHS Acquisition Subsidiary Number 12, Inc.(e) VHS Genesis Labs, Inc.(e) VHS Holding Company, Inc.(f) BHS Physicians Network, Inc.(f) BHS Specialty Network, Inc.(g) Heart & Vascular Institute of Texas, Inc.(f) Resolute Health Family Urgent Care, Inc.(f) Resolute Health Physicians Network, Inc.(e) VHS Imaging Centers, Inc.(e) VHS New England Holding Company I, Inc.(e) VHS of Illinois, Inc.(f) HCM/CV, LLC - ownership - VHS of Illinois, Inc. (50%), HeartCare Centers of Illinois,S.C. (25%) and Cardiac Surgery Associates, S.C. (25%)(f) MacNeal Physicians Group, LLC(f) Vanguard Medical Specialists, LLC(f) VHS Chicago Market Procurement, LLC(e) VHS of Michigan, Inc.(f) CRNAS of Michigan 12Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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) Detroit Education and Research(f) DMC Education & Research(f) Heart & Vascular Institute of Michigan(f) Southeast Michigan Physicians Insurance Company(f) VHS Children’s Hospital of Michigan, Inc.(f) VHS Detroit Businesses, Inc.(f) VHS Detroit Receiving Hospital, Inc.(f) VHS Detroit Ventures, Inc.(g) DMC Shared Savings ACO, LLC(g) Michigan Pioneer ACO, LLC - ownership - VHS Detroit Ventures, Inc. (99.875%),George E. Evans (0.25%), Murtaza Hussain (0.25%), Muhammad Y. Karim(0.25%), Michael G. Taylor (0.25%) and Carl D. Fowler (0.25%)(f) VHS Harper-Hutzel Hospital, Inc.(f) VHS Huron Valley-Sinai Hospital, Inc.(f) VHS of Michigan Staffing, Inc.(f) VHS Physicians of Michigan(f) VHS Rehabilitation Institute of Michigan, Inc.(f) VHS Sinai-Grace Hospital, Inc.(f) VHS University Laboratories, Inc.(e) VHS of Orange County, Inc.(f) VHS Acquisition Partnership Number 2, L.P. - ownership - VHS of Orange County, Inc.,General Partner (1%), VHS of Orange County, Inc., Limited Partner (58.4%), VHS HoldingCompany, Inc., Limited Partner (35%), Physician Investors,Limited Partners (5.6%)(f) VHS of Anaheim, Inc.(g) North Anaheim Surgicenter, Ltd. - ownership - VHS of Anaheim, Inc., General Partner(76.5%) and Physician Investors, Limited Partners (23.5%)(f) VHS of Huntington Beach, Inc.(g) Magnolia Surgery Center Limited Partnership - ownership - VHS of Huntington Beach,Inc., General Partner (1%), VHS Holding Company, Inc., Limited Partner(82.6%) and Third Parties (physicians), Limited Partner (16.4%)(e) VHS of Phoenix, Inc.(f) VHS Arizona Heart Institute, Inc.(f) VHS of Arrowhead, Inc.(f) VHS of South Phoenix, Inc.(g) Arizona Health Partners, LLC(g) Palm Valley Medical Center Campus Association - ownership - VHS of South Phoenix,Inc. (72.38%), Palm Valley Med Bldg L.P. (Plaza) (5.72%), Palm Valley MedBldg L.P. (Ruiz) (12.60%) and Palm Valley Nursing Facility L.P. (NursingHome) (9.30%)(g) Phoenix Health Plans, Inc.(h) VHS Phoenix Health Plan, LLC(g) VHS Acquisition Company Number 1, LLC - ownership - VHS of South Phoenix, Inc.(60%) and Medical Professional Associates of Arizona, P.C. (40%)(f) VHS Outpatient Clinics, Inc.(g) Abrazo Medical Group Urgent Care, LLC(e) VHS Valley Management Company, Inc.(f) Harlingen Physician Network, Inc.(f) Rio Grande Valley Indigent Health Care Corporation(f) Valley Health Care Network(f) VHS Valley Health System, LLC - ownership - VHS Valley Management Company, Inc.,Manager (51%) and VB Medical Holdings (49%)(g) VHS Brownsville Hospital Company, LLC(g) VHS Harlingen Hospital Company, LLC(g) Valley Baptist Realty Company, LLC(g) VHS Valley Holdings, LLC(h) Valley Baptist Lab Services, LLC(h) Valley Baptist Wellness Center, LLC 13Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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. (h) VB Brownsville IMP ASC, LLC(h) VB Brownsville LTACH, LLC(h) VBOA ASC GP, LLC(i) VBOA ASC Partners, L.P. - ownership - VBOA ASC GP, LLC GeneralPartner (1%), Various physicians, Class A Limited Partners (38%) and VBBrownsville IMP ASC, LLC, Class B Limited Partner (61%)(e) VHS West Suburban Medical Center, Inc.(f) West Suburban Radiation Therapy Center, LLC(e) VHS Westlake Hospital, Inc.(e) VHS-Volunteer Insurance Ltd. (Cayman Islands Company)(d) Vanguard Physician Services, LLC - ownership - Vanguard Health Management, Inc. (60%) and MedSynergies, Inc. (40%)(d) Healthcare Compliance, L.L.C.(d) New Dimensions, LLC(c) Vanguard Holding Company II, Inc. Wilshire Rental Corp.(a) Hitchcock State Street Real Estate, Inc. 14Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 333-185162 onForm S-3, Registration Statement No. 333-191613 on Form S-4, 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, 333-166768 and 333-191614 on Form S-8 of our reports datedFebruary 24, 2014, relating to the consolidated financial statements and financial statement schedule of Tenet Healthcare Corporation and subsidiaries, and theeffectiveness of Tenet Healthcare Corporation and subsidiaries’ internal control over financial reporting, appearing in this Annual Report on Form 10-K ofTenet Healthcare Corporation for the year ended December 31, 2013. /s/ Deloitte & Touche LLP Dallas, TexasFebruary 24, 2014 Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 24, 2014 /s/ TREVOR FETTERTrevor FetterPresident and Chief Executive Officer Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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, Daniel J. Cancelmi, 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 24, 2014 /s/ DANIEL J. CANCELMIDaniel J. CancelmiChief Financial Officer Source: TENET HEALTHCARE CORP, 10-K, February 24, 2014Powered 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 Daniel J. Cancelmi, being, respectively, the President and Chief Executive Officer and the Chief FinancialOfficer of 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, 2013 (the “Form 10-K”), to be filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements ofSection 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, thefinancial condition and results of operations of the Registrant and its subsidiaries. Date: February 24, 2014/s/ TREVOR FETTERTrevor FetterPresident and Chief Executive Officer Date: February 24, 2014/s/ DANIEL J. CANCELMIDaniel J. CancelmiChief 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 24, 2014Powered 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 24, 2014Powered 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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